To use a mortgage broker or bank?
A mortgage broker is an intermediary between borrowers and lenders. They can help people find a loan that suits their circumstances and needs by researching and comparing a range of loans available from various lenders.
The broker can negotiate with lenders on behalf of borrowers to try for the best deal possible. Brokers can also support and manage people through the application and settlement process. Most brokers will not charge a fee for their service as they are paid a commission by the lender when the mortgage is settled.
As when researching any financial product, it is important to shop around and compare what deals are available across the market as brokers typically have a panel of lenders and products which may not cover the whole market.
Pros of a broker
- Brokers can do some of the research for you. A broker identifies individual requirements, assesses credit eligibility and researches options that suit those needs and circumstances from a range of lenders.
- A broker can be the one point of contact. They can work on people’s behalf and negotiate the loan with the lender. They can also guide through the application and settlement process.
- You can benefit from a broker’s experience and expertise in the industry. They often have access to exclusive offers or products and can clarify various aspects of a loan and government grants and incentives.
Cons of a broker
- Brokers are paid different amounts of commission depending on the lender. This could potentially influence the loan recommended to you, so it is always worth doing the research and comparing products.
- Although brokers have a wider range of products to choose from than a bank, they do not include all lenders and products. There may be loans in the market that are not offered by your broker e.g products available through online providers.
Pros of a bank
- Working with a bank allows you to build off an existing relationship you might have with your primary banking provider. Your current bank is likely to already have a lot of information about you such as your account history, your income and credit history if you have applied or been approved for credit in the past. Your bank may have exclusive offers and benefits for existing customers and can easily set up automatic payments and linked accounts to your loan.
- Some banks, particularly online lenders, offer cheaper loans that may not be available through a broker.
Cons of a bank
- Banks can only offer you a limited set of products. These loans may not best suit your needs and depending on your credit history, you may not meet the bank’s lending criteria to qualify for the loan.
- Although banks regularly give discounts on their advertised rates, it is up to you to make this negotiation.
- Settling a loan through a bank is a lengthy process and you may not have one point of contact throughout the entire process.