Mortgage Brokers Vs Banks: Making an Informed Choice
You’ve found your dream property and you want to arrange finance, so it’s time to head to your bank and ask for a loan, yes? Well, not necessarily. If you have a good credit rating, know what you are looking for in a loan and have a relationship with a bank, you will most probably be offered a loan that is suitable for you. If, on the other hand, you aren’t knowledgeable and don’t have a credit history, a mortgage broker may be the best option for you.
What Does a Mortgage Broker do?
The first thing a mortgage broker does is assess your creditworthiness. Brokers have access to an extensive database of lenders and will know how to match the most suitable lender for you. Keep in mind that your credit rating will affect the lending rate you are offered, as will your income and your ability to repay the mortgage amount.
3 Good Reasons to Use a Mortgage Broker
- Specialisation – mortgage brokers often specialise in one mortgage area because the lending needs of an investor will be very different to those of a first home buyer. Choosing a broker that specialises in the type of loan you require will ensure you get a built-for-purpose loan
- Choice – a mortgage broker can offer you products from a vast range of banks and credit providers. A banking officer can only offer you one bank’s products
- Experience – Mortgage brokers who have been in business for many years often have years of industry experience and a commitment to serving their clients
In summary, a good mortgage broker will know how to get the best deal and can offer advice and support through each step of the lending process. Brokers will also approach your bank or credit institution of choice and advocate on your behalf. Additionally, a good broker is well practiced in finding the best deals. On the downside, there are a large number of brokers in the market so it can be difficult to establish which brokers are new and which are experienced. Another negative is trailing commissions: make sure you do your research and request to have trailing commission refunded at the time your loan is arranged.
What does a Bank Loan Officer do?
Your loan officer at the bank will follow a similar process to a mortgage broker. However, they will only consider products specific to their bank. A loan officer will match your creditworthiness to the bank’s products, and will also integrate your loan with other products you are already using from the bank. Remember that your loan officer will be limited to offering products from one bank, and probably will not have the capacity to offer the best terms to individuals who are not current customers.
There are pros and cons to using either mortgage brokers or bank loan officers, so it pays to do your research and shop around. If you intend to apply directly to a bank, compare their rates. In the case of mortgage brokers, ask plenty of questions and make sure your broker of choice is licensed and does not have a conflict of interest.