Should I go with a mortgage broker or bank?
Understanding the pros and cons can help you secure the best rate for your needs.
They might seem like the same thing, but mortgage brokers and bank lenders are in fact different. Both can help you secure a home loan, but they each have their benefits and drawbacks. Here, we look into how mortgage brokers and bank lenders differ, and the pros and cons of each.
- They’re accountable: Most bank lenders care about your experience since they are held accountable by their employer.
- They have great service after settlement: If you have questions or need help with setting up accounts after the loan settlement, your bank lender can assist you personally as they are your point of contact within the bank.
- There’s limited options or choices: Going directly through a bank lender could mean you aren’t receiving the best rate, costing you thousands in the long term. For you to get competitive rates, you’ll have to haggle and negotiate. At times, you may even have to sign up for other products and services to get a further discount.
- They’re 100% biased towards their employer: Remember, bank lenders can only represent one bank which will lead to higher rates and compromises. As a consumer, you won't have a good view of what the rest of the market was able to offer you.
- Your experience can vary: Generally, bank lenders are less experienced compared to mortgage brokers leading to all sorts of additional issues. For example, you might have to follow through with the lender yourself to check the progress, sometimes you will be asked to send through further documents as you move along the process which is inconvenient.
- You can end up with the wrong product: Bank lenders may try to fit a square peg into a round hole. It's unlikely they’ll say no to a deal, which means they may try to structure a loan not within their credit policies. If this loan gets declined, you may have to start the same process with another broker.
- There’s inconsistency in rates: Sometimes, if you go to two different bank lenders under the same bank, you might get quoted two different rates. This is often because bank lenders have quarterly targets they need to meet, and they may not be as enthusiastic to put the loan through immediately, they might hold on and put it through for the next quarter.
- More options compared to bank lenders: If your loan is slightly complicated and serviceability is a bit of an issue, brokers are capable of searching for banks with a generous credit policy that will fit your situation.
- Strong engagement before settlement: Most mortgage brokers work for their commission and so they’re a driven bunch. They will do as much as they can to attract your business and keep you engaged, meaning they’ll follow through and explain things well.
- They’re experienced: Most mortgage brokers have a good amount of experience under their belt. This experience will help structure loans and get them across the line in most cases without any issues.
- They can be biased: As mentioned, mortgage brokers work on a commission model. While some banks pay more commissions, others pay attractive trailing commissions. This has an effect on where your loan is being written to and why.
- Lack of service after settlement: It’s sometimes hard to get hold of your mortgage broker after your loan settles. Generally, mortgage brokers will ask you to contact the bank directly to complete any service requests after settlement.
- Some can over-promise: Sometimes, brokers can over-promise to entice you to go with them. They often then turn around and say that the banks are not keeping their end of the bargain.
- Lack of transparency: Some brokers say they have a big number of lenders in their panel. But in reality, they prefer writing loans to a selected few, so you may not be getting a clear view of all the available offers out in the market.
What other options are there?
Going directly to mortgage brokers and bank lenders has some benefits, but you may not be receiving the best rate possible due to commission structures and over-promises. That’s why we created Joust — we’ve made it our business to help you find the best home loan rate.
We use your basic information to entice lenders to fight over you and bid with some of the best home loan rates available. It only takes three minutes, and you can sit back while lenders fight over your home loan.
Ready to find the best home loan rate for your needs? See how Joust can help here.