Mortgage Broker vs Direct Lender: What’s Better for Home Buyers?
According to a report in The Adviser, 66% of home loan borrowers are more likely to use a broker than go to a direct lender. Which one would you choose? If you have trouble deciding, Mortgage Providers takes a closer look at mortgage brokers vs direct lenders to try and decipher the pros and cons of each.
Mortgage Lending Broker
Working with mortgage lending channels offers a significant number of advantages, particularly for first-time home buyers or those with complex financial situations.
- Access to a Wider Market: A broker's most powerful advantage is their access to a vast network of lenders. This gives you more choice than you could find by visiting a few banks yourself and saves you from having to do this groundwork. A mortgage broker in Australia can help you find a loan with a competitive interest rate and features that you might not have discovered on your own, including exclusive deals not available to the general public.
- Expert Guidance & Convenience: Brokers have a deep understanding of different loan products, eligibility criteria and the lending landscape. They can assess your unique situation—whether you're self-employed, have a non-standard income, or need to consolidate debt—and provide tailored advice. They also handle the bulk of the paperwork and communication with lenders, saving you a tremendous amount of time and stress.
- Dedicated Assistance: A broker’s primary goal is to find the best loan for your specific needs. They are your advocate throughout the process, negotiating on your behalf and helping to resolve any issues that may arise. A huge bonus is that all this is usually done for free. In most cases, a broker is paid a commission by the lender after the loan is settled.
- Potential cons: comparing a vast number of lenders through a mortgage broker can sometimes feel overwhelming, but at least you don’t have to navigate it alone, as your broker will clarify and simplify the terms and conditions of each lender for you.
Read more here for more compelling reasons to use a mortgage broker.
Direct Lender
This could include a bank or non-bank lender. If you go directly to a lender you can expect the following benefits:
- A Direct Relationship: Some people prefer the simplicity and comfort of dealing with a single, established brand. For a person who values a direct line of communication, this can be an appealing option.
- Potential for Loyalty Benefits: If you're an existing customer with your banking, savings and superannuation already with a specific bank, they may be willing to offer you a better deal or a smoother application process due to your history with them.
- Streamlined Process: In most cases, you can enjoy a straightforward application from a financially sound borrower. Going directly to a bank can sometimes be a very quick and efficient process, as there's no intermediary involved.
- Potential cons: Direct lenders like banks offer few options, which may present limitations on your interest rate savings, and you may find yourself paying more than you want.
Should I go through a broker or bank?
Your final decision will come down to your personal priorities and circumstances. If this is your first home loan and you want expert guidance from start to finish as well as a broad range of loan products to choose from, a mortgage broker is the best option. A direct lender may suit people who have an existing relationship with a bank, are confident with independent research, and have sufficient funds to invest in a home loan without extensive comparison.
Embark on your home-buying journey with Mortgage Providers by your side. Chat to us about your credit score, home loans or mortgage calculators or get started now with a free assessment.