Is a 0.05% Lower Mortgage Rate Really Worth It?

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I had a first this week. After 18 years in the mortgage business, I told a potential client exactly what I thought.

And I mean exactly what I thought.

Here’s what happened.

The Work Behind the Mortgage

A client came to me because another lender had been “working on his file” for a couple of weeks and still hadn’t been able to get the mortgage done. I jumped in.

Same-day service. Phone calls. Emails. Questions answered. Misconceptions cleared up. A full review of the mortgage and the options available to him.

Rates moved while we were working on the file, so I even went back to the lender and had the rate adjusted downward for him. We got him approved.

Great outcome, right? Well… sort of.

He took my commitment back to the lender who had been unable to get the deal done in the first place, and suddenly — magically — they were able to offer him something better.

By 0.05%.

And he stayed with them.

The Cost of Chasing a Lower Mortgage Rate

Listen, I know this business. You win some. You lose some.

I am genuinely not upset that I lost the mortgage. That happens. If you work on commission, you learn pretty quickly that not every file you touch is going to fund.

What bothered me was something different.

It was the complete lack of respect for the time involved.

Mortgage Brokers don’t get paid for phone calls. We don’t get paid for emails. We don’t get paid for explaining why something you read online may not apply to your situation. We don’t get paid for packaging a file, submitting it, speaking with the lender, negotiating an exception or going back for a rate reduction when rates change.

We get paid when the mortgage funds.

That’s it.

So when someone uses all of that work simply to negotiate a better offer somewhere else, there is a real cost to that.

And not just to the broker.

Lenders are busy. Underwriters are busy. Files take time to review. Brokerages have relationships and commitments with their lending partners.

Submitting a mortgage for approval and then cancelling it once you’ve used that approval as leverage somewhere else wastes time on both sides.

There’s Nothing Wrong With Shopping Around, But Be Honest

That doesn’t mean you shouldn’t get a second opinion. You absolutely should.

That doesn’t mean you shouldn’t make sure you’re getting a competitive mortgage. You absolutely should.

But there is a better way to do it.

Be honest with your broker.

If you’re shopping your existing lender, tell us.
If you’re only looking for a rate quote, tell us.
If you have no intention of moving your mortgage unless we can beat your current lender, tell us.

There are ways we can help you compare options without submitting a full application to a lender and asking an underwriter to spend time approving a mortgage you never intended to fund.

Lowest Rate ≠ Best Mortgage

And while we’re on the subject… can we please stop making mortgage decisions based entirely on the lowest rate?

A 0.05% lower rate looks great on paper, but mortgages are not interchangeable.

And neither are lenders.

Prepayment privileges matter.
Penalty calculations matter.
Portability matters.
The ability to refinance matters.
Restrictions matter.
Service matters.

And the advice you receive when something goes sideways absolutely matters.

Sometimes the mortgage with the slightly lower rate is actually the more expensive mortgage once you look beyond the number in bold at the top of the page.

The Honest Conversation I Had With the Client

In this particular case, I genuinely believed the mortgage I had arranged was the better product — despite being 0.05% higher.

That’s when the client called me.

He wanted to thank me for everything I had done and tell me that if the other lender didn’t come through, I was his “number one choice.”

And apparently that was the moment my 18 years of diplomacy took the afternoon off.

Because I told him the truth.

I explained that while I appreciated the call, I wasn’t particularly interested in being his number one choice after someone else failed again.

I explained the amount of time that had already gone into his file.

I explained that my lender had spent time underwriting and approving it.

And I explained that using one professional’s work to negotiate with another professional — without being upfront about your intentions — isn’t something I think we talk about enough in this industry.

Was it the most polished sales conversation I’ve ever had? Probably not.

Was it honest? Absolutely.