How do they compare?
If you need a home loan, there are three ways to go about it: apply with your bank directly, shop around for a deal yourself or get a mortgage broker to do it all for you.
So, mortgage broker vs bank: which is the better option?
|Assessing your payslips and documents
|Credit officers will look at your home loan application and work out a favourable outcome.
|Credit officers might misinterpret payslips as they don’t understand how to assess your income.
|Mortgage brokers know the home loan process and lending policies of the lenders they work with. They are experts in home loans.
|Since they offer an array of services, they lack mortgage expertise. They only have knowledge about their own lending policy.
|Home loan options
|Mortgage brokers will have a variety of home loan options and interest rates. They are more concerned with matching you with a home loan that fits your situation.
|Home loan options are limited as they can only offer their own products. If you don’t fit their lending criteria, then you’d be declined for a home loan.
|With the advent of online mortgage brokers, you can apply and submit documents online without ever visiting the office.
|While banks do have online application options, most of them will still require you to physically visit the branch to submit documents.
|They will review your home loan at regular intervals to ensure you’re still getting competitive rates on your mortgage.
|Banks are not obliged to ensure that your interest rates are competitive.
|Point of contact
|They are your point of contact during the entire process of buying a home and will work towards your best interest.
|They are working towards the interest of the bank.
Did you know banks don’t have to work in your best interests?
Mortgage brokers now operate under an unrivalled Best Interests Duty when providing credit assistance to consumers, which provides yet another compelling reason to use a broker.
This new legal duty offers customers peace of mind knowing that their mortgage broker is legally required to act in their best interests and put their interests first.
In other words, we must always act in your best interest; however, if a customer goes to a bank directly, then the bank can act in their own interests and not those of the borrower. As mortgage brokers, we act in your best interests when recommending a home loan whereas a lender sells you their products.
Looking for a home loan recommendation but don’t know whom to trust? Mortgage brokers put your best interests first.
Call us today on 1300 889 743 or fill in our online assessment form to get an unbiased home loan recommendation.
The advantages of using a mortgage broker
They will collect your income evidence and the other documents you need to provide as part of your application and take care of the whole process from application to settlement.
- Communicating with credit officers to provide further evidence they may need to assess your application.
- Liaising with valuers, your solicitor, your builder (for construction) and even real estate agents (if you’re buying an investment property or buying at auction) to ensure a smooth application process.
- Being your one point of contact across the entire process and staying in contact at each stage of the process so you know what is going on.
Where great performing bank staff work together with mortgage brokers is when you as a borrower get the best of both worlds.
The funny thing is that these staff members tend to be promoted to management roles away from clients or they become incredible mortgage brokers themselves!
Discover the broker difference by calling 1300 889 743 or by completing our online enquiry form today.
Do mortgage brokers get better rates?
Mortgage brokers have strong negotiating power and can often get you lower interest rates than what your bank is offering you.
Banks will try and give you a good interest rate but they tend to only offer them to borrowers they consider low-risk such as those with a clear credit history, a good deposit and a stable income.
It also helps if you’re an existing customer. Did you know existing home loan customers pay a higher interest rate than new customers? It’s also referred to as a loyalty tax.
Even then, it’s not necessarily the best discount you can qualify for when you consider that there are more than 40 lenders in Australia.
Banks want broker business and they are willing to fight hard to get it because they know that we can simply apply with another lender.
Brokers give you more choice
Banks can only offer you their own products and adhere to their own lending policies which means you’re potentially missing out on a home loan that is better suited to your needs.
Let’s say, for example, that you apply for a loan with the Commonwealth Bank and you don’t quite fit their lending policy.
The bank loan officer doesn’t necessarily know that you don’t quite qualify but they convince you to apply for the home loan anyway. Then again, they might know you don’t qualify at all!
The staff member is pretty much hoping that the deal will go through which means a lot of Australians get declined and miss out on buying their dream home.
A broker, on the other hand, has a panel of lenders and many products to choose from so they will only apply with a lender that will likely approve your loan.
You’re saving time and hassle and can avoid getting unnecessary credit enquiries listed on your credit file when you apply for home loans that you don’t qualify for.
Brokers are credit experts
Bank policy can be very black and white and bank staff don’t know this.
They do not handle complex situations well and do not understand how to properly assess assess them.
This can sometimes be the reason that it can take a long time to process your application and, in some instances, you’ll get declined for no good reason.
Often, the difference between getting approved and declined comes down to the strengths that you’re able to highlight in your application.
“Packaging” your application just right is where a mortgage broker really shines.
They can identify policy exceptions and even negotiate policy exceptions with the credit officer assessing your application because of the strong relationships they have with the lender.
Not all brokers are the same though so have a read of the ‘What Is A Mortgage Broker?‘ page for some tips on choosing the right broker.
A mortgage broker has to earn your trust
For most Australians, there’s safety in applying with a bank that is “too big to fail” rather than a small business owner like a mortgage broker.
You’re not quite sure whether they will be here one day and gone the next.
The reality is that most banks will try to find a way to charge you as much interest as they can.
Once people have worked with a mortgage broker, history and repeated surveys have shown that customers usually had a great experience and returned to a broker for their next home loan.
Not sure if you can trust a broker?
All mortgage brokers must hold an Australian Credit Licence (ACL) or be a credit representative under a wholesaler licence.
This means they must not provide a home loan recommendation that will leave you in a worse off position as per the National Consumer Credit Protection Act (NCCP Act)
You can find out more information on the regulations and guidelines that mortgage brokers must adhere to on ‘What Is A Mortgage Broker?‘ page.
At the end of day, brokers rely on their reputation more than most lenders.
Isn’t it expensive to use a mortgage broker?
Actually, for most home loans, a mortgage broker is free!
In fact, in most cases, you’ll actually pay less to use a broker than going directly to a bank since they can often negotiate a better mortgage deal for you.
The only times a brokerage fee may be charged upfront is for small loans (typically less than $300,000), commercial loans or complex situations.
All fees that a broker charges must be listed in their credit quote so just ask for a copy.
If a broker doesn’t charge any fees then they will not have a credit guide.
You can find out more information about fees on ‘our fees‘ page.
How do I find a mortgage broker?
Chances are, no matter where you live, there will be a local mortgage broker in your area.
The benefit is that they can put you in touch with local real estate agents when you’re shopping for property, and a good conveyancer when it comes time to settling your mortgage.
Doing a simple Google search should bring up some results for your suburb.
However, the beauty of the internet is that online mortgage brokers have made it really simple and safe to apply for a home loan and reach settlement no matter when you live in the country.
Of course, some online mortgage brokers are better than others.
Home Loan Experts has been operating as an online mortgage broker for more than 10 years and in that time we have built industry-leading processes and a large administration team that has allowed us to continually provide a seamless home loan process.
Here’s a guide on how to find the best mortgage brokers in Sydney, and anywhere else in Australia?
Mortgage Broker Vs Bank – NPS score
NPS or Net Promoter Score is a customer loyalty metric designed to measure a customer’s willingness to recommend a service to their friends, family and colleagues. The score is rated between -100 and 100.
According to the monthly report from APRA released in June 2020, Westpac’s net promoter score (NPS) fell deeper into negative territory, from -33.3 to -63.1. Similarly, NAB’s net promoter score fell to -48.1.
Comparing this to our own NPS score of 84.58 over the whole 2019 calendar year, you can see the positive impact we’ve had on our customers through their willingness to recommend our services to others.
The disadvantages of a bank
A 2016 report from one of Australia’s major bank found that the most common reason that people approached a bank instead of going to a mortgage broker was because they already had accounts with them.
So convenience is the most common reason why people go to a bank directly but it doesn’t necessarily ensure that you’ll get a smooth loan application process.
Banks are large companies and communication between departments is a big problem.
What can go wrong?
- There can be delays with your property valuation.
- The credit assessor can misinterpret your payslips because they don’t understand your income.
- The bank may question prior loans that you’ve applied for.
- Your file can be handed over to someone else without clear communication.
- They sometimes even lose entire mortgage applications!
Does the best interests duty apply to banks?
No, the best interests duty that came out of the Royal Commission’s recommendations doesn’t apply to banks!
In other words, as mortgage brokers, we must always act in the best interests of borrowers; however, if a customer goes to a bank directly, then the bank can act in their own interests and not those of the borrower.
We welcome the implementation of the best interests duty (BID) as our customers can rest easy knowing that when dealing with us, we’re acting in your best interest. This will differentiate us significantly from the banks.
Banks don’t reward loyalty
The problem is that when it comes time to refinance, banks tend to forget about you.
You’re paying too much if you’ve had your mortgage for at least 2 years and banks won’t pass on these rate cuts to you because they’re more concerned with getting new business.
Brokers are with you every step of the way
Mortgage brokers are paid on a commission basis which means they’re invested in your application and will work hard to get you approved and provide you with an amazing service.
- Found a property and need to apply for a home loan?
- Are you still looking but wanted to know if you qualify?
- Have you been knocked back by a lender in the past?
As a mortgage broker, I act in your best interests when recommending a home loan, whereas a lender has no legal obligation to do so.
Call us on 1300 889 743 or complete our easy online enquiry form and tell us a little about your situation.
One of our experienced mortgage brokers can provide you with a free, no obligation assessment.