Comparing mortgage brokers vs banks
When it comes to getting a mortgage, there are two types of people in the world. Some go straight to a high street bank and ask for a mortgage, possibly after a little online research. And then some call a mortgage broker. So, what’s the difference between using a mortgage broker and going to the bank for a mortgage? We’re here to discuss this topic without any jargon.
About mortgage brokers
Mortgage brokers are finance professionals qualified to provide individuals with mortgage advice and then provide a brokering service to find the most suitable and advantageous mortgage for their personal needs. Their service typically extends to help with mortgage applications.
Most mortgage brokers are whole-of-market brokers, meaning they search for a mortgage across the whole of the reputable mortgage market, including high-street banks, building societies and online banks. Some brokers charge a fee for their work, whereas others provide free advice and brokering services. In the latter situation, the broker receives a fixed fee or commission from the mortgage provider for providing them with business.
However, mortgage brokers cannot opt for products with specific lenders to secure a more significant fee or commission. They must act with integrity and keep the client’s best interests at the forefront of their work.
About bank mortgages
Mortgages are provided to home buyers by high-street banks, online banks without a high-street presence and building societies. Bank mortgages usually refer to a mortgage from a high-street bank with a recognisable name.
These loans could be a mortgage with a fixed interest rate for a defined period, or they could be a variable rate mortgage where the interest rate can change at the bank’s discretion based on external factors, such as the economy's performance. Bank mortgages can also be used to fund the purchase of investment property that won’t be used as your residential mortgage, namely through buy-to-l (BTL mortgages).
The advantages of bank mortgages are:
- They have a presence in your high street, meaning you can get easier access to customer service than alternative lenders
- Application processes can be easier and quicker if you’re already a bank customer
- Some banks have competitive rates
- You won’t have to pay any broker fees
The main drawbacks of standard bank mortgages are that they may not be as available to people with poor credit history. Moreover, they may not be as competitive as online banks and building societies with fewer overhead costs, and the mortgage products themselves may not be as creative – and therefore beneficial - as alternative lenders.
Banks vs mortgage brokers – what’s the better option for me?
The best option changes from case to case. Some people may benefit from the speed and convenience of going straight to the bank, whereas others may secure a better mortgage deal by enlisting mortgage advice and brokering services. An additional benefit of the latter is that you will have on-hand support to deal with the application process.
Important considerations when choosing banks or brokers
Whatever you decide to do, there are some key considerations before selecting a bank or broker. In either case, you need to ensure they are a legitimate service provider by being fully authorised and regulated by the Financial Conduct Authority. You may also want to consider:
- Online reviews
- Level of customer service
- Promotional discounts and schemes available
- Whether the broker is a whole of market provider
- The breakdown of fees from the bank or broker
Should you go for a broker or bank for a mortgage?
This question can only be answered with certainty by understanding your exact financial situation and mortgage needs. However, in most cases, it can be more beneficial if the aspiring home buyer chooses to engage the services of a mortgage broker.
This is typically because a mortgage broker can compare more suitable options to find cheaper deals. This may be through casting a wider net than simply considering a few recognisable banks, but it may also be through established industry contacts that unlock cheaper deals.
Tips on how to select the right mortgage broker
You’ll probably find several qualified mortgage broker options within your area, all with glowing reviews and endorsements online. So, how do you choose? It’s beneficial to book a consultation with each broker who is likely to offer these meetings for a small fee or even for free. In these consultations, you will be able to get a real feel for the broker and the service they offer. It may be wise to avoid mortgage brokers who conceal fees, refuse to clarify jargon or apply pressure for you to use their services.
What if a broker gives me bad advice?
A new charter has been released giving clients even more protection in the financial services industry, including mortgage advice and brokering. If a broker provides you with bad advice when they should have known better, you may be able to lodge an official complaint that leads to compensation and financial penalties for the broker. Otherwise, legal action is a possibility.
Ready to get the best mortgage deal?
Are you ready to identify and secure the most advantageous mortgage for your needs and preferences? Our mortgage brokers are friendly, approachable and ready to serve you. We often source better deals by casting a wide net and through long-term industry relationships. Even if the local bank is the best option, wouldn’t you want to check for a better deal first? Speak to us now to kick off your mortgage search.
