When it comes to securing a mortgage for your dream home, you have two primary options: working with a mortgage broker or going directly to a bank or lender. Each approach has its advantages and disadvantages, and the decision of whether to go to a mortgage broker or bank is one that can significantly impact your financial future. In this blog post, we’ll explore the key differences between mortgage brokers and banks, why one is definitely a better option than the other, and why. Helping you to make an informed choice about which option suits your needs best in a challenging and volatile mortgage and property market.
Mortgage Broker vs Bank: An Overview
Before we delve into the specifics, let’s clarify the fundamental distinctions between using a mortgage broker and a bank for your home loan. A mortgage broker is a professional who acts as an intermediary between borrowers (yourself) and normally a large number of mortgage lenders (banks/building societies). For brokers like ourselves at Oportfolio, we can offer a variety of thousands of mortgage options from over 90 different banks and lenders because we have access to the entire mortgage market.
Typically brokers will work with a network of lenders, including major banks but also private banks that borrowers can’t access on their own. brokers and their admin teams will assist with you mortgage application process, the necessary paperwork, and negotiating terms on your behalf with lenders and estate agents. In return for the work, brokers earn a commission from the lender upon successful mortgage placement and will often charge a fee for processing your application which is always agreed upon prior to submitting any application. You can find Oportfolio’s fees on our website or by dropping us a quick message.
Banks and Building Societies are the organisations that actually provide the mortgage loans. They are direct money lenders who provide mortgage products from their institution that brokers are able to access. Because they only offer their own mortgages, banks are limited to the mortgage options that they offer.
Mortgage Broker vs Bank – The Pros of Using a Mortgage Broker
When exploring their best option in the debate ‘mortgage broker vs bank’ UK borrowers have a lot of pros and cons to digest. So we have compiled a comprehensive guide to hopefully help understand what each option actually means. Now, let’s firstly explore why use a mortgage broker instead of a bank for your mortgage needs.
- Access to Multiple Lenders
As mentioned before, mortgage brokers have access to a vast network of lenders, including major banks, and private lenders. This means they can provide you with a wide range of mortgage options, increasing your chances of finding the best deal tailored to your specific needs. By going directly to one bank, you really do limit yourself to that one specific lender’s criteria and products. A broker’s job is to find you the most competitive lender and deal. With the debate of bank or mortgage broker, broker clearly has an upper hand with this point.
- Expertise and Guidance
Mortgage brokers are experts in their field, and they can provide valuable guidance throughout the mortgage process. Like any professional who has taken training, has the best tools available to them, and has the relevant experience, brokers have honed their craft over years so that they can provide borrowers with the best service and guidance possible. They can help you understand complex terms, compare loan offers, and make informed decisions so that you don’t end up paying above the odds or getting locked into a mortgage that doesn’t work for you.
- Time and Convenience
A common myth in the debate of mortgage broker or bank lender is that going direct to a bank is much more convenient than working with a mortgage broker. This is simply not true. Seeking the guidance of a broker can save you time and effort. Getting an appointment with a bank on a good day is a nightmare, and getting multiple appointments (which you would need for your mortgage) is even worse. In most cases you will be expected to make the in-person journey to the bank for face to face meetings on a number of occasions, which might be difficult if your don’t have a branch near you, and getting updates on your application are often few and far between. By letting a broker take care of your application process for you, you are cutting out a lot of the stress and hassle that would normally be placed on your. Your broker will handle the paperwork, negotiations, and communication with lenders, allowing you to focus on other more exciting aspects of buying a home.
- Personalised Solutions
With banks, the criteria is pretty black and white. Your either fit their mortgage criteria or you don’t. If you don’t, you will be ushered away in many cases and won’t be considered for a loan. As brokers, we understand that not everything in life is straight forward, and different people have different circumstances. And this shouldn’t always be a reason to be rejected for a mortgage. Mortgage brokers can tailor mortgages to your unique financial situation and find solutions for you that direct bank contact won’t help with. Whether you have excellent credit, a lower credit score, or specific financial goals, brokers can find a loan that suits you with any one of their lender options. If one lender doesn’t work for you, the broker will find another route forward. Something that you would be left to do on your own if your bank can’t help.
- Potentially Better Rates
Due to their extensive lender network and negotiation skills, mortgage brokers may be able secure better interest rates and terms than you could on your own. Many lenders will actually offer broker only exclusives that you can’t get by going direct to a bank, and some lenders are only accessible via brokers. By only going to the banks that are available to the general public, you are really limiting your potential mortgage options and better rates and products.
Linked to point 3, mortgage brokers can often accommodate your schedule, meeting with you outside regular banking hours, which can be especially beneficial if you work full-time. Not many people who work full time or have a family to look after are able to make time in their busy day to go to a bank. Say if you work from 9am until 5pm Monday to Friday and the bank wants you to come in at 11am on Wednesday, you will either need to book time off work or re-schedule. which could massively delay your mortgage application. A delayed mortgage application can lead to other repercussions such as losing the property you are looking to purchase.
A mortgage broker can work with you and your schedule. If a certain time or date works best for you, your broker can arrange a call or a zoom or a face-to-face appointment with you, so that your don’t lose any of your already precious time. It’s as simple as that.
The Cons of Using a Bank vs Mortgage Broker
Are Mortgage Brokers Better Than Banks? The question of whether mortgage brokers are better than banks ultimately depends on your individual circumstances and priorities however, we have clearly illustrated the pros of using a mortgage broker. But why wouldn’t you use a bank?
- Limited Mortgage Offerings
We’ve already discussed this, but it is such an important thing to realise. Mortgage lenders can only offer mortgages that they have available. If their best mortgage rate is 6%, then that is it! They may reduce rates in the future, but they can only offer you the rate that they currently have. If a mortgage lender only offers standard straight forward residential mortgages, then that is all you will be able to get from them. If you need a more specialised mortgage such as a buy-to-let or a shared ownership mortgage, or a bridging loan, your local bank might not offer them. If your bank has strict criteria around credit issues or deposit amounts and sources, then you might not be able to get a loan from your own local bank.
2. No or Little Urgency
Because a bank is the direct lender of the money, and because they get thousands of applications a day, the urgency is not always there with the bank directly. With mortgages, you normally need to have your application applied for, approved, and offered as soon as possible to meet tight deadlines set by sellers and their solicitors. With banks, you may have to wait weeks for an appointment and can only get access to the banks at times and dates that suit them…not you. This could lead to your application being delayed and with things like purchases, you may end up losing the property to another buyer due to these delays. A broker will be able to chase the lender for you and make sure that everything is meeting timelines nicely.
3. Difficulty To Access
Mortgage brokers have access to the latest online digital broker tools and can access lenders at the click of a button, most lenders also have direct access to mortgage underwriters to discuss applications in person. With most banks, you will be expected to come into the bank directly for appointments and to provide documents. This can be very difficult for people who perhaps don’t have great mobility or don’t have a bank branch in close proximity to them. When using a mortgage broker, you don’t need to do anything in person if you can’t.
Is It Better To Get Mortgage From Bank or Broker?
Here are some factors to consider when making your decision about the mortgage broker vs bank pros and cons:
- Using a broker over a bank is full of pros. Mortgage brokers are best when you want access to a wide range of mortgage products and lenders. When you have a unique financial situation or credit challenges. When you prefer expert guidance throughout the process instead of trying to navigate things on your own. When saving time and effort is a priority for you. When negotiating for the best rates and terms is important.
- The only real cons of using a mortgage broker depend entirely on your own circumstances and the quality of the broker. If your approach a lender who does not have access to many mortgage lenders, your options may be slightly limited. For example, if your first choice lender rejects your application and your broker does not have any other lender they can approach, then you may be back to square one again. If you have a broker who is not completely familiar with all aspects of the mortgage market, then they may not be able to help with more specialist lending types such as shared ownership or buy-to-let.
- The pros of going directly to a bank are limited but still necessary to point out. Some people may already have a very good ongoing relationship with their bank, such as premier account holders who could potentially have better access to decision makers or other services that could expediate a mortgage application. But this is quite rare. Because everything is being done directly in house, there may be an argument that there is potentially less time taken to rectify any issues or mistake on the lenders side of things. For example, if a lender misinterprets a document that you have provided, they can call you directly to clarify things without having to pause the application assessment at all.
- The cons of going directly to a bank have already been explored in detail, but to sum up: If you want access to a wide range of mortgage options, this is not possible direct with one lender. If you want flexible mortgage criteria, this is not always possible with a limited mortgage lender. If you want help and guidance with your application and recommendations, this is not what you will receive from going direct. And if you want a speedy and stress-free process that meets your deadlines and timeframes, you won’t get this direct with a bank unfortunately.
Mortgage Broker Process
A big thing to know when looking at mortgage brokers vs banks is the application process of a broker, as most things go on behind closed doors. So that you don’t have to stress and worry about the application. Here is a breakdown of the mortgage broker process that you will likely experience if you choose a broker vs bank mortgage:
Initial Consultation: The process usually begins with an initial consultation with your mortgage broker. During this meeting, you’ll discuss your financial goals, credit history, and any unique circumstances that may affect your mortgage application. This can be face to face, over the telephone or in person and always fits around your schedule, whenever works best for you. Unlike a bank, you must meet their opening and closing time frames and will have an appointment time that you must stick to, or risk losing your place in the queue.
Loan Assessment: Your mortgage broker will evaluate your financial situation and creditworthiness. They will use this information to determine which lenders and mortgage products are the best fit for you. If one lender does not fit your circumstances, they will use their knowledge and expertise to find another lender that will potentially be willing to lend to you.
Lender Selection: Based on their assessment, the mortgage broker will present you with a selection of mortgage options from various lenders and explain their recommendations. This step is where the market access that brokers have really shines, as they can provide you with a more extensive array of choices than a single bank.
Application Submission: Once you’ve chosen a mortgage product, your broker will assist you in preparing the necessary documentation and submit your application to the selected lender on your behalf. All you will need to do is
Negotiation: Unlike a bank, your mortgage broker will be able to negotiate with the lender to secure the best possible terms for your mortgage, including interest rates, loan duration, and repayment options. By going directly to the bank, you will only have access to their recommendations and can risk not getting the best product available to you.
Processing and Approval: After your application is submitted, the lender’s underwriting department will review your financials. The broker and their administration team will liaise with the lender throughout this process to ensure a smooth and timely approval. If there are any issues at all or if the lender needs anything, your broker and admin will be alerted immediately and act to resolve any issues so that you don’t need to worry about it.
Offer and Completion: Once your mortgage is approved and agreed by the lender, your broker will assist you with the final stages of the process, including the completion steps and paperwork and any last-minute details that need to be checked before things are finalised. They’ll make sure everything is in order with your solicitor for you to take possession of your new home, and will be there every step of the way.
Bank Mortgage Process
Now let’s have a look at a general bank or building society mortgage application process.
In-House Consultation: When you choose to work directly with a bank, you typically visit your local branch to discuss your mortgage needs with a bank loan officer. This initial meeting sets the stage for the entire process. Things like phone calls or zoom calls are not common with direct bank applications, so you will need to make sure that you are able to make the in-person trip to a branch near you. If not, you may struggle to have your consultation and any follow up meetings needed.
Loan Assessment: The bank loan officer will assess your financial situation, including your credit history, income, and debt. Based on this evaluation, they’ll recommend mortgage products offered by the bank. If you don’t meet their criteria for any reason, that will be the end of the process. The bank will reject your application request and you will need to try and find another option or lender on your own.
Bank’s Mortgage Products: Since you’re dealing directly with a bank, your options will be limited to the mortgage products and interest rates available through that specific lender. You won’t have access to a broader range of choices like you would with a broker.
Application Submission: You’ll complete the mortgage application with the bank loan officer’s assistance. They will guide you through the process and ensure that all necessary documentation is provided. However, this is normally all done face to face too, rather than electronically. That means that you may be asked to come back to the branch on several occasions if you need to provide any more information or documentation.
In-House Processing: The bank handles the entire mortgage process in-house, from processing your application to underwriting and approval. This can lead to a streamlined experience but you may also not be made aware of where you application is at at different stages and if there are any issues at all, you will be expected to resolve them yourself. Whereas a broker would normally be the first to be made aware of any issues and will help you to resolve them.
Approval and Completion: If your application is approved, the bank will proceed with the completion process, finalising the mortgage agreement, and ensuring all legal requirements are met. However, they will only do what is necessary on their side of things. Meaning that they won’t work with the solicitor on either side to ensure a smooth completion and will not always be concerned with any deadlines that you need to meet. A broker will work with you and the solicitors and will chase the lender to ensure that they process everything in time for your application.
Additional Considerations For Broker vs Bank Mortgage
Beyond the step-by-step process, there are other important factors to take into account when deciding between a mortgage broker and a bank. Let’s explore these in more detail.
Mortgage Broker vs Bank Fees
One of the key differences between mortgage brokers and banks is how they are compensated. Mortgage brokers earn a commission from the lender upon successfully placing your mortgage. This commission is typically a percentage of the loan amount. They also typically charge an administration fee for the work undertook during the application process. Each broker charges a different fee and it is always discussed and confirmed prior to any applications taking place. On the other hand, when you work directly with a bank, you don’t have to pay broker fees or commissions. However, it’s essential to note that the cost of these fees may be indirectly factored into the interest rate or other terms of the mortgage provided by the bank.
Credit Score and Mortgage Brokers
If you have a less than perfect credit score, a mortgage broker can be particularly valuable. They can leverage their portfolio of mortgage lenders to find options that are more accommodating to borrowers with credit challenges. Banks, with their stricter lending criteria, may be less flexible in such cases. For example, if you have had a county court judgement (CCJ), most high street lenders will need this to be old and have completely dropped off your credit file. Other lenders will allow it to be on your credit file but satisfied and cleared, and others will actually allow it to be recent and still showing on your file.
Bank Relationships and Exclusive Deals
Existing relationships with a bank can be advantageous. If you’ve been a loyal customer with a particular bank, they may offer you exclusive mortgage deals or discounts as a reward for your loyalty. These deals can sometimes be more attractive than what’s available through a mortgage broker. However, many brokers who have strong relationships can also use their connections to get clients exclusive deals and criteria allowances too. For example, a well established and respected broker could speak directly with a lender about a case being rejected and can often change the lender’s stance and opinion. Lenders also offer broker only exclusive deals that you can’t access unless you are a broker.
Making An Informed Decision
In the complex and volatile world of mortgages, there is no ‘one size fits all’ solution. Different borrowers have different needs and different preferences. The question of whether a mortgage broker or a bank is better is a highly debated one, but one that we obviously have a very strong opinion on. But your decision should be based on your unique financial situation, goals, and preferences.
Mortgage brokers offer access to a broad range of lenders and products, expertise, and personalised guidance. They are especially beneficial for borrowers with diverse needs or those seeking competitive rates and terms. Something that is very relevant in a market of higher than normal interest rates and strict lender criteria. On the other hand, working directly with banks can potentially provide some familiarity, in-house direct processing, and potential discounts for existing customers. If simplicity and an established banking relationship are essential to you, a bank might be the preferred choice. But is certainly not one that opens up a lot of options for you.
Ultimately, the key to making the right choice is to thoroughly research both options, compare offers, and seek advice from experts in the field such as ourselves at Oportfolio. By doing so, you can make an informed decision that aligns with your property ownership goals and secures the best mortgage deal for your future home.
So, whether you’re leaning towards a mortgage broker or a bank, take the time to explore your options and secure the best mortgage deal for your future home. If you want to get the ball rolling and don’t know where to start, please give our team a call at Oportfolio Mortgages today or send us a quick email. We are here to help and would love to be able to assist you in any way that we can.