Mortgage brokers versus banks
While a mortgage broker can help you sort through all the lenders in the market, there may also be advantages to going directly to a lender. Which one should you choose?
|Service||A broker guides you through various mortgage options and helps you compare rates, fees and features.|
The broker can advise you on every step of the home loan process but will ultimately connect you with a bank or non-bank mortgage lender.
|A bank will explain their mortgage offers and find one that suits your needs.|
A lending specialist from the bank will help with your application.
|Mortgage options||Brokers have access to hundreds of loans from a panel of 20-30 lenders.||Banks have their own set of mortgages. Bigger banks have loans for almost every borrower, while smaller ones may have less options.|
|Benefits||You can get expert help from a professional who has their eye across a large section of the market.|
Compare rates from an entire panel of lenders.
The broker works for you and their service is usually free.
|Many banks have a large selection of products.|
Lending specialists from a bank can provide detailed advice similar to a mortgage broker.
|Drawbacks||You need to apply with a lender anyway. A broker just adds another step to the whole process.|
Some of the lowest rates are only offered by smaller non-bank lenders who aren't always on broker panels.
Brokers work for you but they get commissions from the lender you choose via their service.
|Borrowers in unique or complex circumstances may have a tougher time getting finance directly with a bank.|
Banks want your business and obviously won't tell you that there's a similar or better product offered elsewhere.
|Commissions and fees||Brokers receive a commission from lenders, not borrowers. They don't charge fees either.|
But the lender you eventually choose may have their own fees.
|Banks will typically charge some form of application or settlement fee, plus several other fees.|
Keep in mind that some banks charge very few fees, and some products have more fees than others.
The mortgage broker process explained
- A mortgage broker assesses your situation and your creditworthiness to develop a better picture of your chances of qualifying for a home loan.
- They take your information and work to find a loan that meets your needs as closely as possible.
- You make your choice and the broker will guide you through the application process.
If you have questions about your mortgage options, contacting a broker can be very effective.
The pros and cons of using a mortgage broker
- Brokers offer choice to a wide range of lenders, and a good broker is well practiced in finding the best deals. They will know the nuances of lenders' credit policies, and should be able to direct you to lenders best suited to your circumstances.
- When it comes to seeking a mortgage via a bank, the broker can also advocate on your behalf, increasing your chances of success with the process.
- Mortgage applications can confuse people. A broker helps you get your application paperwork together with a minimum of confusion.
- Due to the sheer number of brokers out there, it can be difficult to determine which brokers are highly experienced, and which brokers are new.
- If you don't have a solid understanding of the finance and mortgage industry, it can also be difficult to judge what is a good deal, or when you might do better visiting a local lender. Using a mortgage broker requires a bit of personal research and understanding, although it’s certainly possible to gain this information.
What does a bank loan officer do?
Bank loan officers work for one specific bank or lender, and often receive volume incentives when providing clients with loans.
If you already have great credit, are a customer of the bank, and have a stable income, you will most likely find a good rate through your bank. A loan officer can match you to the best loan product available within that specific bank. If you choose this option, and you are already a customer of the bank, don't be afraid to probe for a better deal on your mortgage.
The pros and cons of going directly to a bank
- Going through a bank loan officer can allow you to access a direct line to the very best deals at the bank or lender you choose to work with. Bank loan officers are also extensively experienced in working with the lender, their policies and their loans.
- If you're already a customer, they can often structure a loan to work with other bank-provided products you have already.
- Another advantage of going through a bank loan officer is dealing directly with your lender. This means any questions you have or any additional information the lender needs can be addressed without taking the time to go through an intermediary.
- A bank loan officer has access only to the loans offered by the bank or lender through which they are employed. This can seriously restrict the options available to those who are not a direct customer of the lender already.
- If you're self-employed or have bad credit a lot of banks are unlikely to approve your application. A broker will help you find a lender who can.
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