For most home buyers, applying for their first home loan is rife with questions and concerns about what steps need to be taken. It is common to find yourself lost in the whirlwind of finding the right property for your budget, determining how much you need to borrow in a home loan, and what provider to open said loan with.
Fortunately, financial institutions and advisors can guide you through the entire process, including applying for a home loan. The only question that remains is whether it is better for you to apply through a mortgage broker or directly to a bank. This guide will walk you through the pros and cons of both options, how they differ, and ultimately help you make the right choice for your unique financial goals.
Mortgage brokers work as independent financial intermediaries to connect borrowers with suitable lenders, assess home loan needs, and facilitate the application process. A Sydney CBD mortgage broker works with those expanding their property horizons and looking to open a new or first home loan.
Unlike banks, a mortgage broker acts independently within the mortgage industry and can compare home loans across multiple lenders. They are not required to offer loan products from a single lender and have the flexibility to work alongside you throughout the entire home loan process. Their expertise ensures borrowers get optimal loan terms and a smooth transaction.
Those interested in using a mortgage broker can enjoy various benefits from having an independent agent separate from big banks. By not being associated with mortgage lenders, they can place your interests and financial status first, helping you find the best home loan deal.
Finding a home loan product that best suits you and your finances can be daunting for first-home buyers. Fortunately, first-home buyer mortgage brokers are trained professionals who can navigate that world on your behalf, avoiding common mistakes and extra costs.
By taking on this responsibility, brokers save you stress, time, money, and effort. This leaves you more time to find your dream home or get your affairs in order.
Unlike lending institutions like banks, a mortgage broker's highest priority is you, the client. They place you at the centre of their approach and tailor their solutions to suit your preferences. Your needs and input are always considered before moving on to the next step.
Mortgage brokers possess a vast toolset from years of experience, and their presence in the mortgage industry often comes with a range of lenders to choose from. There is no one-size-fits-all approach when it comes to their clients. Rather, they will create a unique strategy based on your existing finances, budgets, properties of interest, and future goals, among other factors.
Your broker will be with you from start to finish. Whether that is providing home loan recommendations or walking you through the loan application process. However, their services typically do not simply end once the loan has been approved.
Mortgage brokers work alongside you for some time to ensure the settlement of your new home has gone through and everything is running smoothly.
Every service has restrictions in their capabilities or flexibility for your needs. Mortgage brokers are no different, with their separation from major lenders coming with difficulties that may deter some clients.
While a bank or other lending institution will have departments, processes, and various managers to provide oversight, your mortgage broker will be your primary point of contact throughout the entire process. This does require a certain level of trust, and finding the right broker may take some trial and error.
Whether it is a team or an individual brokering on your behalf, there will always be an element of uncertainty based on their best efforts. While the home loans offered by lenders are concrete and guaranteed, the negotiated terms and potential benefits are entirely up to the expertise of your mortgage broker.
Traditionally, a home loan is obtained by applying directly to a bank for one of their in-house products. While this method does not allow you to compare loans between different lenders, it offers greater security. This is because major banks typically have the reputation and experience to invoke trust in clients while also providing a small pool of loan products to prevent overwhelming them.
Many banks offer guidance throughout the home loan process, but the sheer magnitude of some of their clients may mean less individual focus is offered. This extends to individualised home loan plans, which mortgage brokers typically offer most clients as they compare home loans.
For first-home owners, a certain amount of knowledge about home loan repayments, interest rates, and what kind of loan term works for you is typically expected. This works well for those who are motivated and comfortable to begin their home loan journey themselves, especially if they already have a clear goal set in their mind.
Working with a bank to find a home loan cuts out the intermediary, allowing you to focus solely on the advice and guidance your lender is providing. Opening a home loan with a bank offers various other benefits, particularly regarding security and simplicity.
By cutting out the intermediary of a mortgage broker, you connect directly to the lender or lending institution providing your loan. This means you can personally manage the details of your application and loan; no need to wait for any third parties to do so on your behalf. This is an especially beneficial feature for those who already know what home loan they want, as they can skip the research steps and apply immediately for a loan.
Some banks also offer small incentives for direct lending, particularly for existing customers who have already been with them for a certain period. Always check out the features and benefits a bank offers to see if they work well with your financial goals.
Banks have a well-established reputation, one you may be well aware of if you have been a borrower with them for some time. This familiarity offers comfort and makes financial decisions more efficiently if you have a report.
Established financial institutions also offer various perks for their clientele, such as:
Loyalty programs
Sign-up incentives
Guarantees they are obligated to make in accordance with their community standing
A good bank has a legacy of decades or even centuries behind it, and the standard it adheres to will often reflect that position.
Since a set amount of home loans are offered through a bank, most lenders will have in-depth knowledge about each product. This makes answering your pressing questions easy for them, often requiring minimal downtime between the question and response.
Although a bank is undeniably a reliable source of competitive interest rates and loan terms in the mortgage market, it is not a model that fits all potential homeowners. Some certain features or procedures may be considered detrimental to your journey towards obtaining a home loan.
While a broker can access a wide range of different banks to consider your options, the banks only offer a relatively limited range of mortgage products. While you may be lucky enough to find a suitable loan with your bank, there may be better options you are missing out on.
When it comes to bank lenders, there is usually a standardised offer for all home loan products. If you have a complex financial situation, finding a flexible option that supports your unique needs, i.e., a poor credit score, can be harder.
Many banks use their online platform to automate their home loan approval process as much as possible. The upside is simpler deals, but going through automated mediums and systems means less room for negotiation.
If you fail to meet any specific metric, even for reasons outside your control, then your loan application is likely to be denied with little opportunity to discuss your case with an actual person.
While most mortgage brokers do not charge fees for their services, banks commonly charge fees to cover specific aspects of their services. While not all banks charge the following fees, you are likely to see one or two during the home loan application process with a lender:
Application fee: The one-time payment is typically charged when you first apply for your mortgage to cover the processing and documentation of your new loan.
Loan origination fee: A payment related to processing the loan application.
Conveyance fee: A fee that covers transferring legal ownership of a title of land to you as the new owner.
Rate-lock fee: A potential fee for locking in the interest rate.
Government fees: The government may charge you additional fees on top of those from a lender, generally focusing on covering your loan's stamp duty.
Underwriting fee: For the lender's review of the application.
Document preparation fee: A common fee is required for preparing legal documents.
Processing fee: A common cost associated with banks when they handle all the administrative tasks related to the loan.
Valuation fee: Another one-time payment for assessing the value of the property or investment in question.
Legal fees: Fees related to the legal work involved in the transaction.
Lender's Mortgage Insurance (LMI): A fee you may have to pay to protect the lender if your deposit is less than a certain amount, usually 20% of the value of the property or item. Brokers can often structure your loan to avoid this.
Ultimately, the deliberation of mortgage broker vs bank comes down to personal preference. Both options offer their own benefits and restrictions that can come into play at any point during the home loan research and application process.
A bank offers both as a major financial institution for those looking for familiarity and security. You can enjoy more expedited and simpler services if you know what home loan you require.
In contrast, the diversity of loan options and the more personalised services of a mortgage broker can create a greater sense of support. If you have a less conventional financial situation or require more oversight as a first-home buyer, the services of a broker can be a far better deal.
If you are ready to start your home loan application, consider looking to the lending specialist of Get a Better Rate. Our experts are here to guide you every step of the way while securing the best rate possible for your goals.
Schedule a free consultation now , or call us on 0420 991 404 if you have any questions!
No, you can apply for loans and purchase property without a broker. A broker's services are a means of saving time and money, as well as finding better deals via multiple lenders.
Although it's not technically guaranteed, a broker's experience and rapport with various mortgage lenders tend to give them more options than applicants would on their own. They also have the skills and qualifications to negotiate existing loan details to get better deals.
Although it is legally permitted, it's important to maintain open communication and transparency with your brokers to ensure you're dealing in good faith. Some brokers will also include various forms of exclusivity in their contracts for their engagement.
A good mortgage broker has experience in various loan types, including commercial and business loans, although certain brokers may specialise in certain types.
They'll typically liaise with a business representative, such as its owner, treasurer, and/or legal representative(s).
Consultations are typically free and only require information such as your financial position, credit score, budget and what loans/properties you're looking for. Your broker's goals will essentially be to understand where you are, where you've been, and where you're trying to go regarding your financial goals.
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The comparison rate is based on a loan amount of $150,000 over a 25 year term. WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Terms, conditions, fees and charges apply and your full financial situation would need to be reviewed prior to acceptance of any offer or product.
