Mortgage Broker vs. Bank in Ontario: What Is the Difference?

When it comes time to get a mortgage, many Canadians go to their bank first. It is familiar, convenient, and the branch is down the street. Working with a mortgage professional is another way to shop.

This post explains how the two routes differ, what each one can and cannot do, and what to compare before you sign. We are mortgage agents at a brokerage, so we have a point of view. We have tried to be fair to your bank.

How a Bank Mortgage and a Mortgage Agent Differ

Most people searching this topic type "mortgage broker vs bank". In Ontario, the brokerage is the licensed firm, and the people who work with you at that firm are licensed mortgage agents or brokers. We are mortgage agents at Anthem Mortgage Group.

• Your bank offers its own mortgage products at its own rates.
• A mortgage agent can submit your application to the lenders the brokerage works with, which include banks, credit unions and other lenders, and compare the results for your situation.

We are not tied to one lender. That gives you more to compare, but it does not guarantee a lower rate than your bank. Sometimes your own bank matches or beats what we find, and that is worth knowing too.

Why Rates Can Differ Between Lenders

Lenders price mortgages differently depending on their costs, their funding, how much business they want that month, and the type of mortgage. A bank's posted rate is usually a starting point, and many banks will discount it if you ask. A different lender may offer a lower rate on the same file, or a higher one. Rates also vary by down payment, credit profile and whether the mortgage is insured.

Here is an example of why a small gap matters. The rates are made up for illustration and are not an offer or a prediction. It assumes a $500,000 mortgage, a 25-year amortization, a 5-year fixed term, and Canadian semi-annual compounding.

Example rate	Monthly payment	Balance after 5 years
4.75%	$2,837	$440,779
4.50%	$2,767	$438,982
Difference	about $70 per month	about $1,797

Over the 5-year term, the lower hypothetical rate would mean roughly $4,195 less in total payments, plus a slightly lower balance. Rates reset when the term ends, so this is a snapshot and not a saving you can count on over 25 years. A lower rate also only helps if the rest of the mortgage suits you, which is the next section.

Beyond the Rate: Terms That Matter

Two mortgages with the same rate can cost very different amounts depending on the terms. Ask each lender about these:

• Prepayment privileges. Can you make extra payments or lump sums each year, and how much?
• Penalty calculation. If you break the mortgage early, how is the penalty worked out? The Financial Consumer Agency of Canada says the penalty is usually the higher of three months' interest or the interest rate differential (IRD), and that lenders calculate the IRD in different ways. In its example, on a $200,000 balance at 6% with 36 months left, three months' interest is about $3,000 and the IRD is about $12,000.
• Portability. Can you take the mortgage with you to a new home? The FCAC lists porting as one way to avoid a penalty.
• Blend and extend. If you want to change mid-term, some lenders will blend your current rate with a current rate and extend the term. Not every lender offers this, and the terms differ.

Terms differ from lender to lender, banks included. Read the penalty, prepayment and portability clauses before you sign. A mortgage agent can walk you through them, and so can the mortgage specialist at your bank.

How Mortgage Agents Get Paid

In most cases, you do not pay us a fee. When a mortgage closes, the lender pays the brokerage a commission. That commission is part of the lender's cost of doing business, and the amount can vary by lender and product. Some lenders also pay volume bonuses to brokerages.

In some situations, such as certain private or alternative lending files, a fee can be charged to the borrower. In Ontario, a brokerage must disclose its fees and its relationship with the lenders it presents to you. If a fee applies to your file, we explain it in writing before you commit.

You can read how we are paid on our Borrower Disclosure page, and you can ask us about the compensation on your own file at any time.

When Your Bank Might Be the Right Choice

There are good reasons to stay with your bank:

• You have a banking relationship with pricing on several products, and the combined deal works for you.
• Your bank offers a retention or renewal rate that matches what else is available.
• You want a product that is only offered through your institution.

Even then, it helps to have a second quote to compare. At renewal, you can usually switch lenders without being tested again on the stress test, as long as the new lender is federally regulated and you keep the same amortization and loan amount. Credit unions follow provincial rules, so check with the new lender. OSFI and the federal Department of Finance made this change in late 2024. Our mortgage renewal checklist covers what to do before your renewal date.

When a Mortgage Agent Can Help Most

A single bank can only offer its own products. If your file does not fit a standard bank approval, access to other lenders can matter more than a small rate gap. Self-employed income is a common example. Our self-employed mortgage guide explains how lenders look at it. A mortgage agent can also help if you are a first-time buyer who wants the process explained, or if you want more than one quote without visiting several branches.

How to Compare

If you are buying or renewing, get at least two quotes: one from your bank and one from a mortgage agent. Compare the rate, the penalty terms, the prepayment limits, the portability rules and the total cost over your term, in addition to the rate.

Start your mortgage plan

Rates and numbers in this post are examples only. They change often and are not an offer, a quote or a prediction. The Taylor Team, mortgage agents with Anthem Mortgage Group, FSRA licence #10294, Barrie, Ontario.

Sources

• Financial Consumer Agency of Canada, reduce prepayment penalties
• OSFI, minimum qualifying rate for uninsured mortgages (straight switches at renewal)
• Department of Finance Canada, straight switches and portfolio insurance (December 2024)
• FSRA, mortgage brokerage disclosure requirements