There’s truth in the theory a butcher will promote the meat cut they have most. It is also highly probable a mortgage bank clerk will tell you their offering outperforms any other. As might be expected, there are arguments for and against using mortgage brokers. We unpick these in this post.
How Banks and Direct Lenders Work
Direct lenders and banks finance mortgage loans. Therefore, it might make sense to go directly to them. They are large institutions offering a spread of canned options. You deal with them through a clerk not allowed to use their imagination. Therefore, they will only recommend home loan programs offered by their employer.
However, you do have a built-in advantage from using this method. If you are already a customer of the bank, they might offer you a better deal. Furthermore, you enter a robust, carefully engineered process that, if applied correctly should prevent you over-extending yourself.
Mortgage Brokers are Intermediaries
Mortgage brokers are ‘go-betweens’ between borrowers, and the lenders and banks they have on their books. Thus, they have a wider spread of options than clerks working for financial service providers. A good mortgage broker is not loyal to any particular direct lender or bank. They do the investigating and come up with the best solution.
Mortgage brokers know the borrowing / lending industry well. They help prepare clients’ loan applications, and financial documents. They can also ‘pre-approve’ you using industry-standard formulae. They get paid commissions, not salaries. Hence they have a far greater incentive to get your loan through.
So Mortgage Brokers Are My Obvious Choice?
Not necessarily. The same loan from the same provider should cost you the same amount, no matter how you arrange it. However, mortgage brokers earn different commissions depending on the financial provider concerned. Moreover some have preferential arrangements with particular lenders and banks.
For these reasons, it is better to shop around and chat with a few mortgage brokers, until you find the one you feel you can trust. An honest broker should be willing to provide all the answers. In the end though, their service should continue throughout the duration of the loan.
Therefore, should you decide to use a lending intermediary, remember the loan is the same, but the value is in the person with whom you work. Moreover, in the case of a bank or direct lender, that ‘person’ is increasingly likely to be a bot. You can speak to a real expert at Stonegate Equity anytime, about obtaining the best mortgage deal for your ideal home.
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Image: A Mortgage Broker Navigates You Through This: C Trautvetter BY CC 3.0