Mortgage Brokers vs. Lenders vs. Comparison Sites – Which is Best?

If you are ready to start your first home buying journey, chances are the home loan process is pretty foreign to you. If you are confused as to whether you should be doing your own loan research online, talking to a mortgage broker, or liaising with a lender directly, you’re not alone. Mortgage brokers vs. lenders vs. comparison sites – which is best? Is it better to use a mortgage broker or lender? These are all valid questions, as there are several different ways to secure a home loan. In this blog, we’ll explore the various pros and cons of each of these methods.

Mortgage Brokers

The role of a mortgage broker is to guide you through the lending process step by step, and to assist you with finding a home loan that suits your needs, goals and financial situation. Mortgage brokers crunch the numbers for you and assess your borrowing capacity, taking into account market trends, fluctuations and your lifestyle. They will then present you with a range of home loan options to consider.

One of the main benefits of using a mortgage broker is the fact that they have access to a wide range of loan products from a variety of different lenders, providing you with more choice when it comes to choosing a home loan. Mortgage brokers are also useful in that they can educate you on loan features, fees, interest rates and expected turnaround times. Once you decide on a suitable home loan, your broker will then prepare the paperwork required for the loan application, lodge the application on your behalf, and liaise with the lender throughout the process right up until settlement. A mortgage broker can be a steady source of knowledge and serve as a trusted confidant as you journey through life.

Another advantage of using a mortgage broker is that they are not aligned with any one lender. They are also legally obligated to act and provide advice that is in your best interests, so you can rest assured that any credit advice you are given has been provided with your best interests in mind. Best Interests Duty legislation came into effect in January 2021.

Some brokers do charge fees, but many provide their services free of charge. It is always wise to make sure that your

chosen mortgage broker is licenced before using their services. Mortgage Brokers must hold either an Australian Credit License (ACL) or be a credit representative of a licensee (aggregator).

Lenders

Going directly to a bank or a non-bank lender to chat about your home loan options is another way to go. Lending specialists at these organisations can provide similar advice to mortgage brokers, and sometimes are able to offer package deals that include other financial products like credit cards and savings accounts. It can also be useful to go directly to a lender that you already have a relationship with, as this may help you to secure a more competitive interest rate or additional loan features.

However, lenders can only present their own institution’s loan products to you. They don’t have the flexibility of accessing loan options from an array of different lenders. Therefore, your options are limited to a certain extent when you liaise directly with a lender, and sometimes this causes problems for borrowers that don’t meet the typical lending criteria set out by their chosen bank. Also be mindful that the lending specialist you meet with initially may at some stage be transferred, promoted or leave the organisation, meaning that you may not be working with the same individual throughout the entire process.

Lenders generally charge some form of application or settlement fee, but this may vary depending on the lender and the loan product. Lenders are not legally bound by Best Interests Duty legislation and are therefore not obligated to act in the best interests of clients the way that mortgage brokers are.

Comparison sites

Loan comparison sites are convenient in that they provide home loan information with just a few clicks. They compare home loan features, interest rates, fees and monthly repayments across multiple lenders, and you can tailor your search according to your specific needs. Some websites also include borrowing power calculators and loan repayment calculators to help you work out how much you might be able to afford.

However, it is important to bear in mind that loan comparison platforms often don’t take into account your financial situation or personal circumstances. So whilst they are a handy starting point in terms of familiarising yourself with some of the options and rates available, they often don’t assess things like your credit history, salary, investments, debts, or family size. You may discover that you are not eligible for some of the loans listed for a wide variety of reasons. Comparison sites may also present loan options in a specific order or in a certain way to influence your decision, based on their own commercial interests.

If you’re after a broad overview of some of the home loan options out there, then comparison sites can be a useful place to start. But if you are seeking an in-depth analysis of your borrowing capacity and expert credit advice, it may be best to speak with a mortgage broker or lending specialist.

Selecting and applying for a home loan is a big step to take, and the way you choose to approach the process will generally depend on whether you’d like access to a wide range of options, your preferred lender, your personal circumstances, and which stage of the process you’re at. If you’d like assistance from an experienced and knowledgeable mortgage broker who has access to a wide range of loan options, please feel free to make an enquiry via our website today.

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