Should I apply for a mortgage through a bank or a broker?

The path to taking out a home loan can go a few different ways, with the most common being via a mortgage broker or directly through a bank.

So, which option is better nowadays for your home loan application? You’ll still have to apply to a lender for the loan, but whether or not you have a broker assist you throughout the application process is up to your needs and level of expertise. 

Let’s explore some of the advantages and downsides to applying for a mortgage through a bank or a mortgage broker. 

Benefits of applying for a mortgage through a broker

Expert knowledge of the industry

The biggest reason to consider consulting a mortgage broker is their expertise and familiarity with the mortgage industry and its processes. Even if you don’t know the first thing about how a mortgage works, you can get advice covering every aspect of a home loan. 

Also, an established local mortgage broker may offer you more nuanced advice than a franchisee operating nationwide. And while you may find much of this information online, you’d probably end up spending a lot more time looking for it than you’d take speaking to a broker. 

Greater variety of options

A mortgage broker may show you a range of loan options that could suit your needs and goals, all with differing interest rates, fees, features and other key factors. Applying directly with your bank will funnel you through their loan system only. You may miss out on a potentially more competitive home loan by being loyal to your current bank. 

Further, when speaking to a bank employee, you may not get an exclusively tailored opinion that is based on your financial circumstances. A mortgage broker can assist with concerns about future income and other debts, as well as figure out the size of the repayments you can manage.

Additionally, if you have non-traditional financial circumstances, such as being self-employed, you may not meet the criteria of a standard home loan. A mortgage broker may be able to assist in providing a list of home loan options that suit your specific financial situation.  

Help applying and organising documents

Another key benefit of taking out a home loan through a broker is that they generally can assist you with the application process itself, including gathering and organising relevant documentation. If you are time poor, this could be of benefit. 

Benefits of applying for a mortgage directly through a lender

Convenience

If you have some level of financial understanding and you don’t have any significant money-related issues, you could directly go to a banker about your loan, saving the extra effort of consulting a broker. As mentioned earlier, you will need to apply for a home loan with a lender directly anyways. Some customers may see opting for a mortgage broker as an extra step in the process.

In this way, applying for a mortgage with the same bank you’ve always used could be a more convenient option. Going straight to your bank saves you the hassle of having to compare options. Plus your lender may already have some of your details on file to make the application process smoother. 

Familiarity

Your current bank is always going to be more familiar to you than choosing a brand new lender for arguably the biggest purchase you’ll ever make. This also extends to the lender’s customer service, from familiarity with the online banking platform or app, or knowing the local teller at your nearest branch. 

Broker options may not suit you

It’s worth noting that brokers may recommend home loan options from their select panel of lenders. While they must act with your best interests in mind, you are never going to get recommendations across the entire marketplace of home loans. Sometimes smaller competitor banks can offer lower interest rate home loans, and these lenders may not engage with brokers at all.

So, which option is best?

Ultimately, the choice between using a broker or going directly through a bank for your home loan will be up to you, and depend on which factors are more important to your household. 

The best home loan for your household may end up being one that is not on a broker’s panel of lenders orfrom your childhood bank. This is why it is always worthwhile doing your own research and comparing your options carefully. 

Compare home loans yourself using RateCity’s comparison tools, such as tables and calculators. Filter down a wide range of home loan options based on your specific needs. You can also easily view how different lenders compare side-by-side based on factors like interest rates, fees and monthly payments. While this may take a little more effort, you could save thousands of dollars in interest by choosing a lower-rate lender that better matches your budget and goals. 

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