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Mortgage broker or bank: What’s the better option?
Applying for a home loan can be confusing, which is where mortgage brokers can help. But if you're confident, you might want to apply directly to your chosen lender.
To help decide between applying for a home loan directly with a bank or lender versus using a mortgage broker, we've broken down the main benefits and drawbacks of both.
There's really no wrong answer. A broker can make the mortgage experience easier but they don't have access to every lender. Doing it yourself takes more time, but when you've found the right loan and lender, you might end up with a better deal.
Brokers
Lenders
Service
A broker works on your behalf through a multitude of mortgage options, comparing rates, fees and features.
They can guide you on every step of the home loan process, ultimately connecting you with a bank or non-bank mortgage lender and overseeing the application process itself.
A good broker will also continue their service long after the loan has settled, doing regular checks to ensure the loan is still the right fit for you down the track.
A lender will explain its own mortgage offers and find one that suits your needs.
A lending specialist from the bank will help with your application, but you will be expected to do most of the work.
Mortgage options
Brokers have access to hundreds of loans from a panel of 20–30 lenders. The options range from Australia's biggest banks to more niche non-bank lenders. This should mean that they can find a solution for most borrower circumstances.
Lenders have their own set of mortgages. Bigger banks have loans for almost every borrower, while smaller ones may have fewer options.
If you are researching lenders, you theoretically have access to any lender and loan, widening your options significantly.
Commissions and fees
Brokers receive a commission from lenders, not borrowers. It does not impact the cost of the loan. Most brokers don't charge fees either, but you will still need to pay any fees applicable to the lender you eventually choose.
Banks will typically charge some form of application or settlement fee, plus several other fees.
Keep in mind that some banks charge very few fees, and some products have more fees than others.
The mortgage broker process explained
A mortgage broker assesses your situation and your creditworthiness to develop a better picture of your chances of qualifying for a home loan.
They take your information and come up with a selection of loans for you to choose from.
You make your choice and the broker will guide you through the application process.
If you have questions about your mortgage options, contacting a broker can be very effective.
Expert insight: How a broker can help
"A broker works for the consumer; a bank is a business responsible for making profits for their shareholders. Think about it. A good broker will educate you and structure your lending to protect you and keep your options open as much as possible; a bank will structure your lending to secure and protect their position as much as possible. Understanding lending structures, knowing your options and sound financial literacy is key."
A good broker is well-practised in finding the best deals from lenders in their panel. They will know the nuances of lenders' credit policies, and should be able to direct you to lenders best-suited to your circumstances.
When seeking a mortgage via a bank, the broker can also advocate on your behalf, increasing your chances of success with the process.
If you have a complicated borrowing situation, a broker is well-placed to help you navigate your options and minimise your chance of rejection.
Brokers will stay in touch and reassess your loan every couple of years to make sure you're still on the best rate.
Due to the sheer number of mortgage brokers out there, it can be difficult to determine which brokers are highly experienced, and which brokers are new.
If you don't have a solid understanding of the finance and mortgage industry, you are relying entirely on the broker.
There are lenders that don't work with brokers. The perfect loan for you might be one that a broker can't get for you.
Brokers work for you, but they get commissions from the lender you choose via their service.
The pros and cons of going directly to a bank for a home loan
Some lenders are not in any broker's panel. This includes smaller online lenders which often have the market's lowest rates.
If you're already a customer with a bank, it can often structure a loan to work with other bank-provided products you have already.
You deal directly with lending specialists. Any questions you have or any additional information the lender needs can be addressed without taking the time to go through an intermediary.
You can focus on a few select products, with the larger banks still offering good variety for different borrowers.
You only have access to the loans offered by the bank or lender. They won't tell you if you can get a better offer elsewhere.
Banks likely won't maintain the long-term service where they tell you if you can move to a lower interest rate.
If you are rushing to get a loan approved quickly, you might have a problem if your lender is slow or has a big backlog of applications. Brokers often know which lenders are currently able to approve loans faster.
If you're self-employed or have bad credit, a lot of banks are unlikely to approve your application. A broker will help you find a lender that can.
Speak to a mortgage broker and get home loan help
Compare loans from many lenders across the market
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Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio
Richard's expertise
Richard has written 553 Finder guides across topics including:
ChoiceLend offers its loans through Choice Aggregation Services. It has a range of loans including variable, fixed and split rates, as well as equity loans.
Do mortgage brokers use mainly the “big 4” or do they look at smaller type lenders too, like ubank, loans.com, mortgage house and so on?
If only some brokers use these how do I find out?
JodieMay 9, 2016
Hi Markus,
Thank you for contacting finder.com.au we are a financial comparison website and general information service.
Mortgage brokers work with a range of lenders you can check their panel of lenders by visiting the below provider pages on finder.com.au, also, you can check the mortgage brokers websites directly.
Regards
Jodie
markusMay 9, 2016
Hi Jodie,
Thanks for the reply.
Ok so if say a mortgage broker workes with NAB, woud that mean if ubank is affiliated with NAB that the broker will automatically work with that lender too?
JodieMay 9, 2016
Hi Markus,
Apologies I forgot to mention that the three lenders you pointed out, loans.com.au, UBank and Mortgage House, are not offered through any mortgage broker they only offer their home loans direct to the public.
Mortgage broker still work with a great range of lenders there are just some specific online lenders that choose to only offer their loans direct.
Regards
Jodie
DrewJanuary 25, 2016
If a customer was considered by a lender to be a “Good Borrower”; can the customer get as good of a deal going direct to a bank, as a broker could through their channels?
In other words, does a broker have more bargaining power than a customer, if they were to approach to same lender.
Finder
MarcJanuary 27, 2016Finder
Hi Drew,
thanks for the question.
It’s definitely possible for borrowers acting independently of a broker to get a great deal. Sometimes, some of the lowest rates are offered by lenders who do not work with brokers at all to keep their costs lower.
A broker has a distinct benefit when your situation isn’t clear cut e.g temporary visas, unusual income types, or you don’t have the time to properly evaluate your options. They’re also invaluable if you don’t really understand the home loan industry and products but want a good deal.
We’ve seen some great broker rates on offer too, so it’s helpful to compare home loans in the market regardless of which way you go to make sure you’re informed.
I hope this helps,
Marc.
BeatriceApril 8, 2015
A broker has given me 45, 000 I can borrow from a private investor however he wants the insurance up front is this normal
Finder
MarcApril 9, 2015Finder
Hi Beatrice,
Thanks for the question.
If you are referring to Lender’s Mortgage Insurance (LMI), this is normal to be required upfront. If you are ever in doubt about a particular deal, please seek the services of another mortgage broker or speak to a financial advisor.
Cheers,
Marc
HelenMarch 20, 2015
Hi Shirley,
Thanks for your reply.
I mean what sort of things are out of a mortgage broker’s authority? is there anything a mortgage broker not authorised to do in terms of advising or services?
Finder
ShirleyMarch 23, 2015Finder
Hi Helen,
Thanks for your question.
Mortgage brokers can not assist with investment and financial advice, this includes tax matters.
I recommend getting in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that’s more inclined to review your application.
Cheers,
Shirley
HelenMarch 17, 2015
what limits a mortgage broker’s authority?
Finder
ShirleyMarch 18, 2015Finder
Hi Helen,
Thanks for your question.
Could you please provide some further clarification to your question?
Cheers,
Shirley
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Hi,
Do mortgage brokers use mainly the “big 4” or do they look at smaller type lenders too, like ubank, loans.com, mortgage house and so on?
If only some brokers use these how do I find out?
Hi Markus,
Thank you for contacting finder.com.au we are a financial comparison website and general information service.
Mortgage brokers work with a range of lenders you can check their panel of lenders by visiting the below provider pages on finder.com.au, also, you can check the mortgage brokers websites directly.
Regards
Jodie
Hi Jodie,
Thanks for the reply.
Ok so if say a mortgage broker workes with NAB, woud that mean if ubank is affiliated with NAB that the broker will automatically work with that lender too?
Hi Markus,
Apologies I forgot to mention that the three lenders you pointed out, loans.com.au, UBank and Mortgage House, are not offered through any mortgage broker they only offer their home loans direct to the public.
Mortgage broker still work with a great range of lenders there are just some specific online lenders that choose to only offer their loans direct.
Regards
Jodie
If a customer was considered by a lender to be a “Good Borrower”; can the customer get as good of a deal going direct to a bank, as a broker could through their channels?
In other words, does a broker have more bargaining power than a customer, if they were to approach to same lender.
Hi Drew,
thanks for the question.
It’s definitely possible for borrowers acting independently of a broker to get a great deal. Sometimes, some of the lowest rates are offered by lenders who do not work with brokers at all to keep their costs lower.
A broker has a distinct benefit when your situation isn’t clear cut e.g temporary visas, unusual income types, or you don’t have the time to properly evaluate your options. They’re also invaluable if you don’t really understand the home loan industry and products but want a good deal.
We’ve seen some great broker rates on offer too, so it’s helpful to compare home loans in the market regardless of which way you go to make sure you’re informed.
I hope this helps,
Marc.
A broker has given me 45, 000 I can borrow from a private investor however he wants the insurance up front is this normal
Hi Beatrice,
Thanks for the question.
If you are referring to Lender’s Mortgage Insurance (LMI), this is normal to be required upfront. If you are ever in doubt about a particular deal, please seek the services of another mortgage broker or speak to a financial advisor.
Cheers,
Marc
Hi Shirley,
Thanks for your reply.
I mean what sort of things are out of a mortgage broker’s authority? is there anything a mortgage broker not authorised to do in terms of advising or services?
Hi Helen,
Thanks for your question.
Mortgage brokers can not assist with investment and financial advice, this includes tax matters.
I recommend getting in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that’s more inclined to review your application.
Cheers,
Shirley
what limits a mortgage broker’s authority?
Hi Helen,
Thanks for your question.
Could you please provide some further clarification to your question?
Cheers,
Shirley