Mortgage Broker vs. Bank - NerdWallet (2024)

FAQs

Is it better to go with a mortgage broker or bank? ›

a Bank. A mortgage broker can offer a wider array of options and streamline the mortgage process, but working directly with a bank gives you more control and costs less. Kate Wood joined NerdWallet in 2019 as a writer on the homes and mortgages team.

Disadvantages of Using a Mortgage Broker

The compensation varies from lender to lender; thus, the broker can source a deal that boosts their compensation. The fees that brokers receive can also be paid by the client. It can mean that the loan will be expensive for the client. Some lenders do not make use of brokers.

While a mortgage banker reviews and accepts (or denies) your home loan application directly, a mortgage broker acts as a middleman. A broker will review offers from a variety of bankers and lenders to find the best deal and typically charges additional fees for his or her services.

Best Interests Duty only applies to mortgage brokers and not banks or other non-bank lenders. So unlike when you go directly to a bank or lender, your broker is required by law to act in your best interests.

A broker can organise revaluations on your property and reassess your loans in the context of the market at any point in time. At a bank, you're less likely to be contacted about your existing home loan after drawdown, and you're almost certainly not going to be called by them offering you a better rate!

A Broker May Not Source the Best Deal for You

Many home buyers simply assume that a broker can deliver a better deal than they could get on their own, but this is not always the case. Some lenders may offer home buyers the very same terms and rates that they offer mortgage brokers (sometimes, even better).

Mortgage brokers will offer advice and guidance throughout the process and will also act as your advocate with the mortgage lenders, making it less stressful and increasing your chances of securing a mortgage. Mortgage brokers can also sometimes get very good deals, better than you could get going direct to the lender.

The broker should show you loans from other lenders as well, so you can compare. A home loan is a long-term debt, so even a small difference in interest adds up over time. If you can get a lower interest rate from another lender, you could save thousands of dollars.

You can take out a mortgage through a mortgage broker or directly from a bank or building society. Either way, the aim is to find the cheapest mortgage for your needs. Read our 'broker vs lender' guide to learn all you need to know.

How do mortgage brokers make money? ›

They typically earn a commission of around 1%-2% of the loan value, which the borrower or the lender can pay. When you take out a larger loan, your mortgage broker makes more money. A mortgage broker's total compensation can be paid through various means, including cash or an addition to the loan balance.

For banks to make a profit, they loan out money at a higher rate than they pay into your savings account. E.g. They may charge an interest rate of 3% on mortgages and pay 0.1% interest on savings accounts, leaving them with 2.9% as profit. The bank can make money from mortgages in many ways such as: Origination fees.

It's never too early, a broker is the first person you should talk to. Even if you're just starting to think about home ownership, why not include an appointment with a broker or two in your first steps? A reputable broker will be happy to answer a few questions in an informational interview.

Don't stop with just one lender! By exploring your options with multiple lenders, you get more information about your options and get a sense for which loan officers you might feel most comfortable working with. Call each lender to set up an appointment to meet with a loan officer.

If you invest in funds, discount brokers charge lower management costs than banks, ranging from 0.2% or lower. Consequently, you have greater control over your money and assets due to a lack of investment barriers and more varieties of assets. Trading with discount brokers is both efficient and time-saving.

Time-saving: Getting a mortgage appointment with your bank can take up to 2-3 weeks. Mortgage brokers usually offer quicker appointments so you can get started on your home-buying journey sooner.