Should you use a bank or a mortgage broker for your next loan?

Should you use a bank or a mortgage broker for your next loan?

Whether you’re planning to take out your first home loan, refinance your existing mortgage, or invest in a property, one of the key decisions you have to make is whether to take out a loan with a lender or to work with a broker.

When you take out a home loan, you can choose to speak directly to your bank (or another bank), work with a mortgage broker who will manage the process on your behalf, or secure a loan through an online platform.

In this post, we take a look at the benefits and drawbacks of each method to help you weigh up the best decision for your next home loan.

Considerations when securing a loan directly with a bank or online lenders

If you’re planning to take out a mortgage, the natural first step that most people think of is to go to their existing bank or to speak to another lender they’re already familiar with. While this does come with a certain level of familiarity, you risk boxing yourself into home loan products from one lender — which could end up costing you more over the long run.

• There’s a sense of familiarity. Even if you have never taken out a home loan with your existing lender, you may still opt to go with your preferred bank simply out of habit or preference. You may feel comfortable with the level of customer service they have provided you over the years or trust the brand — which can be helpful as getting a home loan can feel stressful and unfamiliar.
• Your bank can only offer its own products. Getting a home loan directly with your bank means you will only be able to access products that they have on offer. These may not be the most competitive interest rate on the market, or they may not quite meet your financial needs or situation. As a result, you may end up having to compromise on interest rates or home loan features to stay with your bank.
• You may need to make time to visit your local branch. Although many lenders allow you to get pre-approval for your home loan online, you will still need to pop into a local branch to provide documentation, speak to a representative, or fill out additional paperwork. This can be inconvenient, particularly if you’re hard at work during business hours when banks are open.
• The bank may throw in extra perks. If you’re an existing customer with a bank, you may also benefit from some additional perks, such as waiving the annual fee for the first year or waiving establishment fees.
• You still need to go through the mortgage application and approval process. Despite the fact that you’re an existing customer, you will still need to go through the entire mortgage application and approval process with the bank — just like you would with any lender, mortgage broker, or online platform. There’s no skipping the queue or getting a hall pass simply because you’re already banking with them.

Considerations when working with a broker

Did you know that 57.5% of all home loans were settled by mortgage brokers in the March 2021 quarter? Mortgage brokers are trusted third parties that help manage the entire home loan process from start to finish, including finding and recommending the sharpest rates on the market, assisting you with your mortgage loan application, and helping with settlement once you’ve secured your dream home.

• You don’t need to pay a broker. One of the biggest misconceptions borrowers have is that you need to pay a mortgage broker for his or her services. Brokers are paid a commission by the lender, not the borrower. There are no costs or hidden fees involved or higher interest rates, which means you can benefit from their service and expertise for free.
• You’ll get access to a number of home loan products from trusted lenders. Mortgage brokers aren’t employed by any single bank or lender. They have access to a variety of products from different lenders on the market, as well as exclusive products that are only available for brokers and their customers. For example, here at Rateseeker, we negotiate lower home loan rates from over 30+ lenders across Australia. This means you’ll have plenty of options when it comes to choosing the best home loan and interest rate for your unique situation. 
• Benefit from experience and advice. For most of us, buying a home is the biggest purchase we’ll make in our lifetime. With the benefits of technology and the internet, you have access to a vast amount of information — but with the changing lending landscape, it can be frustrating and confusing to navigate these changes alone.
•  Because of this, it’s helpful to have someone on hand who can ensure you’re making the right decision every step of the way. A trusted mortgage broker can guide you through the entire lending journey and provide advice based on their own experience, market knowledge, and experience from other borrowers just like you. 
• They’ll do the heavy lifting for you. A big part of securing a home loan is putting together a solid mortgage application. When you work with a broker, they’ll help you prepare your loan application so you have the best chance of getting approved without delay. On top of making the home loan process easy and stress-free, this will also protect your credit rating as getting declined multiple times may impact future home loan applications. 
• They’re impartial. Mortgage brokers shouldn’t favour one lender over another or try to force a specific product on you. Qualified brokers are required to provide you with a loan recommendation that they believe best suits your needs — which means you can rest assured that the products you’re being recommended are in your best interests.
• Who you work with matters. Although working with a broker comes with plenty of benefits, you do need to be wary of who you entrust with the process. Not all brokers are created equal, and working with the wrong broker may lead to additional delays, headaches, and financial stress down the line. That’s why it’s essential that you work with a trusted and accredited broker who has a proven track record for securing successful applications for their clients, such as Rateseeker.

Interested in working with a mortgage broker? Keep these 10 things in mind to separate the best from the rest.

Considerations when using an online platform

There’s an online platform for everything these days, and home loans are no different. Online platforms are a popular way to compare multiple home loan products from different lenders at once, and even secure a home loan directly through the platform.

• All of the information you need, at your fingertips. One of the best things about online platforms is the sheer convenience. With just a few clicks, you can access a number of different home loan products on the market. This means it’s incredibly easy to compare them side by side to find the best one for your needs.
• Access home loans on your own time. The beauty of online platforms is that they allow you to browse and apply for home loans whenever and wherever you want. Rather than having to wait until business hours to head into a branch or call your broker, you can hop online at any time to see what’s available on the market and submit an application.
• You’ll still need to do your own research. Online platforms are exactly that: a platform that aggregates data on different home loan products from a variety of lenders. However, you’ll still need to do research to understand what you’re looking for from a loan, how much deposit you’ll need, any schemes you can benefit from, and more.
• Not all platforms offer expert advice from a qualified broker. Most online platforms give you the ability to chat with an “expert” or a “consultant”. However, it’s important to note that while they may be able to give you some general information, these individuals may not all be certified professionals who are qualified to give you expert advice. This isn’t to say the information they provide isn’t helpful — it’s just important to take it with a grain of salt unless you know the exact credentials of the person you are speaking to.

Rateseeker: the best of both worlds

With Rateseeker’s industry-leading platform, you don’t have to compromise. We bring together the best of both worlds by combining tech innovation with the wealth of expertise and know-how of our seasoned mortgage brokers — all to help you seek the sharpest home loan rate.

Simply answer a few questions and you’ll instantly receive a list of suitable lenders and products for your needs, whether it’s for your first home, refinancing an existing mortgage, or an investment property. On top of this, you’ll be invited to connect with an experienced broker who can provide you with free, honest advice that’s tailored to your individual needs and situation.

You’ll be able to seek the most competitive rate that has the highest chance of getting approved and we’ll take the stress out of the entire home loan application process.

Ready to get started? Talk to the team at Rateseeker today.