We are often asked by clients ‘what is the difference between a broker and a bank?’. The answer is that one is a financial institution that issues loans (bank) and the other is a financial institution that organises loans and advises on them but doesn’t actually give you the money (broker). Perhaps the way to think of it is like this, if you want to eat you can get food at a supermarket, using a broker though is like going to a supermarket and getting advice on different items as to which is the best for your health and the best price for what you purchase.
Every loan ends up in a bank so its not an accurate question in one respect to ask whether the actual loan is going to be different via a broker or a bank. The loan you obtain via a broker is a bank loan, the difference is that a broker will help you choose the best solution for your needs whereas a bank will only ever advise you on the loans they can offer you. It is that element of ‘independence’ that has meant people using brokers is a growing trend, so much so in fact that about 3 people in 5 use a broker.
So when you decide to get a mortgage if you want to get the best rates & the best options along with independent advice then you’ll need a broker. If you don’t need advice then you can opt to go direct to a lender, and 40% of people do this, but they fall into two categories, firstly is the financially literate who know a good deal about mortgages and are happy to navigate the mortgage maze on their own. In this group I have never met a person outside of the industry who knows as much as a good broker (unless they themselves are a good broker!), secondly are those who don’t know any better and they can’t really be helped unless they get in touch with a broker.
Another common question is about ‘fees’, many brokers don’t charge fees, in our firm fees are applied depending on the case, banks chose to reduce the commission brokers get paid this year and as a result of this, combined with fewer transactions and upward inflation in costs fees are due in some cases, but we don’t just ‘charge a fee’ we’ll show you a list of the work that is done to justify the fee and we’ll earn it. If a fee is going to be applied you will be told about it and a ‘fee authority’ form signed, so you won’t be suddenly charged if you decide not to use our firm. This is important as you should have the opportunity to vet your broker before deciding to use them.
If you are going to use a broker make sure that you take a few precautionary steps to ensure that you are only dealing with the best in market.
1. Ask them what professional body they are a member of: PIBA (professional insurance brokers association) is the largest by membership, IMAF & the IBA are also great organizations too.
2. Ask them how many agencies they have, if it is less than ten then you are not getting a full view of the market, once you have more than five agencies you can technically call yourself ‘independent’ but five out of fifteen or more isn’t exactly covering all bases, so more than ten is vital.
3. Ask them if they use a packager or do they deal with lenders directly? If they use a packager there is often a delay in getting answers so find out whether they contact banks directly or via a hub or service provider.
4. Make sure they are properly regulated and ask to see a copy of the brokers regulation, this way you can be satisfied that your broker is accepted by the relevant state authorities.
These tips should help you to decide between using a bank or a broker, if you want to use a broker we’d be delighted to help, you can apply on line for a mortgage (the ‘apply online’ tab at the top of the page will take you there and our speaking web agent will talk you through the internet mortgage application process), or failing that there are plenty of top quality brokers in the country who would also be glad to assist, if you’d like to look at our competitors just type ‘mortgage brokers’ into google and you’ll get a list of them.