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Using a mortgage broker vs a loan comparison site
April 11, 2017
Many people believe that the easiest way forward when getting a loan is to approach their own bank or lender. It seems simple enough: They have all of your details on file and can get the ball rolling fairly quickly.
But the truth of the matter is that your bank is just one of dozens of lenders in the market, and they may not have the best loan option for you. Think about it: your lender probably has access to four or five loan products, however, there are more than 100 subtly different mortgages out there that could suit you better.
And by ‘suit you better’, we mean save you money on interest, provide more flexibility, and charge you fewer fees.
For instance, what if you’re self-employed and your current bank has unfriendly policies towards self-employed borrowers—complete with a higher interest rate?
Shopping around can lead you towards a loan with all the bells and whistles you really need, at the best possible rates. So when you’re applying for a home loan or refinancing your loan, one thing is certain: it pays to review your options.
Benefits of using a mortgage broker
A mortgage broker is a finance professional who has relationships with dozens of different banks and lenders. They review various loan products and banks on your behalf to match you up with the best fit for your situation.
Each bank uses different criteria when reviewing a home loan application. For instance, if you own an investment property and you declare rental income, Bank A might use a calculation that allows 75% of the rental income (with 25% set aside for expenses), while Bank B considers 90% (with 10% set aside for expenses).
Depending on your situation, this type of calculation can have a big impact on your borrowing power and your chances of being approved for a loan.
When reviewing your situation, mortgage brokers will take under consideration a number of factors, including:
- Employment status (PAYG/self-employed)
- Interest only or P&I loans
- Current loans (amount and term)
- Family size/dependents
- Investments and owner occupied loans
Overall, mortgage brokers make their living by placing borrowers into mortgages, as they earn commission based on settled home loans. They have a vested interest in finding the best possible loan to suit you and your needs—because their bottom line relies on it.
Benefits of using loan comparison site
Comparison sites bring together a range of mortgage options in one place. They’re a fantastic resource to help you do things like compare fixed and variable interest rates across multiple lenders, and filter your search based on your personal needs, such as loans with offset or redraw.
One thing to keep in mind however is that while loan comparison platforms offer suggestions based on your location and your broad requirements, they don’t take into account your personal situation. You’ll be able to plug in your requests (investment loan or owner occupied? Fixed or variable rate?), but you won’t be able to customise the search based on your circumstances.
What does this mean in practice? In a nutshell, because every lender has different policies and criteria, you may find a loan via a comparison site that suits your needs, but that isn’t actually available to you. For instance, a two-income family with two kids may be eligible for a loan than a self-employed borrower who has four kids and one family income isn’t eligible for.
For an at-a-glance idea of what loans are available to suit your needs, a mortgage comparison site is an excellent first port of call. But when you’re ready to take the next step and submit an application for finance, a mortgage broker maybe the ideal partner to help you get a loan.
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