My bank REALLY REALLY REALLY wants my mortgage! Really?
Does your bank really, really, really want your mortgage that badly?
Do you know why?
NOT because they make lots of money on mortgages.
NOT because the bank rep needs to fill their mortgage quota this month (this happens too.)
BECAUSE the banks have studies that if they can get you to have 3 or more products with them, your odds of leaving to go to another bank fall by 75%.
This means 2 things:
- If they can get you to have the mortgage in addition to your existing checking and savings accounts and or credit card then you will probably not leave for another bank and their cost of customer acquisition is very high.
- Then they can cross-sell you the products they really, really make money on:
- LOCs – line of credits – and more credit cards both with overdraft protection and insurance for the minimum payments if you are injured or laid-off.
- mortgage insurance – a huge profit for them as they try very hard later not to pay claims in their post-claim underwriting process
- mutual funds
- long distance phone plans
- travel insurance
- all the rest.
And 1 more VERY important thing:
Banks know that 86% of people will stay with their existing bank at mortgage renewal time. AND if you have the magic 3 products will you move your mortgage somewhere else then?
Banks expect you to chisel them down now, and when you renew they renew you at rates that are typically .25% to .75% higher than they should be. And 86% of people just sign the renewal docs and send them back. (More data from studies.)
This does NOT happen with mortgages via mortgage brokers as the banks know they have to renew you at the best possible rates or the very same broker that took the customer to that bank will be the very same broker that moves the customer to a new bank if for a better rate on renewal.
Do you want to play this game with the banks or just skip it all together?
All this advice from the top mortgage broker in Calgary Alberta, Mark Herman.