Bank vs broker: who should you turn to for your home loan needs?

Whether you’re buying a new home or you’re planning on refinancing your existing home loan, you might be considering whether to use a mortgage broker or go directly to a bank.

While both options can be appealing for different reasons, there are some unique advantages to using a mortgage broker for your home loan needs.

In this article we’ll explain the differences between getting a home loan through a bank vs through a mortgage broker. We’ll also go through the pros and cons of each option so that you can have a better idea of what will suit your needs.

Getting a home loan through a mortgage broker

What is a mortgage broker?

A mortgage broker is a home loan expert who organises home loans between borrowers and lenders. A mortgage broker works with borrowers to:

• Figure out their borrowing power
  
  
• Understand what they need in a home loan
  
  
• Provide guidance to borrowers
  
  
• Offer potentially suitable home loan options
  
  
• Explain how mortgages work and answer questions
  
  
• Assist borrowers throughout the loan application and settlement process
  
  
• Provide a review of their home loan even after settlement to make sure they’re still getting a competitive deal.

Is it easier to get a home loan through a broker?

Mortgage brokers can often make the home loan application experience easier and will do a lot of the hard work for you.

They can help narrow down your potential home loan options, advise you on what documentation you need to provide and more.

They can also explain complex industry concepts so that you understand the process more clearly.

As home loan experts, they know the ins and outs of getting a mortgage and can steer you in the right direction. They’ll have a good idea of what your realistic loan options are, bearing in mind what your financial situation is like.

Can a mortgage broker get you a better rate?

Sometimes mortgage brokers are able to negotiate more competitive interest rates for borrowers.

This may be more likely for borrowers who are refinancing and have a good credit score and a reliable home loan repayment history.

What are the pros of getting a home loan through a broker?

1. Best interests duty

Mortgage brokers are legally obligated to act in the customer’s best interests when providing credit assistance.Best interests duty doesn’t apply to banks and lenders, so they aren’t required to keep your best interests in mind.

2. Less work for you

A mortgage broker can research home loan options for you, speak to lenders on your behalf and help you out in a number of other ways. They’ll also be able to help you go through the home loan application process and answer your questions along the way.

3. Having a single point of contact

Unlike dealing directly with a bank, where you will sometimes be in correspondence with multiple employees, you’ll work with just one mortgage broker throughout the process.

This means that your broker will know where you are in the home loan process and will likely understand your situation better than someone jumping in halfway through.

A good mortgage broker will keep you across what’s going on and what documents and information they need from you.

4. There’s no cost

Typically mortgage brokers won’t charge borrowers any fees. Instead they are paid by the lender after you get your home loan.

Essentially, brokers get paid a commission by the lender as a ‘reward’ for bringing them a new customer.

Occasionally brokers do charge fees, so it’s a good idea to clarify this before engaging their services.

5. You’ll have more home loan options

Mortgage brokers typically work with a number of lenders, meaning that your home loan options aren’t restricted to the loans that one bank offers.

This means that you can just go to one person to find out about the loan options offered by multiple banks. This will save you time individually looking through the loans offered by one bank after another.

6. They’re experts

Feeling lost about the home loan process? Need someone with specialist mortgage knowledge and experience to chat to? Do you have a unique situation and you need help finding the right lender?

A mortgage broker might be able to help.

Your broker will strive to answer any home loan questions you have and make informed loan suggestions based on their knowledge of many different products.

What are the cons of getting a home loan through a broker?

1. Limited selection of lenders they work with

While brokers do work with multiple different lenders, they don’t work with every bank under the sun. This means that you might miss out on products that could be better suited to you, or struggle to find a broker that works with the various banks you’re interested in.

In saying this, our Aussie brokers can help you navigate over 3,000 loans from our panel of 20 Australian lenders – that’s a lot of options!

2. A broker is a third party

Some borrowers simply might not like engaging the services of an additional party, and would prefer to just go straight to the bank.

If you’re a borrower who already knows exactly what lender you want to provide your home loan, using a mortgage broker could be more time consuming. After all, you’ll still need to apply with a lender regardless of whether or not you use a broker.

Getting a home loan through a bank

When getting a loan through a bank, you can typically just show up at a branch and ask for a home loan. Alternatively, you may be able to chat with a lending specialist over the phone – especially if it is an online-only bank or lender. Unlike working with a mortgage broker, you are going directly to the source.

What are the pros of getting a home loan through a bank?

1. Convenience and familiarity with the bank

Many borrowers who opt to get a home loan through a bank rather than a broker will use the same bank that they use for everyday banking. This familiarity can provide a sense of comfort – knowing that all of your finances are in one place. Sometimes this can make financial management easier.

2. Could be faster

If you already know what loan you want and which lender provides it, then going through a mortgage broker could be a waste of time.

Bear in mind that it’s smart to have researched and compared loans from a range of lenders before settling on one. A broker can help with this process.

3. Detailed knowledge about the loans on offer

Lending specialists with specific banks will have intimate knowledge of the loans on offer.

A mortgage broker may only have surface-level knowledge of some products and may take longer to get back to you if you have questions about a particular loan.

What are the cons of getting a home loan through a bank?

1. Best interests duty doesn’t apply to banks

The best interests duty that requires brokers to act in the best interests of the borrower doesn’t apply to banks. This means that banks might act differently to brokers, and not always in a good way.

2. Banks don’t usually reward loyalty

Unfortunately, just being a loyal customer to your bank doesn’t guarantee that they’ll give you the best deals. This is particularly pertinent when refinancing, as banks aren’t necessarily just going to pass on the rate cuts they give to new customers. Your bank’s focus will likely be on obtaining new customers.

If you’ve had your current loan for 2 years, it may be smart to consider refinancing.

A broker may be able to help you compare home loan options and find a loan with a competitive interest rate.

3. Fewer loan options

When you go straight to a lender to get a loan, you can only choose from the loans that they offer. These loan options may be sufficient for your needs, but you could be missing out.

4. Won’t always be able to help complex situations

Sometimes it’s difficult to get a mortgage when you have a unique or complex financial situation. This is where a mortgage broker can help as they’ll know about specialty lenders who offer loans to borrowers in these situations e.g. borrowers who have poor credit or self-employed loans.

Should I use a mortgage broker or apply directly to a bank?

At the end of the day, the decision you make will depend on what you think is right for you. There isn’t a right or wrong answer, so consider which method will make you comfortable and alleviate stress.

It can be smart to talk to friends and family who have gotten a loan recently and learn about their experiences. They may be able to recommend a bank or local mortgage broker.

Appointments with Aussie brokers come at no cost to you, so you don’t have anything to lose by booking an appointment to learn more about your home loan options.

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