Why Use a Mortgage Broker?
After all, banks are perfectly capable of providing home loans. You can walk into a branch, speak to a lending specialist, and apply directly.
My answer is simple: because a bank can only offer you its own products. A mortgage broker can look across multiple lenders and find an option that may better suit your circumstances. And I learned this lesson from personal experience.
The Real Reasons
1. Mortgage Brokers Are Generally Paid by the Lender
In many standard residential lending situations, you don’t pay the mortgage broker a direct fee. The lender pays the broker a commission when a loan settles.
However, fees and arrangements can vary, so always ask the mortgage broker upfront whether you will be charged anything. If you are unsure, ask for everything in writing.
2. They Understand the Mortgage Industry
Mortgage brokers deal with home loans every day.
They understand that different lenders have different policies around income, employment, deposits, credit history, property types and borrowing capacity.
What one lender says “no” to, another lender may be willing to consider. That’s one of the biggest advantages of using a mortgage/finance broker.
3. Your Circumstances Matter
A bank employee is working within the products and lending policies of that particular bank.
A mortgage broker, on the other hand, has an incentive to find a lender whose criteria fit your situation because their business depends on successfully arranging loans for clients.
That doesn’t mean a broker can approve every application.
It means they can potentially look at more than one option.
4. Access to Multiple Lenders
This is perhaps the biggest reason to consider a mortgage broker.
A good finance broker may have access to a panel of major banks, smaller lenders and specialist lenders.
That can be particularly useful if you are:
- Self-employed
- Newly self-employed
- Buying with a smaller deposit
- Refinancing
- Dealing with unusual income
- Have bad credit or a default
- Looking at a non-standard property
- Having difficulty meeting a major bank’s lending criteria
5. Potentially Better Options
Different lenders compete on interest rates, fees, borrowing capacity and lending policies.
Because mortgage brokers can compare multiple lenders, they may be able to find an option that is more suitable for you.
But don’t assume a broker will automatically find the cheapest loan.
The cheapest interest rate isn’t always the best loan.
Features, fees, flexibility, loan terms and your individual circumstances all matter.
6. Best Interests Duty
Australian mortgage brokers are subject to legal obligations, including Best Interests Duty, which requires brokers to act in the best interests of their clients when providing credit assistance.
That gives consumers an important layer of protection.
Still, you should always ask questions, understand the recommendation and make sure you are comfortable with the loan you are taking.
7. You Can Choose Your Mortgage Broker
Not every mortgage broker will be the same.
If you don’t like the service, communication or recommendations you receive from one broker, you can speak to another.
You are not locked into the first person you meet.
Shop around for the broker too.
8. You May Be Able to Borrow More Than You Think
This doesn’t mean a broker can magically increase your borrowing capacity.
It means different lenders can have different lending criteria.
One lender might assess your income or expenses differently from another. One might have stricter policies for self-employed borrowers. Another might be more flexible.
That’s why it can be worth getting a second opinion before assuming that the first “no” means there are no other options.
The Bottom Line
My first two experiences with banks taught me an important lesson:
Don’t confuse “this bank can’t help you” with “you can’t get a loan.”
They are two very different statements.
The mortgage market is much bigger than the bank you happen to walk into.
A good mortgage broker can help you understand your options, compare lenders, navigate complicated lending criteria and potentially find a loan that suits your circumstances. They also handle all the paperwork for you.
Before you decide that you can’t afford a property, can’t borrow enough, or don’t qualify for a home loan, it may be worth speaking to one.
Sometimes the answer isn’t “no.”
Sometimes you just haven’t found the right lender yet.
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