Friday, 7 December 2012

Mortgage brokers versus direct sales

Many people looking for a new mortgage or refinancing will automatically consult a mortgage broker.  This is definitely the “easy” option, but doing a bit more of the work yourself can in certain circumstances get you a much better deal.

It makes sense to use a mortgage broker when:
  • You are looking to take out a loan from a major bank (or some large building societies).  Most mortgage brokers have a panel of only about 20 lenders that they work with, and that will include a number of low-doc-type lenders
  • You prefer package deals on which a broker may be able to get a higher than advertised discount
  • Your preferred product is fairly standard and pays the broker a reasonable commission.  Some brokers won’t deal with “affinity”-type loans, which offer a good deal to the borrower, but not to the broker him/herself
  • You like someone else to complete the application forms, etc. for you and deal with the lender on your behalf
  • You would like a cash back rebate on some of the commission (see tomorrow’s post for more details)
You should consider other options if:
  • You are looking at non-bank lenders, building societies, credit unions, etc.
  • You want a basic, highly discounted product that does not pay commission
  • You are member of a professional society that negotiates special offers with lenders on behalf of their members.  These can be quite attractive
  • You are independent and like dealing with lenders directly
Across my home loan history, I’ve had three different lenders.  In each case, I consulted brokers, but they couldn’t match the deals I was offered directly.  In my current refinancing efforts, however, I’ve found that brokers are able to offer better deals.  So I would recommend exploring both alternatives.