Debbie Shankar - 7 Apr, 2014

Mortgage Broker vs. Direct Lender – Which is the Best Option?

Scroll Down

When it comes to home loans you want to find a loan that meets your needs, is affordable and offers you the lowest interest rate. You also want to find a home loan that gives you flexibility, and allows you to reduce your debts without incurring penalties.

But, with more than 5,000 different mortgage businesses in Australia, finding the right mortgage for you can sometimes be difficult, especially when each of these businesses is eager to secure you as a customer.

So, how do you know who can provide you with the home loan best product and service? Well, it basically boils down to you and your personal requirements. Let’s look at what a mortgage broker and a direct lender has to offer, what the advantages and disadvantages of both are, and what you should look for when evaluating both.

What’s a Mortgage Broker?

A mortgage broker is a home loan specialist that has a number of lenders on their panel. When you contact a broker, they’ll ask you a number of questions about your financial situation and home loan needs, and then they’ll help you to find suitable home loan products from their lender’s panel. They’ll then compare these products to find you the most suitable home loan to match your needs and requirements. Mortgage brokers do not typically charge you an upfront fee for their service. Instead, they earn a commission from the lender who finances your home loan.

What’s a Direct Lender?

When you visit a bank, building society or credit union and ask for a home loan, you’ll deal directly with a loan officer. This person is an employee of the lender and they’ll be able to assist you to find the right home loan from their listed products. The direct lender earns a profit by charging you a higher interest rate than the current cash rate.

What Should I Look For When Dealing with a Mortgage Broker or Direct Lender?

You should ask how experienced the person you’re dealing with has in lending, how many home loan products they have on offer, and if they can give you a comparison of these products. If you’re dealing with a mortgage broker then ask if they are a member of a professional mortgage body and if they’re registered. All of these questions should allow you to determine if the person you are dealing with is professional, able to provide you with a high quality of service, and suited to you and your needs.

The Advantages of Using a Mortgage Broker and a Direct Lender

Mortgage Broker
• Greater number of lenders and products.
• Don’t have to conduct research.
• Can save you time and money.
• Can suggest ways for you to get home loan approval.

Direct Lender
• Easy to arrange if you have a good history with the bank.
• You can be entitled to additional benefits if you’re a member.

The Disadvantages of Using a Mortgage Broker and a Direct Lender

Mortgage Broker
• May be biased when it comes to recommending products due to higher commissions being paid on certain products.
• May have a limited number of lenders on their panel.

Direct Lender
• Limited to the products the lender offers.
• Can have reduced flexibility.
• Can have stringent lending standards.

Did you know that eChoice Mortgage Brokers will compare 100’s of loans from over 25 different lenders? Contact eChoice today to find the right home loan for YOU today.

You might also like:

Get your tailored home loan report. Start Now