If you're looking for a mortgage, it's easy to research and compare loans to find the best deal, and then approach a bank or lender directly.
However, you can also use a mortgage broker. As a home-lending experts, mortgage brokers can offer a helpful service for those unfamiliar with the home-loan process, or aid borrowers whose mortgage needs are more complicated.
Are mortgage brokers better than banks?
Using a mortgage broker, rather than approaching a lender directly, is a personal preference. However, using a broker as an intermediary is convenient option.
Brokers have an in-depth knowledge across a range of loans, and may be able to recommend one that best suits your personal borrowing needs. They will also be able to help you with the often complicated paperwork involved in the mortgage-application process.
Brokers can also have a better knowledge of the rates offered by lenders, and might be able to negotiate you a better rate than you could achieve yourself.
However, note that mortgage brokers don't work with all lenders in the market, just a select panel. So even if you use a broker, it's worth doing your own research on the side, to ensure you're getting the best deal.
Are mortgage brokers cheaper than banks?
Mortgage brokers usually don't charge their customers fees. Instead, brokers earn most of their income through commissions, which are paid by banks and lenders upon the successful referral of a new customer.
It's worth keeping in mind how brokers are paid. For while they are regulated and must act in the best interest of their clients, there remains an incentive for them to secure a loan. And this could, hypothetically, affect the providers and products your broker recommends.
Ultimately, whether using a broker is cheaper than going directly to a bank comes down to whether they're able to secure you a better mortgage deal than you'd have been able to achieve yourself.
Is it easier to get a mortgage through a broker?
If you have a large deposit, a steady income and a good credit score, then securing a mortgage by contacting a lender directly should be a relatively straightforward process.
However, if you've an irregular income – for example, if you're self-employed – a low credit score or a low deposit, securing a mortgage could prove more difficult. In this case, a mortgage broker may be able to help you find suitable lenders and assist with the application process.
How do you choose a mortgage broker?
When choosing a broker, there are a number of key questions you could ask, including about:
- Any costs involved
- The number of lenders they work with
- Their expertise helping borrowers with your needs
- Their experience and qualifications
- What fees and commissions they receive
The pros and cons of using a mortgage broker
Possible pros of using a mortgage broker:
- An expert understanding of the home loan market and access to a variety of loan options
- Helping with the complexities of the home loan application process
- Help if your mortgage application needs are unique, such as having bad credit or being self-employed
Possible cons of using a mortgage broker:
- They don't have access to every loan on the market, so it still pays to research all mortgage products
- Brokers are paid by lenders, so may favour a particular bank or mortgage provider
If you're considering using a mortgage broker, it can be a good idea to ask them how they receive their commissions and if certain lenders pay them more than others.
The pros and cons of going directly to a bank
Possible pros of going directly to a bank:
- Some banks and lenders don't work with brokers, so you might be able to find attractive products that a broker wouldn't recommend
- If you are refinancing, you may be able to use your existing relationship with your bank or lender to negotiate a favourable rate
- Refinancing a mortgage directly through a bank can be a very quick process, often as easy as accepting a rate on an app
Possible cons of going directly to a bank:
- Dealing with a single bank without a full understanding of all the mortgage products available in the market could mean you miss out on the best deal
- A bank may required you to provide a lot of financial details and paperwork, which can be time-consuming to put together on your own
- To get the best deal from a bank, you'll need to be prepared to haggle
