Is It Better to Use a Bank or a Mortgage Broker?

By the time you consider purchasing your first home, you likely have a relationship with a bank. Perhaps it started when your grandparents opened a savings account for you as a child, when you started bussing tables as a teenager at the neighbourhood café, or when your parents decided your “allowance” should be placed on a debit card to teach you how to manage your own money.

Whether you have a simple checking account, a savings account or an entire portfolio of accounts, including investments and retirement plans, there is at least one Australian bank you are connected to in some way.

A mortgage broker is another story: you may not have even known they existed until reading this article. That will lead many first-time home buyers to ask, “is it better to use a bank or a mortgage broker?”

Is a Broker Better Than a Bank?

Brokers and banks each play important roles in consumer lending, and you may need both throughout the home-buying process.

Before we explore which one is better for you, we should clarify how they differ in terms of mortgages.

Banks can facilitate a home loan as part of a wide array of services they offer; the loans are limited to their products only, and their interest rate may not be particularly competitive.

Banks do not specialize in mortgages; rather, they are simply one of many products they offer, from checking accounts to home equity lines to safety deposit boxes to commercial loans.

On the other hand, mortgage brokers are solely focused on home loans. They can access many loan products and are not locked into one mortgage lender.

Mortgage brokers are required by the Australian Securities & Investments Commission to adhere to the Best Interests Duty, which ultimately means they are working in the borrower’s interest.

Banks are often working in the interest of…banks.

Therefore, the answer to the question, “Is a mortgage broker better than a bank?” will almost always be “yes.” Below we will look in more detail at why this is the case.

Why Use a Mortgage Broker Over a Bank?

There are many reasons to go with a broker over a bank, but expertise is always at the top of this list.

Brokers are focused solely on mortgage loan products, whereas bankers split their focus among many other products and services.

Think of it as you might a medical specialty: a neuro-oncologist is a better choice to treat a brain tumour than a family physician. Specialized expertise can make a huge difference in the outcome.

Is it Easier to Get a Mortgage With Your Bank?

Some borrowers are inclined to stick with the banks they already use, assuming it will be easier to get a mortgage. This is only partially true. Yes, the bank may be willing to work with you as you are already a client, but what is “easy” is not always “the best.”

The bank may be limited in what they will offer, whereas a mortgage broker may be able to present you with more options (and, more importantly, better mortgage rates!)

Is it Better to Go Through a Mortgage Broker or a Credit Union?

A credit union has advantages over the larger commercial banks; this financial institution operates as non-profit, customer-owned institutions, and some can offer competitive interest rates.

However, when comparing multiple lenders and credit unions, the disadvantages are similar to traditional banks. Credit unions will be limited in their loan product offerings, and you must be a member to qualify.

If you still decide to go the big bank route, you may wonder if the financial institution you use for a mortgage matters. It does matter because not all banks are created equal. Before proceeding, do thorough research on the financial institution you are considering to compare their home loan product, term, and interest rate options.

Is it Easier to Get a Loan Through a Mortgage Broker?

In many cases, it will be easier for the borrower to get the right loan and therefore worth going through mortgage broking because:

• The broker has more loan programs to make available to you
• The broker can advise you on the best way to submit your mortgage application for optimal results
• The broker will not waste your time pursuing a loan product you are unlikely to qualify for at all

Why are mortgage brokers better? Because they have the specialized expertise to connect the home buyer with the right home loan option at the right time. It is in their best interest to get your mortgage application accepted since they often work on a commission basis only. Banks have less riding on whether or not your home loan is ultimately secured.

Why Choose a Mortgage Broker Over a Bank?

Taking out a mortgage—especially a borrower’s first mortgage—is one of life’s most monumental decisions, meaning it can be both stressful and exhilarating. A dedicated advocate or lending specialist who can guide you through this process, ease your concerns, and help you make the best and most informed decisions is invaluable to borrowers.

At Zanda Wealth, our experienced mortgage brokers are passionate about helping our clients every step of the way. Let us show you how we can help with a free strategy session. Contact us today to take the next step toward fulfilling the dream of homeownership.