Home buyers usually have two choices when it comes to getting a mortgage loan: go through a bank or a mortgage broker. Making this choice can be overwhelming and frustrating at the same time.
This article will help you get better understanding of what banks and mortgage brokers offer and who would be the better choice for you.
Let’s first understand who is a mortgage broker and what services they offer? A mortgage broker is a certified home loan specialist. They have access to a range of home loans from a panel of lenders that they are accredited with. They will determine your home loan objectives and provide you the options that are suited to you. They will with the application process all the way through to settlement and even beyond.
Are mortgage brokers better than a bank?
Whether you go through a mortgage broker or directly with your bank is going to depend on your individual circumstances. The mortgage process is not easy for everyone, but it can be if you have the right pieces.
A large deposit saved up and steady income are two major requirements to get a home loan from lenders. In addition, if you have high credit score with no history of bankruptcies and defaults, then you may be more attractive to a lender than someone who does not have these things. If all these aspects match, applying for a home loan by yourself may be relatively straight forward.
The table below provides comparison between going through a broker versus dealing directly through a bank:
| Mortgage broker | Bank | |
|---|---|---|
| Service |
The mortgage broker is there to help you through the entire home loan process. They can advise on every step and make sure that everything goes smoothly from application, underwriting or processing loans with one bank versus another - it's all about finding what works best for your needs! |
You'll work with a specialist from the bank to find an offer that suits your needs. Bank officials will help with your application, but you will have to do most of the work yourself. |
| Options for loan products |
Mortgage advisers generally have access to numerous loan products to choose from a panel of 30+ lenders. |
There are many different lenders out there with their own sets of mortgages. Big banks usually offer loan options for most borrowers, but smaller ones may only have a few choices available to offer. |
| Advantages |
Have contact with multiple banks and lenders. They have the latest updates and knowledge of benefits. Brokers take care of the follow ups and keep you updated at every step. |
A lender is expected to have detailed understanding of their own particular products. Some small banks offer certain additional perks if you deal directly with them and not through a broker. |
| Shortcomings |
If you stumble across a broker who is not very competent, they may not have detailed understanding about complex credit policies and therefore may give you a wrong advice. Therefore, you have to ask rights questions before you engage a broker. |
Banks generally have understanding of their own products only. If you have a scenario that does not fit within the banks' credit policy, they may decline your application. |
Why mortgage brokers have an upper hand?
Mortgage brokers have an upper hand over mainly because they are not beholden to any one financial institution. They are free to shop around for the most competitive rates and terms on behalf of their clients.
They'll be familiar with the intricacies of lenders' credit policies and should be able to refer you to lenders who are most suited to your needs. This reduces the possibility of your application being rejected. This explains the reasons why mortgage brokers settle more loan volume than the banks themselves.
“Mortgage brokers set all-time record for value of home loan settled. In Australia, for the quarter ending December 2021, 66.7% of all home loans were settled by the mortgage brokers.”
MFAA Media Release (March 2022)
MFAA | Mortgage brokers set all-time record for value of home loans settledBrokers might be able to explain all the technicalities of the home loan application process to you such as how much you would be eligible to borrow, documents required for a home loan application and the process involved until your loan fully settles. Bank personnel, on the other hand, who are overworked may not be eager to answer your questions.
Case study: How ZedPlus got a difficult loan approved
Some people might think that a mortgage broker's job is to get them the best deal possible, but in reality, they are there for you through thick and thin. Anshu Lukka, mortgage broker and director at ZedPlus, proved this true when he helped a self-employed couple working in hospitality industry secure their loan during COVID-19 pandemic.
“The couple in their 40s wanted to purchase an owner-occupied property in one of the suburbs in Queensland for $630K.
“This was during the COVID era where lenders were becoming more uncertain about applicants who were self-employed or potentially having low credit scores.
“The clients tried with many banks directly but were declined despite having healthy deposit.
“The conventional lenders had advised that they could not support the clients with this purchase due to their self-employed status and because of how risky it was for them in general.
“We approached a small lender who were sceptical about application for the same reasons. I'm happy to say that after I convinced the lender with all of my professional experience and strong arguments, they eventually agreed.
“It's not always easy to know what you need when it comes time for purchasing a new home. But one thing is certain: if your mortgage broker has done their job well, they'll help make sure that everything falls into place seamlessly and without hassle." Anshu Lukka says.
How do I know I've found a good broker?
- Inquire about referrals: The majority of the business for many of the greatest brokers comes from referrals. Ask around to discover if anyone you know has worked with a reputable mortgage broker.
- Explore housing loans on your own: Although mortgage brokers have access to hundreds of different loan programmes, it doesn't hurt to perform some independent research on your own. Remember, this is your mortgage, and you'll be paying it for several decades. It will benefit both you and your broker if you arm yourself with knowledge.
- Check reviews by other client: Use a search engine to look up your broker's name and read client reviews. This is an excellent way to learn about a broker's background and service. Examine the feedback.
“Anshuman and his team have provided an exceptionally high quality service over the time we have used Zedplus Accounting and Finance. Anshu has without a doubt been committed and worked arduously to achieve the outcome we were hoping for. He and his team regularly communicate at every step, are patient and give as much time as needed to ensure everything is carefully explained. Anhsu offers a very honest and friendly approach to the client relationship. I have no hesitation in recommending the services to Zedplus Accounting and Finance to those who are looking for an honest, committed and trustworthy accounting and finance business.”
- Katina DTo read more reviews visit:
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Check their accreditations: Your mortgage broker should be a licenced expert. You should also check with the Australian Securities and Investment Commission (ASIC) to see if your broker is registered as a licence holder or a credit representative.
We are accredited mortgage broker (CRN# 499239) and also an active full-time member with Mortgage and Finance Associate of Australia (membership #210056).
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Experience of the mortgage brokerage firm: Check whether the brokerage firm that you are dealing with is competent and has adequate experience in dealing with complex scenarios.
At ZedPlus, along with mortgage advise providers, we are also Chartered Accountants and registered tax agent (RTA # ). Therefore, we can help you not only in securing a home loan at the most competitive interest rates but also in creating a loan portfolio which fits with your tax planning goals.
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Do they charge any fee?
- While most mortgage brokers don't charge their clients, some do. Therefore, you should pose the question to the broker at the start so you're clear about all the costs involved.
At ZedPlus, we do not charge any fee for our mortgage broking services. We get paid by the banks of your choice after your home loan is settled.
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How many lenders do they have in their network?
- You should check to see if the broker has a varied panel of lenders, including both banks and non-banking institutions.
At ZedPlus, we have 30+ lenders to choose the loan products from. We get paid by the banks of your choice after your home loan is settled.
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Conclusion: Clearly, there are advantages in dealing with a mortgage broker as opposed to dealing directly with a bank.