Mortgage broker or bank: What’s the better way to find a home loan?

0:00
In the financial world, there are so many hustlers, swindlers, and con artists claiming they can save you money. Are mortgage brokers in that category, or are they actually trying to get you a better deal? In this video, we'll look at the pros and cons of going to a broker versus direct to a bank.

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A mortgage broker is someone that will take into account your personal circumstances to shop around and find the best deal for you. They take out all the hassle of comparing the millions of loans that are out there. Millions was an exaggeration. There's probably a few thousand.

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But they will take into account all of that your personal circumstances. They'll even do the application for you. They will hold your hand throughout the process so that you don't have to do all the nitty-gritty paperwork and all the stress day in and day out while you apply for your home loan.

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So, what's the alternative to a mortgage broker? Well, going direct to a bank. And that way you compare all the options yourself. As I've said, thousands of them, and you go directly, you apply through their online portal, you fill in the application yourself, and you wait for a decision.

1:02
According to the latest research, about 76% of Australians go through mortgage brokers for their home loan. That has risen a lot over the last few years. In about 2018, it was closer to the 50% mark. And the reason that is, just because there are so many more home loans on the market than there ever have been. And it really depends on your own circumstances, how much money you're earning, whether you're earning extra income above your salary.

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There are so many things to take into account. The market has just got so much more confusing and people are more time poor. So people are turning to brokers more than they ever have done. Do mortgage brokers actually save you money? They can do. The answer isn't quite as simple as one may think, but mostly yes, they can.

1:39
They have access to a range of lenders. They know these lenders through their BDMs and lending specialists. So they can very often negotiate better rates. They know the lender's appetite, so they know if you are a good match for them. They can very often get you a lower rate than you would be able to find yourself.

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Having said that, brokers don't have access to every single lender. They have a panel of about 30. So, there are some cases where the lowest rate they may be able to find you is not necessarily the lowest rate on the market, but that isn't always the case.

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Now, if you didn't want to go through a mortgage broker, it is fairly simple to go direct to a bank. The biggest hurdle is comparing the thousands of loans that are out there. But you can use a comparison site like Finder and use the filters to make it a smaller pool of home loans to choose from.

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Once you have selected a lender, the next hurdle is to gather all the documents. You need things like pay slips, bank statements, income verification, personal identity verification, all these things and then you go through the homeland application yourself.

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But the online processes now are really simple. So they should be able to guide you through. The biggest question that we get asked the most is how do mortgage brokers get paid and does that cost end up with the borrower? No.

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For the most part, mortgage brokers do not charge a fee for you to meet with them. They mostly don't charge a fee for any of their services leading up to the home loan application process. Mortgage brokers mostly get paid through banks. They pay a commission, an upfront commission, and then while you're paying the loan, they'll get a smaller monthly commission throughout the life of the loan.

3:09
There are some circumstances where that isn't the case. If you have a more kind of specific, difficult, complex scenario such as you are self-employed, maybe you have an income that you receive outside of your salaried income or you're, you know, getting a specific type of investment property, they may end up charging you a fee for the document collection and the application process, but the initial appointment should always be cost-free to the borrower.

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But there are still brokers out there that can charge a fee for service and that is where they will charge you an upfront fee for your appointment. Just clarify that before you have your meeting with them.

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So what is better, a mortgage broker or a bank? Well, that really depends on you. If you are overwhelmed by the home loan landscape, time poor and don't have the patience to fill out the application yourself, you're confused or you have a complex lending situation, then a mortgage broker will be really helpful in that situation.

4:02
If you have a very basic home loan need, your documents are all streamlined and you have one salary, and it's simple, a bank is a good solution for you, but you just need to do all the hard work yourself in comparing and finding the right loan.

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If this is not your first loan and you are refinancing, you might be thinking about whether it's worth going back to your broker or sticking with the home loan lender that you are already with.

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A mortgage broker again will be able to compare more of the market and find you some great deals and help with the whole process and do some cost analysis based on whether it is worth paying the exit fees for your loan to make savings on your new loan, but also your existing lender may be able to give you a better deal for being a loyal customer.

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So, it's really worth giving your lender a call, but then also seeking out a mortgage broker just in case. That is mortgage brokers versus banks in a nutshell. But to find out more, it's always worth going to finder.com.au AU for all of the information.