Banks versus Brokers

Navigating the Australian mortgage landscape can be daunting.

With so many lenders, loan types, and interest rates, finding the right home loan can feel like navigating a maze.

You have two options: seeking a home loan directly from a bank or enlisting the expertise of a mortgage broker.

Recent data reveals a growing trend among Australian property seekers favouring mortgage brokers over direct dealings with the banks.   

A mortgage broker is an intermediary between borrowers and banks. They are licensed professionals who have a deep understanding of the home loan market and help borrowers find the most suitable loan that aligns with their financial situation and goals.

We generally recommend borrowers go with a mortgage broker rather than dealing with a lender as they offer a customer-centric service, provide access to a wider range of loan products, personalised guidance and potentially favourable rates and terms.

Mortgage brokers are typically paid by commission from the banks upon successfully referring a borrower to them, and usually do not charge their clients.

Of course you do not have to use a broker. You can go to the bank yourself or search the home loan market to see what is available. While brokers typically work with a panel of lenders, they do not have access to all of them. This may give you an advantage in your own search, but you do need to do the leg work yourself.

Your individual circumstances will vary and depending on your credit score, income, deposit amount and personal preferences, you may opt to deal with a lender directly.

Mortgage Broker Checklist

If you do decide to go with a mortgage broker, it usually best to seek out recommendations. Not all brokers are the same and if you dont have any recommendations, start with the list below to help you find a good one.

Use this checklist to guide your selection:

• Licensing and Accreditation: Ensure the broker is licensed to provide financial advice and brokerage services in Australia. They should be registered with the Australian Securities and Investments Commission (ASIC) and hold an Australian Credit Licence.
• Experience and Expertise: Look for a broker with a proven track record and extensive experience in the mortgage industry, particularly in the Sydney market. Consider their specialisation, such as first-home buyers, investors, or other loan scenarios (eg, SMSFs).
• Industry Association: Check if the broker is a member of a professional organisation, such as the Mortgage & Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA). These organisations have membership requirements and provide ongoing professional development education for their members.
• Lender Panel: Ask about the lenders they work with. A broader lender panel gives you more options and increases the chances of finding the loan that best suits you. Ensure the broker you choose has access to a wide range of lenders, as the greater the range, the greater your chances of approval and the more likely your chances of finding exactly the product you require .   
• Fees and Compensation: Understand how the broker gets paid. Most brokers receive commissions from lenders upon successful loan settlements. Ask if the commissions vary by lender. Some may charge upfront fees for their services. Brokers should be transparent with their fee and commission structures. Understanding how the broker is paid will help you assess any potential biases towards certain lenders.   
• Communication and Availability: Choose a broker who communicates clearly, is readily available to answer your questions, and keeps you informed throughout the process. They should be responsive and proactive in their communication.
• Reviews and Testimonials: Seek out online reviews and testimonials from previous clients to gauge their experiences with the broker. Look for patterns in feedback regarding their service, communication, and expertise. Online reviews and forums can provide valuable insights into a broker’s reliability and customer service quality .  
• Professionalism and Reputation: Consider the broker’s professionalism, reputation, and ethical standards. Look for someone who is trustworthy, reliable, and committed to acting in your best interests.