Mortgage Broker vs Bank: What To Expect From Each

When searching for the best possible home loan, you’ll need to decide between engaging the services of a mortgage broker vs bank.

Deciding between a mortgage broker and a bank

Mortgage brokers work with multiple lenders to find competitive loan options for borrowers, while banks provide loans exclusively from their own product range. Exploring what these differences mean for borrowers can help clarify which best suits your needs.

Mortgage broker vs bank: Key differences

Mortgage broker:

A mortgage broker is an industry professional who acts as intermediaries between lenders and borrowers. Brokers have intimate market knowledge and work with many different lenders to access different loan products. This expertise can help clients secure competitive deals tailored to their needs.

In the June 2024 quarter, mortgage brokers were responsible for 73.7 per cent of all new home loans issued in Australia, according to data from the Mortgage and Finance Association of Australia.

For buyers, a good mortgage broker can expedite the loan search process while offering access to the best available mortgage from a variety of lenders.

Banks:

Banks are large financial institutions that lend directly from their own range of products. They make money by issuing loans and charging interest and fees.

The Australian mortgage market is dominated by the Big Four banks — The Commonwealth, Westpac, ANZ and the National Australia Bank (NAB) — followed by smaller, often regional banks, many of which the Big Four own anyway. There are also non-bank mortgage lenders, such as credit unions and industry-specific associations.

For buyers, working with a bank means fewer loan options on offer, but potentially having a more streamlined process, especially if there’s already an established relationship with the institution.

🤓 Nerdy Tip

Mortgage brokers and banks each have their advantages, and understanding the difference can help you make the most informed decision. However, don’t just take our word for it — consult a property professional and talk to family or friends, especially if they have experience with a mortgage broker or bank you’re considering.

What a mortgage broker offers borrowers

Expediting the entire process: Applying for a mortgage can be time-consuming, often involving back and forth between you and your lender. A mortgage broker should expedite the process by explaining complex agreements and terms. They should also provide you with clear guidance on the required documentation for the loan. This can be especially valuable for self-employed borrowers or those with a less-than-perfect credit history who need a specialised type of home loan.
They act in your best interest: At least, they’re supposed to. Mortgage brokers are bound by law to offer you the best available mortgage for your specific circumstances — not the one that pays them the biggest commission.
Access to a wide array of products: Everyone’s needs are different and mortgage brokers have a much wider array of products at their disposal than you could get from one lender, so they should be able to get you a better deal. This could mean reduced fees, negotiating a lower interest rate, or other favourable terms.
No direct cost to you: One of the big advantages of using a mortgage broker in Australia is that they don’t charge you directly; their commission comes from the lender.
Ongoing support: Mortgage brokers also provide refinancing services if you need to adjust your loan in the future for whatever reason.

» MORE: 10 questions to ask your mortgage broker

What a bank offers borrowers

Established relationship: Many people go directly to the bank they’ve been with their entire life because they have an established relationship and feel more comfortable. This will invariably mean fewer product choices. On the plus side, however, familiarity can take a lot of the hassle out of the loan process. The bank already has your details, can see the amount being deposited into your accounts and knows your credit history. Who knows, the good old family bank may just have what you’re looking for, saving you from shopping around.
Matching other offers: Generally, a bank should be able to offer competitive interest rates, fees and innovative home loan features. Still, you may find a great mortgage offer elsewhere that your bank is willing to match. Remember, there’s no harm in asking. Your bank may be willing to play ball just to keep your business (and possibly that of your family), especially if you’re a valued customer.
Access to professional financial advisors: While an individual bank will not have as many products at their disposal, they’ll have a lot else on offer beyond home loans. For instance, you can usually find a dedicated teams of professionals to assist you with investment advice or tailoring the mortgage to your needs.
Convenient pre-approval: Most banks have relatively seamless and painless pre-approval procedures. These are often online applications with quick responses about borrowing capacity.
All your finances in the one place: Banks offer a range of financial services, all in one spot. This means you can link your loan repayments automatically to a savings account, and any other accounts you may have with the bank. Once your mortgage is up and running, you can connect it to additional features, such as an offset account.