What are digital mortgage brokers? And should you use one?

By: Sandra MacGregor on July 3, 2024
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In the ever-evolving landscape of personal finance, digital mortgages have begun to gain popularity over the last few years. They offer Canadian homebuyers convenient and attractive options that may not be available with a less-competitive conventional bank.  

But what’s the catch? This article will explore what digital mortgages are, their safety, the pros and cons of using digital mortgage brokers, and how digital mortgages may become even more popular in the future. 

What is a digital mortgage? 

A digital mortgage, also known as an online mortgage, is a home loan process that happens entirely online (usually via a website or mobile app). From application to approval, you never actually meet in-person with a mortgage specialist.  

This modern approach to getting a mortgage uses advanced technology to streamline and speed-up the loan process. While going through the mortgage process completely online may make some people uncomfortable, fans of digital mortgages argue that the online process is more convenient for clients and makes things faster and more efficient. 

How do digital mortgages work? 

The digital mortgage process is a lot like the traditional application process except that it takes place all online.  

Rather than sitting down with an agent in person, you instead begin by filling out a simple online application on the lender’s website or via their app. You’ll be required to provide similar information as you would in a traditional application, such as your income, debt load, employment information and the desired loan amount. The mortgage loan broker then determines if you’re eligible for a mortgage and will contact you about the next steps.  

Who offers digital mortgages? 

Digital mortgages are offered by a growing number of financial institutions and fintech companies in Canada. For example, Wealthsimple, one of the country’s most popular robo-advisors, has partnered with Pine Financial to offer digital mortgages. QuestMortgage, an offshoot of Questrade, is another fully online mortgage brokerage. Traditional banks like TD are also increasingly adopting digital mortgage solutions. 

Mortgage agent vs. mortgage broker 

Understanding the difference between a mortgage agent and a mortgage broker can be helpful when searching for a mortgage, whether online or in person.  

Both are licensed professionals who work with a variety of lenders to help clients find a suitable mortgage product. However, the main difference between the two is that mortgage brokers have taken on additional training which allows them to oversee individual mortgage agents.   

Mortgage agents themselves also fall between Level 1 mortgage agents and Level 2 mortgage agents. Level 1 agents typically only mediate between borrowers and traditional mortgage lenders like banks and credit unions. Level 2 agents and brokers facilitate mortgages between borrowers and other forms of lenders, like alternative and private lenders.  

Read more: Should you get your mortgage using a broker or a bank? 

Are digital mortgages safe?  

Reputable digital mortgage providers use advanced algorithms and security protocols to protect your information. That said, it’s up to you to do your research to be sure you’re dealing with a reputable firm.  

As a first step, make sure the broker you’re working with has all the necessary licences for the provinces they’re operating in – if they’re in Ontario, for example, they should have a Financial Services Regulatory Authority (FSRA) Brokerage Licence number, and that number should be cross-referenced on the FSRA mortgage agent database.  

From there, read reviews of the company to get a feel for what to expect and whether other customers have had positive experiences. Before proceeding, ask about fee and payment structures – they may advertise low rates, but you never want to be hit with an unexpected fee later.  

Remember that mortgage brokers aren’t paid by the borrower, they’re paid on commission by the lender after the mortgage closes. With the exception of highly specialized mortgages, any money you pay should go directly to the lender.  

Lastly, you are also responsible for maintaining the security of your account - basic security precautions include using strong passwords and multi-factor authentication, as well as protecting your computer from viruses. This will ensure that your data stays well within your sightlines.   

The pros of digital mortgage brokers 

There are numerous benefits to going with a digital mortgage, including: 

  • Convenience. Rather than having to meet several times with a mortgage loan broker in their office, you can apply for a new mortgage or refinance your mortgage from the convenience of your home at any time, 24/7.  
  • Speed. The digital loan application process is faster than traditional applications. 
  • Ease of use. You can upload your documents online, check your status anytime and get updates all online.   
  • Better rates. The streamlined digital process results in savings to the lender which they can pass on to clients in the form of more competitive rates. 

The cons of digital mortgage brokers 

While there are significant benefits to getting a digital mortgage, there may also be drawbacks, including: 

  • Lack of personal touch. Some people prefer to form a personal relationship with their mortgage provider and feel the need for face-to-face meetings, where they can get all their questions out of the way. 
  • Security. Like with other non-traditional brokers or newer financial technology (fintech) companies, it’s extra important to confirm that you’re dealing with a reputable digital lender to ensure your information is secure online. 
  • Products. Digital mortgage providers may only have a limited range of products (though this may change as they become more popular). 

How can digital mortgage brokers offer lower rates? 

One of the most attractive features of going with a digital mortgage is that they can offer better rates than traditional mortgages with banks.  

As mentioned before, the vast majority of mortgage brokers are paid on commission by lenders after the mortgage closes. However, by keeping all operations online, digital brokerages can save on expenses like office space and staffing. These savings can then be passed on to their customers in the form of lower rates and discounted fees. Occasionally, a digital mortgage provider may even offer cashback promotions. 

Should you get a digital mortgage?

If you’re an experienced borrower who is comfortable with technology and place a premium on speed and convenience, you’ll likely feel at home with a digital mortgage provider. Depending on the rates offered, you could even save thousands of dollars over the term of your mortgage.  

However, they’re not ideal for everyone.  

People who value face-to-face interactions or have lots of questions about their eligibility, for example first-time homebuyers, may prefer the personalized service offered by traditional brokers.  

And some digital mortgage brokers that pride themselves on the simplified, streamlined approach, may have a hard time covering the unique needs of customers with more complicated financial situations (or who are looking to buy more complicated homes!). 

Where do aggregators like LowestRates.ca fit into all this?  

Amidst digital mortgages and traditional brokerages, there’s a third resource for homebuyers. Aggregators, like LowestRates.ca, combine the convenience and low-rate potential of digital mortgages with the personalization and care of a human broker.  

Here’s how it works:  

  1. Customers fill in their details on our mortgage quoter. Based on the information they key in, they’re presented with a range of different rates from partners (a combination of lenders and brokers), ranked by the lowest rates.  
  1. Once they choose a rate, the aggregator (that’s us!) calls the customer back to verify details and connects them with the mortgage provider, with whom they will also share the customer’s details.  
  1. The mortgage provider will then coordinate with the customer directly to fine-tune the details and verify documents.  

Just like with a digital mortgage broker, the customer fills out their details online and can immediately begin the verification process, with the added advantage of being able to see other rates to decide what’s best for them. But, at the end, they still get the personalized experience of working with a broker, who can guide them through the process.  

Read more about how it works here.  

Are digital mortgages the norm now?

Digital mortgages offered by firms like QuestMortgage and Pine Financial are just a taste of what’s to come. As our dependency on technology grows, more and more mortgage providers are already foraying into the digital space.  

Platforms like Lendesk are making it easier for individual mortgage providers to have their own digital presence by creating their own user-friendly websites. As more lenders embrace these technological solutions, the entire mortgage process will likely become more streamlined, efficient and accessible, as well as more competitive, which is good news for Canadian homebuyers.  

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