how to choose between a mortgage broker and bank
How to Choose Between a Mortgage Broker and Bank
A mortgage broker and a bank are both institutions, which help you borrow loans for your requirements. This Buzzle article will help you understand how to choose between a mortgage broker and bank.
Mortgage Broker | Bank |
Product Access | |
He has access to many lenders, and this includes banks, trust companies, finance companies, credit unions, and other credit institutions. | It has limited access to its only line of products. The people you might deal with here are under different profiles, like mortgage bankers, portfolio lenders, loan officers, etc. |
Independence and Objectivity | |
He will work only for you. While he will have contacts with a number of lenders, he is not tied to any of them. | The officers here will work for the bank. Their loyalties lie with the institution and not with you, so you may or may not get the best deal here. |
Cost | |
He will not charge you anything (mostly). He is paid a commission by the lending institutions for which he works. | You do not have to pay anything here either, since you are not going through an agent. |
Services | |
He will keep you updated for annual reviews, debt consolidation, and renovation financing. | It gets you your statement (annual) and notice for your mortgage. |
Rates | |
Since he knows a number of lenders, probably even those you might not be aware of (perhaps due to less advertising), he might offer you some of the best rates in the market. He might be able to guarantee you an interest rate of 3 to 6 months. | It will offer you a decent rate as well, but only for that specific bank. You may not be able to get access to a better deal from a better institution. |
Flexibility and Time | |
He is flexible and helps you save time and money. You do not have to undertake the cumbersome task of visiting the lending institutions yourself. Also, he is aware of the entire market, he knows the best products available, and he knows where you can get the best deal. He can also be available for you anytime you wish. | You will have to adhere to their rules and code of conduct, and your loan may take a long time to get approved. You have experienced help here as well; however, you are not a priority here, the bank is. |
- Although he has access to a number of lenders, if he has a personal relationship with certain institutions, there is no doubt that he might work against you. Sometimes, he may want to provide business to an institution that gives him the highest commission; thus, he may not work in your favor.
- While he may not charge you, at times, some of them do charge a sizable amount as their fee. This kind of a situation arises if you have a bad credit history, poor credit score, or a low income. In fact, he might charge you so much that you might as well approach the lending institution directly. So, if he is charging you and you wish to continue with this, make it quite clear as to how much the fees will be.
- Some of them might be inexperienced, not knowledgeable, and may not know of all the schemes available in the open market.
- As much as they assure you that they know the best of lenders and will give you the best deal, this may not be true always, i.e., if you leave all the paperwork to them, they might talk only with a handful of institutions to speed up the process, and you might end up with the wrong deal. Hence, be sure to do some research yourself.
- The bank, as mentioned in the table above, will allow you to have access only to its own products. So, you might not be able have a better deal somewhere else.
- They have a corporate and impersonal approach, so unless you have been a long-term customer or an eligible customer with a good credit history, you may not get any discounts or preferential treatment.
- The officer will work for the bank (exclusively), so you can be sure that your advantages are not taken into priority.
- The process might take a long time; also, you have to keep visiting according to their timings.
- Banks follow strict ethics and guidelines and are more regulated, and although this is a much disciplined approach, your loan approval process may be full of complications and hassles, not to mention, time-consuming.