Compare Loan Rates
If it is true that commission based brokers charge more, then it should also be true that
banks have the lowest mortgage rates and costs if they are not commision based.
In order to test this assumption, we surveyed the refinance rates
offered by a selection of both mortgage banks and brokers. According to our survey, the difference in
mortgage rates was at most, about 1/8 of a percent, with mortgage brokers often having the lowest refinance rates. Banks and credit unions may have an advantage for better home equity loan rates and fees. Our survey does not claim the final word, but it appears that
banks are not giving away the store.
It turns out that banks and brokers use the same mortgage
investment companies as their source of funds. Wholesale loan
prices tend to be consistent among lenders, other than a
potential volume discount. Some mortgage banks in effect
also compete with themselves by having both a retail division, and
a wholesale division that gives brokers the ability to sell
the same loan programs.
Free market competition can also prevent zealous
overpricing of refinance rates. Regardless of how they are paid, if
a mortgage broker cannot offer competitive rates to borrowers,
they won't be able to sustain their business. As long as
borrowers continue to compare rates and loan fees, banks and brokers need to abide by market pricing, and also try to
provide more efficient customer service.