When lodging your next finance application, should you join the 51.8% of people using a mortgage broker? Or so should you go directly to the bank?
As people increasingly turn to mortgage brokers – largely due to the extra layer of value they provide – banks have been forced to embrace this important source of customers, eliminating any double standards.
There are, however, some lingering misconceptions. So we’ve debunked 4 myths about going directly to the bank, which might help with your decision.
1. The Bank Will Get Me a Better Rate
Many banks now have special pricing teams which handle requests for rate discounts. The same teams handle these requests, no matter whether they come from a broker or from a branch of the lender.
In addition to this, many banks have now introduced auto-decisioning tools. So unless special consideration is required, the computer will look at the request and determine what discount will be offered.
Where once banks may have given special pricing to customers who came directly to them, this does not occur today.
2. My Bank Manager Will Look After Me
As a person who values relationships, I can understand this line of thinking. After all, you’ve been a loyal a customer – so why wouldn’t the bank manager look after you, right?
In a customer service sense, this is probably true. But when it comes to lending, the bank manager does not have any influence over the approval process.
In fact, banks are increasingly introducing “credit scoring” systems which can knock out your application, even before a human has looked at it!
And once it gets to a human for assessment, banks have special credit teams dedicated to assessing home loan applications. These people do not have any idea who you are and are simply interested in whether your application is in line with their credit policies.
A good mortgage broker will be aware of the credit policies of many lenders and will ensure that your application is only lodged with a lender where it fits policy. They have access to a wide range of prime loans and non conforming loans to assist with various situations.
3. I’ll Get a Better Deal Because A Broker Won’t Get Commission
Banks recognise that there is always costs associated with acquiring and servicing new customers.
To acquire new customers, banks pay for expensive newspaper spreads, television advertising campaigns and sponsorship of footballs teams – just to name a few.
And once they’ve acquired a new customer who requires a home loan, they need to pay a staff member to meet with the customer, collect the required documentation and process the application – all time consuming processes. Add to this any additional costs for office space required, etc.
Mortgage brokers save the bank a significant amount of money, serving the client to them on a platter with an already prepared application which fits their policies. What could be better for a bank!
Increasingly, banks are viewing brokers as an extension of themselves and are prepared to pay a commission for the significant cost savings and other value they bring.
So whether you go directly to the bank or through a broker, you can be sure that you’ll get the same deal.
4. A Mortgage Broker Will Make Me Change Banks
Firstly, your broker can never make you do anything!
People expect different things of their bank. Some people love a consolidated internet banking platform, while others consider it important to be able to walk into a branch to conduct their business.
Whatever your reason, if you do not wish to consider other lending options, your mortgage broker is certainly able to lodge an application with your current bank.
And if the application is for new lending, your current bank will still pay your broker a full upfront and trailing commission.
On the rare occasion where an application relates to an internal refinance within the same bank, the bank will generally not pay another upfront commission to the broker. However a good mortgage broker will take a longer-term view, recognising that the most important thing is the relationship with their client!