Should You Use a Mortgage Broker or Go Straight to the Bank?
When you're ready to buy a home or refinance an existing loan, you face a key decision: work with a mortgage broker or approach your bank directly? Both paths can lead to a successful loan, but they offer different advantages and drawbacks. Understanding the differences will help you choose the right approach for your situation.
What's the Difference Between a Mortgage Broker and a Bank?
A mortgage broker acts as an intermediary between you and the lenders. They have access to loan products from multiple banks, non-bank lenders, and credit unions. Rather than being tied to one institution's offerings, brokers can compare rates and features across dozens of options to find what suits you best.
Going directly to your bank means you work with their lending team on their products only. You'll have a single point of contact and deal exclusively with their loan offerings, interest rates, and terms.
The key distinction is choice and access. Brokers open doors to a wider market, while banks offer depth in their own ecosystem.
Pros and Cons of Going to a Bank for a Loan
Pros of going to a Bank
If you have an existing relationship with a bank, going direct offers continuity. You may qualify for loyalty discounts or better rates based on your banking history. The process is straightforward and transparent; you know exactly who you're dealing with, and there's no intermediary.
Direct applications can also be faster if the bank already knows you well. You also avoid any concerns about broker commissions influencing recommendations.
Cons of going to a Bank
The biggest limitation is the product range. Banks only offer their own loans, meaning you can't easily compare them against competitors. This often results in missing better rates elsewhere in the market.
Getting competitive quotes requires contacting multiple banks independently, which is time-consuming. Banks also have less incentive to compete hard for your business compared to brokers, who are actively pitching your application to multiple lenders.
Why Go to a Mortgage Broker?
Brokers save you time and legwork. Instead of contacting multiple banks for quotes, a broker does this for you and presents comparable options. They also negotiate on your behalf, often securing better rates than you'd get walking in off the street.
For complex situations such as self-employed applicants, those with less-than-perfect credit, or unusual income structures, brokers have the expertise to navigate them.
Another advantage is that brokers often have access to exclusive products not available directly to consumers. They also handle much of the paperwork and follow-up, reducing stress during the application process.
Cons of Using a Mortgage Broker
While brokers offer significant advantages, it's worth considering a few limitations. Potential cons of using a mortgage broker are:
- Some brokers don't have access to every lender on the market, so theoretically, there could be a loan outside their panel that suits you better. However, most brokers work with extensive panels covering the majority of available products.
- Some brokers may have relationships with certain lenders that pay higher commissions, which could influence their recommendations. This is why it's important to work with a licensed, reputable broker who has a statutory duty to act in your best interests.
You can verify credentials with professional bodies like the Finance Brokers Association of Australia Limited (FBAA) or the Mortgage & Finance Association of Australia (MFAA).
It's also worth asking your broker directly about their commission structure and which lenders pay them more; transparency here is a good sign of a trustworthy professional.
Is It Easier to Get a Mortgage Through a Broker?
The ease of getting approved for a mortgage depends largely on your individual circumstances rather than whether you choose a broker or bank.
If you have a substantial deposit, steady income, and a good credit score with no history of defaults, applying directly to a bank can be relatively straightforward.
However, if you have an irregular income, a lower credit score, or a smaller deposit relative to the property value, a mortgage broker becomes invaluable. Brokers can find lenders willing to work with non-standard applications, saving you significant time and potentially improving your chances of approval.
Brokers also have relationships with lenders and knowledge of their internal processes, which can help navigate applications more efficiently. For borrowers with complex financial situations, a broker's experience in presenting applications in the best possible light can make the difference between approval and rejection.
When Do You Need a Mortgage Broker vs a Bank?
A broker is worth considering if you're:
- A first-time buyer wanting expert guidance
- Self-employed or have irregular income
- Looking for the absolute best rate available
- Time-poor and prefer someone else doing the legwork
- Dealing with complex financial situations
- Refinancing an existing loan and want to explore options
If you're refinancing, learning about home loan refinancing strategies can also help you understand what brokers can offer.
Going direct to a bank makes sense if you're:
- In a straightforward financial situation
- Highly satisfied with your current bank relationship
- Only interested in one bank's products
- Prefer face-to-face relationship banking
- Want complete transparency without intermediaries
How Do You Choose a Mortgage Broker?
If you've decided to work with a mortgage broker, finding the right one is important. Here are key questions to ask when evaluating a broker:
- Are they licensed? Check that they're licensed to provide credit advice. You can verify this with the broker directly or contact professional bodies like the FBAA or MFAA.
- What experience and qualifications do they have? Look for brokers with proven track records and relevant qualifications in mortgage broking.
- Do they have expertise with borrowers in your situation? If you're self-employed, investing, or have unique circumstances, find a broker who specializes in these areas.
- How many lenders are on their panel? A larger panel generally means more options and flexibility. Ask them which lenders they work with.
- How do they receive their commissions? Transparency about commission structure is a good sign. A trustworthy broker will explain how they're compensated and which lenders pay them more.
Take time to choose the right broker upfront to make the process smoother. Start by exploring your options with us or get in touch directly to discuss your needs.
The Bottom Line
Neither mortgage brokers nor banks are universally "better". It depends on your circumstances. If you value choice, expert comparison, and time-saving, a broker is likely your best option. If you have a solid bank relationship and a straightforward application, going direct may be perfectly adequate.
