Is it better to use a mortgage broker or go straight to the bank?
When you’re looking for a home loan you can either apply directly with a lender or use a mortgage broker.
A broker is an intermediary who connects borrowers with suitable home loan products. If you’re unfamiliar with the home loan process or your financial situation is complicated, a good broker could make the process a lot easier.
On the other hand, you’re also free to research loans yourself and approach lenders directly. If you’re refinancing, you might even start by asking your current lender for a better deal.
There are advantages to both options and the right one depends on you and your situation.
Are mortgage brokers cheaper than banks?
Mortgage brokers generally don’t charge fees to their customers. Instead they’re paid in commission from the banks and lenders they pass borrowers on to. That means, in theory, it isn’t any more expensive to use a broker compared to just going direct. Whether it works out ‘cheaper’ depends on whether you’re saving in interest and fees with the loan you end up with.
It is worth keeping in mind, though, that mortgage brokers do not work with every lender on the market. Brokers generally work with a select panel of lenders, so it’s possible the lowest rates around might not be available via a mortgage broker.
It’s generally a good idea to compare home loans, even if you’re using a broker, in case you can find a better deal on your own.
Is it easier to get a mortgage through a broker?
How easy it is to get a home loan depends on your circumstances. If you have a large deposit, steady income, and a high credit score with no history of bankruptcies or defaults, you’re likely to stand out as an attractive candidate to a lender. In that case, finding a competitive home loan yourself might be relatively straightforward. Lenders typically try to make it as easy as possible to apply online, and you can compare home loans to find a product that suits you.
If you have a more complicated application though, perhaps you have an irregular income or a very small deposit, finding a mortgage by yourself could be tougher. A mortgage broker might be able to help you with your application, and could know which lenders are more likely to approve your home loan.
How do you choose a mortgage broker?
If you’re looking for a good broker, there are several questions worth asking to figure out whether you’ve found the one:
- Are they licensed and qualified? Brokers need to hold an Australian Credit Licence (ACL) and usually need to have completed their Cert IV in Finance and Mortgage Broking and Diploma of Finance and Mortgage Broking Management.
- Do they have expertise helping borrowers with similar circumstances to yours? Specialist knowledge can be one of the biggest advantages to using a broker. If you’ve got an unusual financial situation (maybe you’re self-employed with irregular income), it makes sense to find a broker with plenty of experience with similar borrowers.
- How many lenders do they deal with? Brokers deal with a panel of lenders rather than the whole market. The bigger the panel, the more options you could have available through them.
What are the pros of using a mortgage broker?
Expertise
Home loan hunting can be intimidating, especially if you don’t know much about it. Brokers are experts and can walk you through the application process and help you figure out which product is right. This can be especially useful if you have an atypical application—if you’re self-employed for example or have a patchy credit history.
Save you time
Even if you know what you’re doing, shopping around for a home loan can take time. Going with a broker could speed up the process, at least on your end, and minimise any hassle.
Negotiate on your behalf
A good broker keeps working for you even after you sign the loan contract. They can look out for a lower rate, either at another lender or by negotiating with the current one. Lenders sometimes miraculously manage to shave off a few basis points if there’s a threat you might refinance elsewhere, and a good broker can make those calls for you.
What are the pros of going directly to a bank?
Wider range of products
Mortgage brokers don’t work with every lender on the market, so there could be products out there better suited to you than what their panel can offer.
Rates may be lower
Many online lenders don’t deal with brokers at all, operating with a solely direct-to-customer approach. Since online lenders usually have fewer operating expenses, using a broker could mean missing out on some of the market’s more competitive interest rates.
Potential for direct-only cashback offers or deals
Some lenders offer cashback offers and interest rate discounts to home loan applicants or refinancers, but many of these are only available to borrowers applying directly.
