Mortgage broker vs bank for home loan – which option is best? Both have pretty similar roles so we’re definitely not surprised by how common a question this is by most Australians, from first home buyers to property investors.
On one hand, working with a mortgage broker can generally just be quite convenient. Not to mention that it gives you the ability to compare loans from multiple lenders. On the other hand, walking into your local bank feels straightforward and familiar. You might not have that feeling like someone’s trying to make money out of you, either. So, how do you choose the right path for your financial situation?
Generally speaking, there’s not actually a one-size-fits-all answer here because both options have their pros and cons when it comes to factors like:
- Interest rates
- Loan choices
- Support
- Overall experience
Throughout this guide, we’ll look at the key differences – from rates and fees to the range of home loan products and long-term support – so any potential home buyers out there reading this can decide what’s best for them.
Working with a Mortgage Broker
A mortgage broker is like a home loan matchmaker. When you’re working with a mortgage broker, they do the legwork to find loan options from multiple lenders that suit your needs. Instead of being limited to one bank’s offerings, you get access to a variety of home loan products across different financial institutions. That’s the main takeaway.
A good mortgage broker will understand your goals and overall financial situation, then use their network to find a deal that fits. The best part here is that brokers are typically free for you – they get paid by the lender, not by charging fees to you. In other words, you usually won’t pay any out-of-pocket broker fees for their service.
So really, it’s no wonder nearly three-quarters of new home loans in Australia are arranged through brokers – many Aussies like the choice and convenience brokers give you.
Other Advantages
And on that whole scamming issue, brokers in Australia are actually legally required to act in your best interest. This means they must prioritise finding you the best home loan deal for your needs.
This duty sets them apart from a bank lender, who isn’t held to the same standard. Keep in mind, though, brokers work with a panel of lenders – a wide selection, but not every lender in the market. And while it’s rare, an unethical broker might favour one lender that pays them more commission. However, the Best Interests Duty now in place is designed to prevent that by legally obligating brokers to put your needs first.
Simplicity
Using a broker can also make applying for a home loan much easier. They:
- Help gather your documents
- Fill out forms
- Handle the back-and-forth with lenders
If you’re a first home buyer feeling overwhelmed, a broker will walk you through each step in plain English. And if you’re an investor, a broker can save you heaps of time – many property investors rely on brokers to compare loan options and juggle multiple lenders for them.
Extra Support
Another big plus is the ongoing support. A broker’s job isn’t over once your loan settles. Down the track, they can check your loan and make sure your rate stays competitive. In fact, brokers often help you refinance or switch loans later if it benefits you.
It’s a long-term relationship, not just a one-off transaction. Of course, choosing a mortgage broker you trust is key – you want someone in your corner for the long haul.
Working with a Bank Lender
Going directly to a bank is the traditional way to get a home loan. The one you probably have in your mind as the default option. If you walk into your bank to apply, you’ll deal with a bank lender (basically a loans officer or bank manager).
This means working with one financial institution and its own suite of home loan products. The bank can’t offer you loans from other lenders – only what they sell in-house. So you won’t get the same breadth of choice you’d have with a broker.
However, many people still like going to their bank. Maybe you’ve been with them for years and feel comfortable there. The familiarity can make the process feel simpler since the bank already has your details on file.
Other Advantages
Sticking with your bank can have other perks, too. It’s convenient to keep all your finances in one place – your savings, accounts, credit cards, and mortgage under one roof.
Banks also sometimes reward loyalty with perks like interest rate discounts or fee waivers on bundled products. And if you find a great deal elsewhere, your bank might even match it if you ask. There’s no harm in saying to them that you found a lower rate and asking if they could beat it. Often they’ll try, especially if you’re a valued long-term customer.
On the flip side, going direct means comparing loan offers falls on you. Your bank isn’t going to tell you if a competitor has a better deal. So if you stick with one bank, you’ll need to shop around yourself to make sure you’re not missing out. That can be time-consuming – you might have to contact multiple banks and collect loads of different quotes.
Also, bank staff don’t charge you to discuss a loan – the bank earns money from the loan’s interest rate and fees once you sign up.
So in short, there’s usually no real difference when it comes to mortgage broker fees vs bank costs; you typically won’t pay any extra for the loan by using a broker instead of going direct. The two paths mainly differ in how many options you can see and who does the legwork.
Mortgage Broker vs Bank Manager – Which Is Best for You?
So how do you decide between the two? Think about what matters most to you: Do you want plenty of options and a guide to help you compare them, or do you prefer the simplicity of dealing with a bank you already know and trust?
If you’re a first home buyer who needs extra guidance, a broker might be your best bet. But if you’re confident in your bank and like the idea of a one-on-one with a familiar bank manager, you may lean toward the bank.
For an investor with long term plans to build a property portfolio, a broker’s ability to tap multiple lenders can be a big advantage. On the other hand, if you already have a specific loan in mind from a particular bank, going direct might feel more straightforward.
You can even talk to both a broker and your bank and compare – there’s no rule against getting information from both. Ultimately, brokers vs banks each have their place. The “best” choice is whatever makes you feel most confident and gets you a good deal. That could be from the personalised touch and broad comparison a broker gives you, or the simplicity of dealing with your bank, it’s about what works for you.
How Upscore Can Help
Ready to make your home loan journey easier? Sign up for Upscore’s Finance Passport – a free tool that simplifies applying for a home loan and comparing lenders.
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