Money - 2 Jan, 2018

Mortgage Broker or Bank? Choosing the Right One for You

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When it comes to getting a home loan, you want to find the best deal. But, this does not mean just focusing on the lowest rate. You also need to consider what home loan features you want, the type of interest, and your circumstances. So, does a mortgage broker or bank offer you the better deal? Let’s separate the fables from reality by asking mortgage experts what they really think, so you can decide for yourself.

Mortgage Broker or Bank? What the Bank Can Offer

Most Australians like the safety of a bank because they’ve been around for years and they have greater financial backing than some smaller lenders. But, this doesn’t mean they’ll offer you the best deal. What’s the bottom line? Often banks take brand loyalty for granted and they’ll charge more for their service due to demand.

So, what did the mortgage experts have to say? Well, the hottest banking questions asked to include:

  • Do banks reward loyalty? Often a bank will look at your history. So, if you’ve been banking with them for years and your credit history is outstanding, then this may persuade them to give you a better deal. They also look favourably on existing customers with a strong employment and savings past, and those who have other loans with them that they manage well. Want to know the best part? Often, they’ll let you bundle loans together, which will give you a better rate on all loans you have with them.
  • Do banks offer many home loan products? While a bank has several home loan options these are their own In addition, they also must adhere to their lending policies, which may prevent them from offering all their products to you.
  • Isn’t going to my bank easier? Many Australians go directly to their bank for a home loan because they already have an account with them. This strategy means it’s far easier because you don’t need to supply the bank with a financial or savings history. Here’s the deal: according to research, convenience is the main reason why Australians use a bank over a broker.
  • Can my banker offer me a personalised service? If you have a designated banker, then, yes, they can provide you with a personalised service, to some degree. Now: some bank customers will even have a designated branch or business banker. Others, though, have a loan officer that’s available at the time of their enquiry.
  • Will I deal with the same person over the lifetime of my loan? Sadly, no. Bank staff typically move around – good performers receive promotions, and staff cuts and branch closures lead to redundancy. So, the person who you deal with today may not be the person you deal with tomorrow.

Are you looking to purchase a property or refinance?

Mortgage Broker or Bank? The Mortgage Broker Defined

Mortgage brokers, on the other hand, are usually an unknown quantity and must earn your trust. But, they’re able to compare hundreds of loan products to find the right one for you. Plus, they’ll negotiate with a bank on your behalf, so they may be able to shave more off the interest rate your bank initially offered you.

Some of the most frequently asked broker questions according to mortgage experts are:

  • Do mortgage brokers work for banks? A broker doesn’t technically work for a bank. They are either employed by or own independent businesses. However, a lender, including banks, do pay a broker a commission when they sign you up for a home loan.
  • Do mortgage brokers charge a fee? In most cases, a mortgage broker’s service is free of charge. Although, some brokers will charge a fee for smaller loans under, say, $200,000. In addition, you may have to pay a fee if you repay your loan in under 2-years. Known as a ‘clawback fee’, a bank usually charges a broker this fee, which they may pass on to their customer.
  • What does a mortgage broker do for you? Brokers provide a personalised service from the start to the finish of your home loan. They help collect all your needed evidence and present the best application possible, they also take care of your application, as well as settlement. Want to know the best part? They negotiate the deal and liaise with credit officers, valuers, solicitors and even builders to simplify the buying process.
  • What do you need to give a mortgage broker? You’ll need to provide a broker with the same information that you give a bank – identification documents, financial history, employment details, an asset profile and a list of liabilities. They’ll also want to know how many dependents you have, how much you’re looking to borrow, and the size of your deposit. Plus, they’ll ask to check your credit history to see if you pay your bills on time.
  • Do mortgage brokers get better deals? A mortgage broker has a panel of lenders. These are typically banks, including the Big Four, as well as credit unions, building societies and other reputable financial institutions. Therefore, they can compare far more loan products than a bank can, and they can provide you with comparison information, so you make an informed decision.
  • How does a mortgage broker earn your trust? A good mortgage broker will make a time to meet you, and will then discuss your needs and financial history. At this time, you can ask them questions about their qualifications and level of experience. If you feel comfortable with them, then you may want to take the meeting further and begin discussing your home loan options.

However, regardless of whether you use a mortgage broker or bank, conducting independent research is ‘a must’. By spending the time to research mortgages, before signing up, you’ll have a better understanding of the market and you’ll instantly recognise a good deal when you find it.

Do you want a home loan for under 4%? If you said yes, then contact eChoice. Our brokers have access to 100’s of home loan products. So, we’ll find the right mortgage for you.

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