Mortgages: bank or a broker?

When it comes to buying a property most people use a mortgage – unless they’ve won the lottery!

But when needing a new mortgage deal for your next purchase, what should you do? Should you head to your bank or building society or use a broker?

Many buyers will head to the bank where they currently hold their current account to ask their mortgage adviser for help. But is that the way to get the best deal?

The difference between bank and broker

Banks and building societies are a direct lender. That means when they lend you money to buy a property, it comes directly from that bank or building society.
That means they can only offer you mortgages they have available and cannot access other lenders. Direct lenders include online companies that specialise in mortgages, speciality lenders and credit unions.
When accessing a mortgage from a direct lender, you have to do all the legwork to figure out if it’s right for you.

Mortgage brokers work differently. They act as an intermediary between you and direct lenders, including high street banks and specialist lenders. Unlike a bank, they have access to a wider range of mortgage lenders.
Also, they can access mortgage deals that even the banks can’t offer. After talking over your requirements, mortgage brokers take care of the rest. They will contact lenders and come back with options that fit your criteria. They will then work with you to figure out which loan is best for your circumstances. Brokers also help facilitate the transaction right up to closing.

Why use a mortgage broker?

There are a number of advantages when using a mortgage broker. These include:

• Access to more deals. A bank can only offer you their products but a broker can access the ‘whole of the market’. They often access deals the bank’s adviser can’t, too. They can also access specialist lenders for mortgages that are less common.
• Helping you prepare. Mortgage brokers can help you gather documents and information you need to apply for a mortgage. Most brokers will also keep you updated with the sales process, which is great if you’re not aware of all the steps when choosing a mortgage deal.
• Convenience. If you use a bank for a mortgage, you’ll have to do handle a lot of the paperwork. Brokers will generally do that for you and talk to the lender on your behalf. The best brokers today can also do a lot of the work without you having to visit their offices.

Why use a bank?

Some people like to deal with a high street bank when looking for a mortgage. Here’s why:

• Direct dealing. There are no intermediaries when dealing with a bank. People who like to make their own decisions prefer dealing directly with the lender.
• Fewer fees. Mortgage brokers don’t work for free. You’ll need to pay them a fee, so you’ll need to add that cost into your budget. Sometimes, lenders pay the broker and this is built into the cost of your mortgage. Brokers must tell you what their fees are upfront, so ask when you’re looking for a mortgage broker. They cannot receive a fee from you and from the lender.
• You know staff. If you’ve been a customer of a bank for many years, you may prefer dealing with someone you know well. They will often understand more about your finances because they’ve dealt with you over the years. But as branches close, this is probably becoming less common.

What about comparison websites?

Comparison sites allow you to input details once and then offer a list of deals. It might help you get an idea of what is available, but comparison sites mean you’ll be doing all the work.
They won’t access all of the deals available to a broker and it’s up to you to understand the full process and mortgage technicalities. You also don’t get any guidance and if you make a mistake, the lender will hold you responsible.

What should I do?

It’s entirely up to you to choose how you want to look for a mortgage. If you want access to more deals, aren’t fully aware of the mortgage process and haven’t time to chase up lenders, solicitors and paperwork, then a broker makes the best option. It’s often less stressful.
For those who like to deal with one lender and trust their bank, then you may prefer that option. Remember, you may not access the best individual deal this way and you will need to do some of the work.
Comparison sites might appeal to those who really understand mortgages and have lots of time. It’s quite different to buying car insurance this way.
If you would like to chat to the team at Jill Moore Select Properties about their thoughts on mortgages, contact us today.