What’s The Difference Between A Mortgage Broker Versus A Bank
When it comes to obtaining a mortgage, you have two main options – working with a mortgage broker or a major bank.
Although both options have their advantages, opting for a mortgage broker could provide a range of benefits that make it the better choice for many borrowers, whether you are purchasing your own home or investment property.
What Is A Mortgage Broker
Mortgage brokers are independent professionals who work with a variety of lenders to obtain the best financial (mortgage/loan) options for their clients.
Acting as an intermediary between the borrower (you) and the lender, their services are usually free to the borrower as they receive a commission from the lender.
Make sure you check the terms and conditions before commencing work with any mortgage broker, they must disclose any commission or payment they receive.
Benefits Of Using A Mortgage Broker
One of the primary benefits of working with a mortgage broker is that they have access to a more extensive range of lenders and products than a major bank.
This allows them to shop around on your behalf and obtain more favourable terms than if you were to approach a bank directly.
For instance, they may be able to find lenders who offer more flexible repayment terms or lower interest rates.
For individuals purchasing their own home, a mortgage broker can also help you understand the different types of loans available, such as fixed rate, floating rate, and revolving credit loans.
They can assist in determining how much you can afford to borrow, taking into account your income, expenses, and other financial obligations.
For individuals purchasing an investment property, a mortgage broker can help you understand the different lending criteria and requirements for investment properties.
They can also help navigate the often complex application process and offer advice on how to structure the mortgage to maximise investment returns.
Another benefit of using a mortgage broker is that they can provide expert guidance throughout the entire mortgage process. They can help borrowers understand the various mortgage products and features available, and provide advice on which options are best suited to your individual needs and goals.
Products:
Offer a broader range of finance products and repayment options.
Time-saving:
Shopping around for the best mortgage deal can be a time-consuming process, especially if you are not familiar with the lending market. A mortgage broker can take care of this for you, saving you time and hassle.
Flexibility:
Mortgage brokers can work with a range of lenders, including non-bank lenders that may offer more flexible terms and conditions.
Tailored service:
Mortgage brokers take the time to understand your individual needs and goals, and can provide a personalised service that is tailored to your unique situation.
More choice:
As mortgage brokers work with a range of lenders, they can offer a greater choice of products, features and benefits than a major bank.
Support beyond settlement:
Mortgage brokers can provide ongoing support and advice even after your mortgage has settled, helping you to manage your repayments and make the most of your investment.
Benefits Of Using A Bank
Major banks have the advantage of providing a range of banking services and products, such as savings accounts, credit cards, and insurance products.
They are also a one-stop shop for all banking needs, making it easy to manage finances in one place.
If you have been with a bank for several years and already have a loan with them, you may find refinancing or applying for a new mortgage a little easier, since you are a current client.
Major banks have physical branches, for those who like to pop into their local branch and apply for a loan this may be a better option.
Though as time moves on we are seeing fewer and fewer physical branches, especially in smaller towns.
Banks do offer a lot of convenient services including, websites, apps, digital signing and banking applications.
The five major banks are typically stable institutions with a long history of providing mortgages, which can give you peace of mind when making such a significant financial decision.
However, major banks are limited by their range of products and lending criteria, which may not be suitable for all borrowers.
Their application process is often more rigid and may take longer to complete than when working with a mortgage broker.
Additionally, major banks may not always offer the most competitive interest rates or flexible repayment terms.
For example, a bank may require a larger deposit or a higher income level than what the borrower is capable of providing, making it difficult for them to obtain a mortgage.
Mortgage Broker Versus A Bank
In contrast, a mortgage broker can offer a more personalised service that caters to each borrower’s unique situation.
They take the time to understand their individual needs and goals and can offer a range of options that may not be available through a major bank.
For example, a mortgage broker may be able to secure a mortgage for the borrower through a non-bank lender that offers more flexible terms and conditions, such as lower deposit requirements or lenient income criteria.
They can also offer ongoing support and advice even after the mortgage has been settled, assisting borrowers to manage their repayments and maximise their investment.
Nowadays you don’t just deal with one person at your local bank as you use to.
Banks have call centres around the world, physical banks have less staff and if you want to discuss your finances you can’t just drop in you have to make an appointment.
In conclusion, opting for a mortgage broker to help you obtain a mortgage can provide a range of advantages, making it the better choice for many borrowers, whether you are purchasing your own home or investment property.
With access to a wider range of lenders and products (including major banks), expert guidance, and a personalised service.
Working with a mortgage broker can help you secure the best mortgage deal and maximise your investment.
My Top Tip
If you haven’t contacted your mortgage broker for some time, give them a call and have a chat about your finances, there may be better loan options for you that you don’t know about.
I wrote an article about how we were able to save clients thousands of dollars because we had access to some great rates that were not advertised (READ HERE)
If you don’t have a mortgage broker or are looking for one we would love to hear from you.
We can discuss your circumstances or situation and see if we can help you. Or if you have received a loan offer from your bank, we are happy to see if we can beat it.
David Windler
Financial Adviser and Mortgage Broker
Director The Mortgage Supply Company