Mortgage broker vs using a bank: which is best for you?

What is a mortgage broker, and what do they do?

Mortgage brokers or advisers are financial intermediaries who help clients secure the right mortgage for their needs. They work with various lenders, including some that may not be accessible directly to the public.

Thanks to their broad access, mortgage brokers can find competitive rates and products crafted for your specific financial circumstances.

Mortgage brokers are qualified experts, so when you want to buy a property, they will quiz you on your financial situation, intended purchase property, and the type of mortgage you need. They will use this information to find the right deal for your circumstances.

Mortgage brokers can also give you expert guidance throughout the application process. 

For instance, they can:

• Advise on the best products for self-employed individuals or those with irregular incomes.
• Assist you with collecting the necessary documentation to ensure your application is complete and accurate.
• Offer personalised guidance based on your financial situation and goals.

What is a bank’s role in mortgage lending?

Banks play a more straightforward role in mortgage lending by offering their own range of mortgage products directly to their customers. When comparing a mortgage broker and a bank, banks are limited to their internal portfolio, which could restrict the options available. 

However, there are some advantages to using a bank, including:

• Streamlined communication for customers who already have accounts with the bank.
• Potentially faster processing times for applications due to already-established relationships.

While banks offer less variety, their familiarity with existing customers can simplify the process for those who prefer a direct approach.

What is the difference between a mortgage broker and a bank?

Working with a broker instead of a bank differs in several ways.

Time to process applications

• Mortgage brokers: They often handle most of the legwork, speeding up the process by ensuring all your documentation is accurate and complete.
• Banks: A broker at a bank often has more responsibilities and may be slower processing your application. This could result in losing the property you want to buy if the deal doesn’t go through fast enough and other buyers beat you to the purchase.

Range of products

• Mortgage brokers: They can access products from multiple lenders, including niche providers unavailable to the public.
• Banks: They are limited to offering their own products, which can reduce variety but simplify decision-making.

Personalisation

• Mortgage brokers: They can offer tailored advice and solutions based on your individual needs and circumstances.
• Banks: They focus on matching clients with their internal products, which may not be ideal for everyone or the most competitive.

Costs

• Mortgage brokers: Some charge fees for their services, others are commission-based, while some are fee-free. However, brokers can often secure lower rates that offset their fees.
• Banks: They don’t usually charge fees for mortgage advice but may offer less competitive rates.

Depending on the mortgage value or product type you choose, some brokers charge for their services. These costs might be a flat rate, hourly fees, or a percentage of the borrowed amount. 

Some brokers’ services are free of charge, but they earn a commission from the lender. Some might also receive a commission and charge you for their services.

Broker fees can be added to the mortgage, but remember you will pay interest on both your mortgage and broker fees until the final amount is paid.

Application support

• Mortgage brokers: They can provide hands-on assistance with paperwork and the overall application process, as well as ensure you have the correct documentation.
• Banks: They may offer less comprehensive support, often requiring customers to handle much of the process themselves.

Mortgage broker vs using a bank: the pros and cons

There are advantages and disadvantages to using a mortgage broker or bank, including:

The pros of using a mortgage broker

• They have access to a wide range of mortgage products and lenders.
• Tailored mortgage advice and guidance are provided based on your circumstances and goals, and they can save you time by comparing deals for you.
• They can be useful in complex cases, such as self-employed individuals or those with poor credit.
• Their existing relationships with lenders can help improve your chances of your mortgage application being approved.
• Mortgage brokers can explain the industry jargon and help you understand the full implications of getting a mortgage.
• Mortgage brokers can usually offer advice and help you find related insurance products.
• If you can’t get a mortgage in your current financial situation, mortgage brokers can help you prepare your finances for future success.

The cons of using a mortgage broker

• Some brokers charge fees for their advice and services. It’s always a good idea to determine the payment structure before committing to a particular broker.
• Brokers act as intermediaries, which means there’s an extra step in the process. It can, therefore, take slightly longer to get to the application stage.
• Mortgage brokers’ experience and qualifications can vary. Inefficient brokers can cost you money or slow down the process. Make sure you vet them properly before selecting one.
• Some mortgage brokers earn their money from commissions from the lender, so it’s worth asking them in this scenario why they’ve chosen a specific deal. You should also ask them upfront whether they work with particular lenders before using them.

The pros of using a bank

• The mortgage application process may be more straightforward.
• Long-standing customers may negotiate better rates or discounts.
• Familiarity with existing customers sometimes streamlines the process as the bank already has most of the information they’ll need.
• It may be quicker to resolve issues when dealing directly with the bank.

The cons of using a bank

• Banks have a limited product range, so you may choose a mortgage that isn’t the most competitive or right for your circumstances.
• They may not offer the most competitive interest rates, which could cost you a lot in the long run.
• A bank may offer less personalised service and application support, which can be useful if you have complex circumstances, such as being a self-employed individual.

Is it best to use a mortgage broker or a bank?

Choosing between a mortgage broker or a bank depends on your circumstances. You should consider using a broker if you’re keen to access multiple lenders, need tailored advice, or have a complex financial situation (such as an irregular income or poor credit).

A bank may be a better option if you prefer a more straightforward process, already have a strong relationship with your bank, or are comfortable comparing mortgage products independently. 

A first-time buyer with a low deposit may benefit from a broker’s expertise and access to niche products. In contrast, an existing bank customer refinancing a mortgage may find their bank’s streamlined process more convenient.

When should you consider a mortgage broker?

A mortgage broker may be a better choice if:

• You’re self-employed or have an irregular income.
• If you want access to deals only a broker will be able to get for you.
• If you want to access more competitive deals or find lenders with less strict criteria.
• Your credit history or credit score is poor.
• If you’re looking for additional products such as buildings or life insurance, a broker can help you find the right policy for your circumstances. 

When should you consider using a bank?

A bank may be more suitable for you if:

• You have a long-standing relationship with your bank and are happy with its service.
• You're confident in making an independent comparison of mortgage products against the bank’s own range.
• The bank’s deal meets your needs, and your focus isn’t on finding the most competitive rate, as this may not be available via your bank.
• Your circumstances aren’t complex, and you don’t need expert advice. 

How to decide between a mortgage broker and a bank

To make the best choice between using a mortgage broker and a bank:

• Compare mortgage deals from both a mortgage broker and your bank.
• Schedule a free consultation with a broker to see what they can offer you.
• Consider the complexity of your financial situation and long-term plans.

Consulting a qualified mortgage broker is worthwhile as they should give you independent advice, which you may not find with a bank offering only their mortgage products.

Get expert financial advice

The mortgage application process can be nerve-wracking, especially for newcomers to the property market, but understanding the difference between mortgage brokers and banks can help you choose the best option. 

Unbiased can match you with a professional mortgage broker or financial adviser to ensure you have the best chance of getting your application approved.