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Banks may Not have Your Best Interest at Heart

The banks are not intentionally trying to deceive their customers, but over time we have been conditioned to believe that the “big banks” are trustworthy, stable, and a pillar of society. We start to believe that they have our best interest at heart, all the time. Therefore, we create these deep relationships with our banks. However, the bank is not your friend – they are a business. And every business has one major goal – to make money.

1. New customers get all the perks

Banks have always been keen on attracting new customers. Incentives have always been part of process for customers to join a new bank. Look at the advertisements at your own bank. Chances are you will see: Free iPhone when you open a new account 15,000 Aeroplan points if you open an unlimited chequing account $50 bonus if you open a chequing or savings account with us However, if you’re an existing customer, you’re out of luck. If you’re like me, you will go up to the teller and ask “Why am I not getting a new iPhone?” Go ahead, try it. You will get a very rehearsed response, something along the lines of “I’m sorry, that is for new customers only.” Even if you threaten to leave, they know it is usually an empty threat. Why, because the banks count on 4 statistics as to why you will not leave: Complacency: You have been here for so long that change sounds scary Hassle: All of my bills are direct withdrawal. If I switch accounts it will be too much hassle Ignorance: You are simply oblivious to the perks your bank is offering to non-customers Canadian: We are Canadian. It’s just not in our culture to push hard or barter So why would you think going to your existing bank to arrange a mortgage will result in them giving you a good deal? If you speak to a broker, on the other hand, you are a new client. Let them shop around for you and find out who is giving away the best perks, and let them help you make the best decision.

2. A low mortgage rate does not always equal to the best mortgage

People tend to see the cheapest mortgage and get excited, what they don’t realize is that they will likely end up paying thousands of dollars in the long run. For example, by saving $20/month, you may end up paying a penalty of $3500. It happens all of the time. Essentially, you want a mortgage that can be managed properly to reduce costs over time. Interest rates are important, just as important as other features. A good broker can help you decide.

3. If you work with a broker, they will continually treat you like a new customer

The best part of a broker is a) they are independent, giving the customer individual attention 2) they work for you, the customer and c) most importantly, the customer is always treated as a new one Many customers need to be reminded not to sign their renewal statement from the bank. Sadly, over 50% of Canadians will blindly sign the bank’s renewal statement. When working with a good broker, they will inform you of any new options available to you, as well as advise you on whether accepting and signing the renewal statement is your best choice. Hint: More often than not, it is better to switch to become a new customer all over again.

4. The banks operate on a barter system

If you do not constantly ask for a deal, you won’t get one. Banks have a duty and responsibility to their shareholders to make as much money as possible. Again, because they are a business, and frankly speaking, the customer is just another transaction. If you don’t like to barter, let your broker do it for you. Brokers are very appreciative of every transaction, and will compete very hard for you.

5. Lenders and brokers are not the same

Although, mortgage lenders and mortgage brokers appear the same, they are not. To point out the difference in the simplest way, a mortgage lender lends money, while a mortgage broker finds money. A broker is the also the middle man/negotiator between the customer and lender.

“Just like every car has 4 tires and a steering wheel, they are many different models and features that go beyond the basics. Some people choose a luxury vehicle because they like the options and the service. Others just care about finding the cheapest vehicle on the market. It all depend on the customer and their individual needs.” Mark Olkowski, Principal Broker at TheRedPin.

A mortgage broker can present you with various option, since they have the expertise and connections to lenders.

Any questons? Feel free to contact me!

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