When you're shopping for a home loan, you have two main sources for financing; a bank or a mortgage broker. Choosing between a bank or mortgage broker is circumstantial for each person, one may be more suitable than the other.
To help you get a loan for your dream home, should you choose a bank or a mortgage broker? It's a valid question, given how long the application process for a mortgage can be. Depending on your personal circumstances, for example; whether you are a first home buyer or refinancing, you will need to understand your offers and submit an application to obtain the finances you require.
Choosing between working with a bank directly or with a mortgage broker in Melbourne depends on factors such as:
- The strength of your current banking relationship
- Your need for flexibility in a lender
- Recommendations and referrals
- Who has the loan options you want
Each option comes with positives and negatives. Below, you can find more information, so you are able to make an informed decision on whether to work with a bank directly, or with a mortgage broker.
How do Bank Mortgages Work?
Obtaining a mortgage from your bank is a simple process, especially if you have strong credit, income and assets. In the process, you will complete a loan application, then meet with the bank's loan officer and then finally, review your available options. The selected bank may have excellent choices for you, and getting a mortgage through your own financial institution may qualify you for relationship perks.
However, that being said, working with just one bank limits your options. Another bank may offer a better deal that's more suitable for your situation, but you will not be aware of other options, if you are limited to speaking to one bank. This could be vital, for example; if your credit score qualifies you for a better rate at one bank over another. Even a small difference in your interest rate can cost up to thousands of dollars over the span of a 20 year mortgage.
Doing your own personal research is important. Familiarise yourself with mortgage qualifications and consider the relevant factors which will affect your loan approval, fees and rates. Explore ongoing interest rates and see how your bank's rates compare. When you have the resources, you will have an idea of whether or not you are receiving substantial offers from a bank.
If you are uncertain about offers, you can always research other lenders or enlist the help of a mortgage broker to ensure you have the best offer before you sign.
How do Mortgage Brokers Work?
When you are looking for a home loan in Melbourne, a mortgage broker acts as a middleman between you (the client) and lenders. Most mortgage brokers work with various lenders, not just limited to banks, helping you gain access to a wider range of loan choices. If your credit score is satisfactory, you are currently self-employed or you have special circumstances; a mortgage broker offers you flexibility to assist you to find the best fit.
Working with a great mortgage broker is similar to working with a great real estate agent. They will get you results you will not easily achieve on your own. After all, mortgages have a lot of complex parts: interest rates, financial jargon, down payments and more. A mortgage broker in Melbourne will help you understand how all of these variables work together and what makes one loan more suitable than the other.
However, be cautious that some mortgage brokers receive commission from specific lenders. Having said that, they may have an incentive to direct you toward a specific lender over another, without considering what is best for your personal financial needs and goals. Some mortgage brokers will also charge you fees, but an experienced broker will be upfront with both loan options, and always provide you with transparent information.
To help guarantee your mortgage broker is suitable for your personal situation, consider the following;
Get a referral. Recommendations from family, friends or a trusted real estate agent can help you find a trustworthy mortgage broker.
Ask about fees upfront. Ask the mortgage broker how they are being compensated and if you will have to pay fees for their services
Work with an independent broker. This ensures that they don't have preferred lenders who may not offer the best rates for you. Independent mortgage brokers like What If We Finance are only committed to ensuring you find an unbeatable deal.
Mortgage Broker vs. Bank: Which One Should You Choose?
In general, if your loan is a straightforward transaction, you may be able to save money and time with a bank. If you are in a complex situation, a Melbourne mortgage broker will know which lenders are most flexible to suit your needs and goals. They also know which lenders are lenient on credit and will likely approve your application.
Although, many mortgage brokers in Melbourne today, including What If We Finance, offer free services and advice. They have the knowledge, experience and ability to help you find an unbeatable deal quickly and efficiently.
For more information and enquiries, don't hesitate to contact What If We Finance today. We hold our own Credit Licence with ASIC and accreditation with the Mortgage Finance Association of Australia (MFAA). We are available 7 days a week and can meet at your office or a place convenient to you. We can also meet in our Melbourne CBD office during business hours.