If you’re looking for a mortgage, one of the first decisions you may need to make is whether to use a mortgage broker or approach a bank directly. Both options have advantages and disadvantages. Going directly to a bank can be straightforward, particularly if you already have an account with them, while a mortgage broker may be able to compare mortgage products from a wider range of lenders.
So, should you choose a mortgage broker or go direct to a bank? The right option will depend on your circumstances, how much research you want to do yourself and the type of mortgage you’re looking for.
What is a mortgage broker?
A mortgage broker is a professional who helps customers find and apply for mortgages. Rather than necessarily dealing with just one bank, a broker may have access to mortgage products from a range of different lenders. Some brokers have access to a wide range of lenders, while others may only recommend mortgages from a smaller panel. It’s therefore worth asking a broker which lenders they can access before deciding to use their service.
A broker can look at your circumstances, discuss your requirements and help identify mortgages that may be suitable for you. They may also help with the mortgage application and liaise with the lender during the process.
What does going direct to a bank mean?
Going direct means approaching a bank or building society yourself rather than using a mortgage broker. You can usually research the bank’s available mortgage products online, speak to a member of its mortgage team and make an application directly.
One potential advantage is that you are dealing directly with the lender providing the mortgage. However, the bank will generally only be able to offer you its own mortgage products rather than comparing the whole of the market.
What are the advantages of using a mortgage broker?
One of the biggest potential advantages of using a mortgage broker is that they may be able to compare mortgages from a number of lenders.
You may have more mortgage options
If you approach one bank directly, you’re generally looking at that bank’s own mortgage products. A broker may be able to consider products from several lenders, potentially giving you a wider choice. This could be particularly useful if your circumstances don’t fit neatly into a standard mortgage application.
A broker can save you time
Searching through mortgage products, comparing interest rates, checking fees and understanding different mortgage terms can take time. A broker can do some of this work for you and explain the options available.
They may understand more complicated circumstances
Some borrowers have circumstances that can make finding a mortgage more complicated. This could include being self-employed, having multiple sources of income, a small deposit or other financial circumstances that don’t fit a standard application. A broker who regularly deals with different lenders may know which lenders are more likely to consider particular circumstances.
They can help with the application
A broker may also help you understand the application process and provide guidance about the information and documents you need to provide.
What are the disadvantages of using a mortgage broker?
Using a broker isn’t necessarily the right choice for everyone.
You may have to pay a fee
Some mortgage brokers charge a fee for their service. Others may receive commission from the lender, while some may use a combination of the two. Make sure you understand how the broker is paid and whether you will have to pay a fee before proceeding.
Not every broker has access to every lender
It is important not to assume that every mortgage broker can search every mortgage available. Ask whether they are independent or have access to a limited panel of lenders, and which lenders they can consider for you.
You are still responsible for the final decision
A broker can provide recommendations and help you understand your options, but you should make sure you understand the mortgage you are taking out, including the interest rate, fees, term and any conditions that apply.
What are the advantages of going direct to a bank?
There are also good reasons why some people choose to approach a bank directly.
It can be straightforward
If you already bank with a particular lender, you may find it convenient to start your mortgage search there. You can speak directly to the bank, find out which products it offers and deal with the lender throughout the application.
You may not have to pay a broker fee
If you arrange your mortgage directly with a bank, you won’t have a mortgage broker’s fee to consider. However, this doesn’t necessarily mean the mortgage itself will be cheaper. You should compare the overall cost of the mortgage, including the interest rate and any arrangement or other fees.
You can research mortgages yourself
If you are comfortable comparing mortgages and understanding the differences between products, you may prefer to do your own research. Going direct can give you control over the process and means you can approach different lenders yourself.
What are the disadvantages of going direct to a bank?
The main limitation is that you are generally only considering that particular bank’s mortgage products.
You may have a smaller choice
A bank can only offer you its own mortgages. Even if its rates look competitive, another lender could potentially offer a mortgage that is more suitable for your circumstances. You would therefore need to compare mortgages from other lenders yourself if you want to understand the wider market.
It can take more time
If you want to compare several banks yourself, you may need to research each lender, check its eligibility criteria and make enquiries with multiple providers. A mortgage broker may be able to do more of this comparison work for you.
Is it better to use a mortgage broker or go direct?
There isn’t a single answer that applies to everyone. A mortgage broker could be worth considering if you want someone to compare lenders for you, have a more complicated financial situation or simply don’t want to spend a lot of time researching mortgages yourself. Going direct could suit you if you are confident researching mortgage products, already have a preferred lender or want to deal directly with a particular bank.
It can also be worth comparing both approaches. You could speak to a mortgage broker and research mortgages available directly from banks before making a decision. Remember that the mortgage with the lowest interest rate isn’t necessarily the cheapest overall. Look at the full cost of the mortgage, including arrangement fees, valuation fees, early repayment charges and other applicable costs, as well as the interest rate.
What should you consider before choosing a mortgage?
Before deciding whether to use a broker or go direct, consider:
- How much deposit you have available
- How much you can realistically afford to borrow
- The mortgage term you are considering
- The interest rate and whether it is fixed or variable
- Any arrangement or other fees
- Whether there are early repayment charges
- Whether the lender’s criteria match your circumstances
- Whether you want someone to help compare mortgage options
- Whether a broker charges you a fee for their service
- Which lenders a broker has access to
It is also important to remember that getting a mortgage is a significant financial commitment. You should consider your own circumstances carefully and make sure you understand the mortgage before proceeding.
Mortgage broker or bank: which should you choose?
Choosing between a mortgage broker and going directly to a bank ultimately comes down to what works best for you. A mortgage broker can potentially give you access to a wider range of lenders and save you time comparing products. However, you may have to pay a fee and not every broker has access to every lender.
Going direct to a bank can be simple and may suit borrowers who prefer to research their own options. The downside is that you are generally limited to that lender’s mortgage products unless you also compare other banks yourself. Whichever route you take, shopping around and comparing the overall cost and suitability of different mortgages can be worthwhile.
Disclaimer
This article is provided for general information only and is not intended to constitute financial, mortgage, legal or other professional advice. MovingSoon does not provide regulated mortgage advice and does not recommend any particular mortgage, lender, bank or mortgage broker.
Mortgage products, eligibility criteria, interest rates, fees and lending requirements can change. Your ability to obtain a mortgage will depend on your individual circumstances and the lender’s assessment.
If you are considering taking out a mortgage, you should consider obtaining advice from a suitably qualified and authorised mortgage adviser or other regulated financial professional where appropriate.
