Mortgage broker or bank: What’s the better way to find a home loan?
Mortgage brokers guide you through the whole home loan process and can help you if you're in a rush. But comparing banks and lenders yourself is easier than you think.
A mortgage broker can give you home loan options from a panel of lenders and help you with the application too. And their services are free.
But you can compare options from your bank, and lenders from across the market. You can often find a lower rate this way too.
If you're in a hurry or have a complicated borrowing situation, a mortgage broker is very helpful. But you can definitely find a great loan by yourself.
Getting a home loan via a mortgage broker versus a bank
Mortgage brokers are a popular service for Australian borrowers. MFAA data shows 76% of all new home loans are settled through a mortgage broker.
Brokers are convenient, helpful and usually free to borrowers. But comparing options from bank and lenders yourself isn't hard. And you can find a lower rate without too much hassle.
The pros and cons of using a mortgage broker
Pros
Using a broker is free. Mortgage brokers are paid commission from the bank and usually don't charge fees to the borrower (some brokers might charge for more specialist cases).
Fast loan approval. A good broker knows the nuances of lenders' credit policies, and can find you a really suitable lender. The broker advocates on your behalf and guides you through the application, increasing your chances.
Expert help. If you're buying an unusual property, have a small deposit, are self-employed or have multiple loans, a broker can really help you find a lender to suit your needs. It's much harder on your own.
It's easier. Having a mortgage broker run you through the home loan process makes life easier and takes some of the stress out of buying a home.
Cons
Fewer options to compare. Brokers have access to a panel of lenders (usually around 30). This includes the big banks, but not every smaller online lender. These are the lenders which often have the best home loans.
You have to pick a broker. While a broker does a lot of work comparing home loans for you, you have to do the legwork to find a good broker. Because there's plenty of them, and some are better than others.
Commissions can influence your broker. While using a mortgage is free, it's hard to know how much your broker is influenced by the commissions they get from different banks.
The pros and cons of using a bank
Pros
More loans to compare. You can look at rates from more than 100 lenders, compared to a mortgage broker who has access to around 30 lenders.
You could find a lower rate. You might find a great rate from a small online lender which doesn't feature in a broker panel.
Banks have lending specialists. Mortgage brokers offer a very personalised service, but banks and lenders also have specialised to guide you through the application process.
Loyalty can pay. The bigger banks have a wide range of home loan products, and it's very convenient to get a loan with your current bank.
Cons
You have to do more legwork. With the DIY approach you have to compare home loans, do more research and figure out what you need without any help.
Applications can be confusing. A mortgage broker guides you through every stage of the loan application. Some people find it stressful to do this themselves.
Approval might take longer. Brokers have a good sense of which bank can handle your application fast. That's often very useful when your settlement deadline is approaching fast.
Higher chance of rejection. If you're self-employed or have bad credit, a lot of banks are unlikely to approve your application.
Which is better: mortgage broker or bank?
Deciding whether you want to use a mortgage broker or go straight to a bank is really up to you.
A mortgage broker is a great option if you:
Aren't sure if you can find the best rate for yourself.
Are confused by the whole process.
Need a home loan quickly.
Have a complicated borrowing situation.
If you can spend the time getting to understand home loans, comparing different options and working through the application yourself you might want to use a bank instead.
But even with a broker it's important to take some time to understand how home loans work. The more you learn the more equipped you are to find a better deal and stay on top of your loan repayments.
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."
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Frequently asked questions about mortgage brokers vs banks
Mortgage brokers often can't get you a better rate than if you were to go direct to a lender, but it depends.
Brokers generally have access to a panel of around 30 lenders. These panels won't have a lot of the smaller online lenders who offer the cheapest loans, but the panels will differ between brokers. You could compare home loans yourself across a larger number of lenders to find yourself a better deal.
However, not every borrower is eligible for a bank's lowest rate. It might be that your mortgage broker, who knows the banks' appetites, can find the lowest rate available for your situation or negotiate a bank's rate.
Yes, a mortgage broker can help you apply for pre-approval. Brokers will also know the banks that do and do not offer pre-approval, as well as how fast they can provide it - which can be crucial if you're coming up to auction.
Mortgage brokers typically don't charge a fee to borrowers. They are instead paid by commission from the banks, with both an upfront commission and a smaller ongoing commission through the life of the loan.
However, there are some mortgage brokers who have chosen to charge a fee to borrowers instead of receiving a commission. Brokers may also charge fees if the borrower situation requires more work in certain complex situations.
Richard Whitten is Finder’s Money Editor, with over seven years of experience in home loans, property and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Graduate Certificate in Communications from Deakin University. See full bio
Richard's expertise
Richard has written 596 Finder guides across topics including:
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?
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.
A mortgage broker from Loan Market can compare loans from 60+ lenders.
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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