Mortgage Broker Vs Bank
How do they compare?
If you need a home loan, there are 3 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.
For most Australians, going with a major bank or lender seems like a safer option because you have trust in their brand. It can be hard to put your trust in a broker you’ve never heard of before.
However, when it comes to mortgage broker vs bank, it’s important to separate myth from fact so you can make an informed decision.
Banks punish loyalty
However, it may not necessarily be the most competitive rate you qualify for.
On top of that, if you’re planning on refinancing with your current lender, banks don’t reward loyalty!
If you’ve had your mortgage for at least 2 years, chances are that you’re paying too much!
Banks don’t pass on rate cuts to existing customers and they won’t tell you about them.
Find out if we can beat your bank by call us on 1300 889 743 or by completing our free assessment form today.
More choice in products
Would your bank tell you if you could get a better deal with the lender down the road?
Banks can only offer you their products and adhere to their lending policies which means you’re potentially missing out on the savings that come with shopping around. It gets worse.
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 staff member 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 praying that the deal will go through so this usually means that 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. For example, your ideal lender may really be ANZ!
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 (some of them)
Bank policy can be black and white and, frankly, bank staff don’t know it.
They don’t understand complex situations and how to properly 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.
Negotiate a better deal
Mortgage brokers have negotiating power and can often get you lower interest rates than what your bank is offering you.
Why do brokers have negotiating power?
Well, firstly, it’s fair to say that banks will try and give you a good interest rate, however, it’s not necessarily the best discount you can qualify for by shopping around with other lenders.
Banks want broker business and they’re willing to fight hard to get it because they know that we can simply take you down the road.
A mortgage broker has to earn your trust
For most Australians, there is safety in applying 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.
Realistically though, the bank is going to 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?
Rest assured that all mortgage brokers must hold an Australian Credit Licence (ACL) or be a credit representative under an wholesaler licence.
Have a read of ‘What Is A Mortgage Broker?‘ for more information.
Isn’t it expensive to use a mortgage broker?
For most home loans, a mortgage broker is free!
In fact, in most cases, you’ll actually pay less by using a broker than going directly to a bank since they can often negotiate a better deal for you.
The only times a brokerage fee may be charged upfront is for small loans (typically less than $200,000), commercial loans or complex situations (such as people with bad credit and minimal income evidence).
There may also be a fee charged if you repay your mortgage within the first two years, known as a clawback fee.
This fee is charged by the bank to the broker and some brokers will pass this fee on to customers.
All fees that a broker charges must be listed in their credit quote so just ask for a copy of that.
If a broker doesn’t charge any fees then they will not have a credit guide.
You can find out more information fees on the ‘Our Fees‘ page on our website.
Isn’t easier to go to my bank directly?
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.
Convenience is the biggest reason why people go to a bank direct but you could potentially miss out on saving thousands of dollars over the life of your mortgage by not using a mortgage broker.
Banks are also notorious for being bad communicators and unreliable so although it may be more convenient to apply with a bank where you already hold existing accounts, it doesn’t necessarily ensure that you’ll get a smooth loan application process.
On top of that, bank staff tend to be moved around a lot and good performers are often promoted into management positions so they’re not even seeing customers anymore. Some even become mortgage brokers themselves.
Banks can be really disorganised
Lots of things go wrong from application to settlement.
There can be delays with your property valuation, the credit assessor can misinterpret your payslips because they don’t understand how you make a living or the bank may question prior loans that you’ve applied for.
Sometimes, they even lose entire mortgage applications!
A mortgage broker’s job is to solve these problems as they occur and keep your application headed for settlement.
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. That means:
- Liaising with credit officers to provide any further evidence they may need to assess your application.
- Liaising with valuers, your solicitor, your builder (if you’re constructing) 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’s going on.
Brokers provide a personal touch
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.
Because they’re experts in credit, they can answer all of your burning questions instead of directing you to another department.
- 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?
Call us on 1300 889 743 or complete our easy online enquiry form and tell us a little about your circumstances.
One of our experience mortgage brokers can provide you with a free, no obligation assessment.
When it comes to mortgage broker vs bank, we have the banks beat!