Mortgage broker vs using a bank: which is best for you?
We reveal the advantages and disadvantages of applying for a mortgage via a mortgage broker or a bank to help you make the right decision for your circumstances.
Mortgage brokers work with various lenders to find the right mortgage deals for their customers, while banks offer a range of their own products.
Mortgage brokers and banks differ in their product range, costs, and application support.
Understanding the advantages and downsides of each can help you decide whether a mortgage broker or a bank is your best option for securing a mortgage.
What is a mortgage broker, and what do they do?
Mortgage brokers or advisers are financial intermediaries who help clients secure the right mortgage for their needs.
They work with various lenders, including some that may not be accessible directly to the public.
Your mortgage is one of your largest monthly outgoings. Just a small difference in your interest rate could save you thousands over the years.
Although there are plenty of deals around, using a mortgage broker can often give you access to cheap deals that aren’t available directly. It’s especially worthwhile if you have complex financial circumstances like a low credit rating or being self-employed. They’ll be able to help you find a deal that’s right for you.
Mortgage brokers are qualified experts, so when you want to buy a property, they will quiz you on your financial situation, intended property purchase, and the type of mortgage you need.
They will use this information to find the right deal for your circumstances.
Mortgage brokers can also give you expert guidance throughout the application process.
Here’s a summary of how a mortgage broker could help.
| Type of help | Detail |
|---|---|
| Personalised guidance | They can work to find the right product to suit your finances and circumstances. |
| Broad access | Thanks to their broad access, mortgage brokers can find competitive rates and products crafted for your specific financial circumstances. |
| Advice for self-employed | Advise on the best products for self-employed individuals or those with irregular incomes. |
| Help with admin | Help collect the necessary documentation to ensure your application is complete and accurate. |
What is a bank’s role in mortgage lending?
Banks play a more straightforward role in mortgage lending by offering their own range of mortgage products directly to their customers.
When comparing a mortgage broker and a bank, banks are limited to their internal portfolio, which could restrict the options available.
However, there are some advantages to using a bank, including:
Streamlined communication for customers who already have accounts with the bank.
Potentially faster processing times for applications due to already-established relationships.
While banks offer less variety, their familiarity with existing customers can simplify the process for those who prefer a direct approach.
What is the difference between a mortgage broker and a bank?
Working with a broker instead of a bank differs in several ways.
Here is a summary of the main differences.
| Differences | Mortgage brokers | Banks |
|---|---|---|
| Time to process applications | Often handle most of the legwork, speeding up the process by ensuring all your documentation is accurate and complete | Applying online may be fast, but if you’re sitting down with an in-house broker this can take longer. They have more responsibilities and may be slower in processing your application |
| Range of products | Can access products from multiple lenders, including niche providers unavailable to the public | Only offer their own products, which can reduce variety but simplify decision-making |
| Personalisation | Can offer tailored advice and solutions based on your individual needs and circumstances | Focus on matching clients with their own products, which may not be ideal for everyone or the most competitive |
| Costs | Some charge hourly fees or a percentage of the loan value for their services. Others are fee-free, but they earn a commission. However, brokers can often secure lower rates that offset their fees | Don’t usually charge fees for mortgage advice, but may offer less competitive rates |
| Application support | Provide hands-on assistance with paperwork and the overall application process, and ensure you have the correct documentation | May offer less comprehensive support, often requiring customers to handle much of the process themselves |
When you’re weighing up fees, it’s important to remember that broker fees can be added to the mortgage, but remember you will pay interest on both your mortgage and broker fees until the final amount is paid.
Mortgage broker vs using a bank: the pros and cons
There are advantages and disadvantages to using a mortgage broker or bank, including:
The pros and cons of a mortgage broker
| Pros | Cons | |
|---|---|---|
| Access | Access to a wide range of products and lenders with existing relationships with lenders | May earn commission - ask if they’ve chosen a specific deal and clarify fees upfront |
| Costs | May be able to find you a better deal | May charge fees (check payment structure before committing) |
| Advice | Tailored advice and guidance which may save you time by comparing deals | Experience and qualifications can vary |
| Help with complex circumstances | Can help in complex cases eg. self-employed individuals or those with poor credit | N/A |
| Mortgage process | Help with the mortgage process and provide advice on other insurance-based products | Can take slightly longer to get to the application stage |
The pros and cons of a bank
| Pros | Cons | |
|---|---|---|
| Access | No advice is needed to access deals | Limited product range, so may be less competitive |
| Process | Often simple process because the bank has most of the information | N/A |
| Costs | Long-standing customers may negotiate better rates or discounts | May not offer the best deals, potentially costing more in the long run |
| Help with process | May be quicker to resolve issues when dealing directly with the bank | May offer less personalised service and application support |
Is it best to use a mortgage broker or a bank?
Choosing between a mortgage broker and a bank depends on your circumstances.
You should consider using a broker if you’re keen to access multiple lenders, need tailored advice, or have a complex financial situation (such as an irregular income or poor credit).
A bank may be a better option if you prefer a more straightforward process, already have a strong relationship with your bank, or are comfortable comparing mortgage products independently.
A first-time buyer with a low deposit may benefit from a broker’s expertise and access to niche products.
In contrast, an existing bank customer refinancing a mortgage may find their bank’s streamlined process more convenient.
When should you consider a mortgage broker?
A mortgage broker may be a better choice if:
You’re self-employed or have an irregular income.
If you want access to deals that only a broker can get for you.
If you want to access more competitive deals or find lenders with less strict criteria.
Your credit history or credit score is poor.
If you’re looking for additional products such as buildings or life insurance, a broker can help you find the right policy for your circumstances.
When should you consider using a bank?
A bank may be more suitable for you if:
You have a long-standing relationship with your bank and are happy with its service.
You're confident in making an independent comparison of mortgage products against the bank’s own range.
The bank’s deal meets your needs, and your focus isn’t on finding the most competitive rate, as this may not be available via your bank.
Your circumstances aren’t complex, and you don’t need expert advice.
How to decide between a mortgage broker and a bank
To make the best choice between using a mortgage broker and a bank:
Compare mortgage deals from both a mortgage broker and your bank.
Schedule a free consultation with a broker to see what they can offer you.
Consider the complexity of your financial situation and long-term plans.
Consulting a qualified mortgage broker is worthwhile, as they should give you independent advice, which you may not find with a bank offering only their mortgage products.
Get expert mortgage advice
The mortgage application process can be nerve-wracking, especially for newcomers to the property market, but understanding the difference between mortgage brokers and banks can help you choose the best option.
Unbiased can match you with a professional mortgage broker or financial adviser to ensure you have the best chance of getting your application approved.
)