Getting the best rate for your home loan is one of the very initial steps in purchasing your property. Whether you are a first home buyer or investing in residential property, there are a couple of ways you can go about it. Most two standard options would be making a direct application to the bank or going through a mortgage broker. It is one of the critical decisions that could either make it or break your home purchasing plans.
In particular, first home buyers tend to go through a callous process doing their first refinance to get their application's approval. There is a whole raft of things to consider as you do not want to go through the entire process of applying for a mortgage only to be told your application will not get through. Therefore, it is essential to seek for experienced and professional broker or lender that can make this part of the property process less apprehensive.
Nevertheless, who should you turn to? A mortgage broker or direct bank lending?
Hence, we shall take a look at the pros and cons of both mortgage broker and bank lending to help you identify the differences and decide on which to turn to.
What are the pros and cons of using a mortgage broker?
- Operate under the unrivalled best interest duty: A mortgage broker is legally required to act in the Client's best interests where they steer clients towards a product that works for them, not the broker, even if that does not benefit much to the broker
- Deep understanding of the lending process: Mortgage broker may be able to explain the nuances financial aspects of buying a home to people who are not confident in navigating the process for themselves
- Access to a wide range of banks and lenders: Depending on the Client's financial circumstances, there are several home loan banking options rather than simply going with a provider you already bank with
- One-stop contact: Enquiries and concerns can be addressed at any time during the business working hours without the need of making an appointment
- Mortgage brokers are free to use for borrowers: Mortgage brokers are paid through the commission by the lender or the bank that approved your application
- No guarantee on your application: Mortgage broker will give all their best advice and services to the clients. However, there is no guarantee to the success of client's application
What are the pros and cons of using the bank?
- Information available online: Clients can easily access home loans and compare home loan rates from a different range of banks. The application can also be easily processed with just one click on their website
- One less process for existing customers: If the Client is already a customer with the bank, the structure of home loan application will be provided based on the products that Client already have
- Not the best interest duty: Banks are typically bound through customer credit code, and thus, the bank will only offer products to the clients even if it is the best market for the Client's financial circumstances
- Limited home loan product choice: The client can only have access to the loans offered by the banks or the lenders
- Longer application processing time: In most cases, one or two extra steps might be involved during the application process time, such as call centre staff, mortgage lending personnel, or delays with a property valuation
- Misinterpretation of application approval: Sometimes, credit assessors can misinterpret the Client's application due to missing documents, vague understanding of the client's financial information, etc.
Which option is better for me?
Ultimately, there is no right or wrong option. Applying for a home loan could be a very stressful time, and you should go with the method in which you are most comfortable. If you are unsure of your decision, one piece of advice is to ask different opinions from multiple lenders or brokers.
At KBRZ, we have a professional loan brokerage team with strong finance backgrounds and years of experience. Feel free to speak to a KBRZ home loan specialist by sending us a quick email through firstname.lastname@example.org