As mortgage brokers, we often get asked by clients to place their mortgage with the same institution where they have all of their banking so everything is conveniently located in one place. This seems like a great idea because then you only have one place to deal with. However, there are several pitfalls to this that you need to know about before you decide to place all of your banking with one institution.

The first and most obvious is that you limit yourself to what kind of rate you can get with that lender. They may or may not have the best rate and even .1% difference on your mortgage rate can mean thousands of dollars of extra interest over the term of your mortgage. Considering it only takes a couple of hours of your time in gathering documents for a mortgage, foregoing several thousand dollars in interest to stay with your “bank” doesn’t help your financial situation at all. Over the lifetime of your mortgage this could easily add 3 – 5 years onto your mortgage before it gets paid off. Many people will spend several hours of time researching prices to save money on everyday household products but when it comes to moving their mortgage they hesitate.

Many people want the comfort of walking into their “bank” and talking to their account rep about their mortgage. The reality is that there are usually only two things you normally do with your mortgage: 1) make extra payments and 2) change payment frequency. These are easily done online or over the phone.

The MOST CRUCIAL MISTAKE in putting all of your banking with one institution is the risk you put your other assets at. We have had situations where customers have co-signed mortgages for others or were unable to make their own mortgage payment for several days or weeks. The bank they were dealing at started pulling payments from other accounts, investments and even business accounts. This can really put you in a bind if those other monies were intended for other purposes. The bank claims they have the right to any of your assets to get whatever payments you are obliged to pay for.

We always suggest to our clients to follow the motto “don’t put all of your eggs in one basket”. You can have your lending with one lender, day-to-day banking with another, investments with another and if you have business accounts they should be held elsewhere. This will keep you in control of your money and not your bank. With online and telephone banking it’s very easy to access these accounts at any time.

The other major advantage of spreading your banking products around is you have options and other relationships developed in case you don’t get what you want from your bank. They may not give you the rate or the product you want in one area and if you then have to go shopping around elsewhere you already have relationships established which will make it much easier to start somewhere else.

So as the saying goes “don’t put all of your eggs in one basket”. Diversify your banking products and keep yourself in control of your finances!

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