There are 5 banks in Canada that is often grouped as one entity and referenced to as "The Big Five Banks". These banks are:
- Royal Bank of Canada (RBC)
- Toronto-Dominion Bank (TD)
- Bank of Nova Scotia
- Bank of Montreal (BMO)
- Canadian Imperial Bank of Commerce (CIBC)
The Big Five often offers the best rates.
Being the largest banks in Canada, they often offer the best rates. However, on the flip side, they are often stricter when it comes to their mortgage products and offerings. Because they offer the best rates, you should always check with them first before approaching other banks, mortgage brokers, or private lenders.
The Big Give often offers HELOC - Home Equity Line of Credit - with their mortgage products
Home Equity Line of Credit, or also referred to as HELOC, is a fantastic product to have. It basically means there is a Line of Credit with low interest rate (just slightly higher than your mortgage interest rate, in the range of 0.5~1%) with a growing credit balance as you pay off the principal of your mortgage. For example, if you have a $1 million mortgage with RBC with HELOC, when you pay off $200,000, you will have a $200,000 Line of Credit available for you to use. You can use that as emergency fund, or use that to invest and utilize its low interest rate. This is an extremely useful cash flow and investment capital instrument.
You can avoid significant broker fees by going with The Big Five
When you go with a mortgage broker, or a mortgage agent that offers products from credit unions or private lenders, they often charge you an additional broker fee - usually in the range of 1~1.5%. Which means, if you get a $1 million mortgage with these lenders, you’d be paying at least $10,000 to $15,000 broker fee. This is how mortgage brokers make a living by connecting homebuyers to the lenders they work with. In addition to the broker fee, keep in mind that these lenders often cannot offer the best rates and they often don’t offer additional products such as HELOC.
Therefore, when applying for a new mortgage or when renewing an existing mortgage, check with The Big Five first for the best rates and the best products.
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