Do I Speak to a Mortgage Broker or My Bank If I Want a New Mortgage?

Posted 10 December 2018 by Nick Parkhouse

Do you use a mortgage broker or approach your bank directly when you want a mortgage? Here’s a guide to the pros & cons...

Taking out a mortgage is likely to be the biggest financial commitment that you’ll ever make. So, it’s important that you make the right decision, whether you’re buying a house or switching your home loan.

Estimates show that more than two thirds of mortgages are now arranged through brokers. So, is it better to speak to a mortgage broker or should you go to your bank or building society directly?

Keep reading for a guide which looks at the pros and cons of using a mortgage broker and approaching your bank directly for a mortgage.

Why you should use a mortgage broker?

Mortgage expert Andrew Montlake says that ‘estimates show that over 70% of mortgages are now arranged through brokers’.

Mortgage brokers are qualified people who can advise you on a wide range of mortgage products from different lenders. They can be self-employed or often they will work for a financial services company, estate agent, or mortgage brokerage.

The main advantages of speaking to a mortgage broker about your mortgage include:

  • Independence – Many brokers offer a ‘whole of market’ service. This means that they can offer mortgages from a wide range of lenders. As they are not tied to one specific lender, it means they can offer independent and unbiased advice.
  • A wide choice of mortgages – As brokers often have access to a wide choice of lenders, they can search thousands of mortgages to find the right one for you.
  • Exclusive products – Many lenders offer rates exclusively to mortgage brokers. This means you can access deals that may not be available to you if you approached a lender directly.
  • Speed – You’ll often be able to make an appointment with a broker quickly, whereas you may have to wait for a meeting with your bank. Many brokers also proactively manage the application process, meaning they can utilise contacts at lenders to make sure your application is approved within your timescale.
  • Expertise – If your circumstances are out of the ordinary (perhaps you’re self-employed, or a lot of your income comes from bonuses) then it may be harder for you to find a lender who will agree your mortgage. Brokers have good market knowledge and experience, and so as well as helping you to find a good deal, they will also match you with a lender whose underwriting criteria will suit your personal situation. This can also help you to reduce the risk that your credit rating will be damaged by making multiple mortgage applications.
  • Convenience – Using a broker means that you will generally only have to provide your personal information once. Rather than approaching lots of different banks directly and providing your details multiple times, a broker can use your information to find a suitable deal for you.

While there are lots of advantages to using a mortgage broker, there are some downsides.

One of the main concerns of using a broker is that they may charge you for their services. Brokers often receive a commission from the lender with whom they place your mortgage, but many also charge a fee to you directly.

Bear in mind that the cost of using a broker should be balanced against both the time and cost savings they can generate by finding the right mortgage for your circumstances.

In addition, you may find that your bank may offer you exclusive deals – perhaps as a loyal customer – for applying directly. These deals may not be available through a broker.

Why should I go to my bank directly?

Many people have been loyal to their bank for years. If you have been banking with your bank for a long time, then you’re likely to be loyal to them and prefer to manage your money with your local branch.

In addition, some banks and building societies offer ‘loyalty’ deals to existing customers. If you are a bank or savings account holder you may be able to take advantage of a cheaper deal simply by virtue of being an existing customer. You may not be able to access these products through a broker.

Loyalty and familiarity are just two reasons why some borrowers decide to approach their own bank directly when they are looking for a mortgage. In addition, you may have already done your mortgage research and you know which product and lender is right for you. If you don’t feel that you need independent advice, then you can approach a bank directly with confidence.

It’s also rare that you will pay a fee for advice if you go through a bank directly. While your broker may charge a fee for their services, you won’t typically pay a bank or building society for advice.

The main disadvantage of speaking to your bank directly for a mortgage is that you won’t have the same choice of products. You’ll be restricted to the fixed, discounted and tracker rates that your bank offers, and so you may not get the very best deal as this might be only available through a rival lender.

Which is best? A mortgage broker or my bank?

If you’re looking for truly independent advice and you want to secure the best mortgage possible from a wide choice of lenders, then you’re likely to be better off speaking to a mortgage broker.

However, there are compelling reasons that you might approach your bank directly; particularly if they offer ‘loyalty’ products or you have a close relationship with them.

James Daley, of consumer rights group Fairer Finance, says: “Using a broker tends to make sense, especially if you're taking out a mortgage for the first time.

“Mortgages have become ever more complex over the past few years, with a litany of fees and charges which can obscure the real cost of the deal. Brokers are also invaluable if you are self-employed or have special circumstances. 

“But brokers can be expensive…so it's important to find a broker that is reasonably priced,” he adds.

 

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