Buying a House: Bank or Mortgage Broker?
Determining how to finance the purchase of a house is one of the most important decisions you will ever make. If you are going to spend hundreds of thousands of pounds on a home that you intend to live in for the rest of your life, you want to get it right. So do you finance the purchase through your regular bank or building society, or do you go with a mortgage broker you found online?
Mortgage brokers can operate in a traditional brick-and-mortar setting or completely online. The thing to understand is that a broker is not a lender. A broker is a facilitator of sorts. Mortgage brokers help lenders and borrowers connect with each other, then facilitate the transaction between them. To many home buyers that leads to the question of why one would use a broker to begin with. Why not just go straight to the lender?
Being skeptical of mortgage brokers is reasonable. To figure out the best way to go in your situation, ask yourself the questions listed below. How you answer them will determine whether you are better off with a bank or mortgage broker.
1. Do I want access to as many products as possible?
Today’s home buyers are not necessarily content to take the first financing package that comes along. They have been raised on the internet and the opportunities it offers to shop around. So just like they shop around for car insurance and broadband, they are more likely to shop around for mortgages as well.
If you are a shopper by nature, understand that the ‘off-the-shelf’ selection of products at your bank is going to be extremely limited. By going with an independent mortgage broker instead, you will have a much greater selection to choose from. Independent mortgage brokers have access to considerably more products.
2. Do I want the best possible interest rate?
It’s hard to imagine anyone purposely wanting to pay a higher interest rate than is necessary to obtain a mortgage. Why would anyone want to pay 10% when a better deal at 7% is available elsewhere?
When you deal with a bank or building society, there is no incentive for them to tell you that you could get a better interest rate with another lender. And even if their rate is the best rate you can get, you will never know if you don’t look around. Once again, that is something the mortgage broker can do for you. He/she can look around at a huge number of deals to find the one that offers the best rate.
3. Do I want financing advice?
Licenced mortgage brokers, at least here in the UK, are also recognised as financial advisers. They advise clients on a multitude of mortgage products as a matter of course. But that’s not all. They also offer advice on how financing a home fits into the bigger picture.
Mortgage brokers help buyers determined the right fit for their budgets. They explain the concept of affordability. They advise clients in such a way as to ensure that a client’s final decision considers the full financial picture. You will not get that kind of advice from a bank loan officer.
The underlying principle in all of this is the fact that an independent mortgage broker is not locked into a single bank and its products. As such, he or she is free to assist clients in whatever way is best for them. That is exactly what a mortgage broker does. A mortgage broker’s business depends entirely on turning inquisitive home buyers into satisfied customers. So as a general rule, they take care of their clients in ways that banks can only dream of.