When you are looking for a mortgage, should you use a mortgage broker or bank? Which is best for you? These are great questions and the honest answers are there isn’t one option that’s right for everybody. Going to your bank can be convenient and familiar, while an independent mortgage broker may be able to consider mortgages from a range of lenders and help you navigate different lending criteria. Ultimately, the right choice depends on your personal circumstances, what you’re looking for, and how much support you want throughout the process.
Getting a mortgage is one of the biggest financial decisions most of us will make. Therefore, it’s worth taking some time to understand and compare your options. This is highly advisable, rather than automatically choosing the first mortgage you are offered.
At Harbour Mortgage Solutions, we believe mortgage advice should be straightforward, personal, and easy to understand. We’re based in Barry, South Wales, and help clients throughout the UK with their mortgage and protection needs.
This article, ‘Mortgage Broker or Bank? Compare Which Is Best For You?’ is a true, unbiased guide, highlighting the differences between independent mortgage brokers and banks. It’s packed with information to help you make an informed decision as to whether you choose a mortgage broker or bank.
Mortgage Broker Or Bank: What’s the Difference?
The simplest way to explain it is this:
If you approach your own bank for a mortgage, you’ll normally be dealing with an adviser connected to that lender. They will explain the mortgage options available from that bank only. Then they will recommend a suitable option from the bank’s range of mortgages to match your personal circumstances.
If you approach an independent mortgage broker, they can consider products from different lenders that best match your personal circumstances. The exact range available depends on the broker and the service they provide.
Neither approach is automatically right or wrong. The important thing is understanding what you’re being offered and whether it suits your circumstances.
What Are The Advantages of Going Directly to Your Bank?
There are some genuine advantages to arranging a mortgage directly with your bank:
It’s familiar
If you’ve been with your bank for years, you are probably already comfortable wit it’s online banking, branches, and customer service. That familiarity can make the process feel straightforward.
Your bank may have a suitable mortgage
Banks offer a wide range of mortgage products, and depending on your circumstances, one of those could be appropriate. If you’re remortgaging, for example, and your bank is your existing lender, they may offer you a product that you feel is suitable without needing to change lenders.
MoneyHelper notes that some lenders may have exclusive rates or discounts for their current customers. There is nothing wrong with taking a mortgage from your existing bank if the product is suitable for you.
It may be convenient
If you are comfortable doing your own research and your financial circumstances are relatively straightforward, dealing with your bank may be all you need. When it comes to deciding between a mortgage broker or bank, for some people keeping everything with one provider is simply easier.
What are the Advantages of Using a Mortgage Broker?
One of the main potential advantages of an independent mortgage broker is the ability to consider products from a range of lenders rather than starting with one provider.
Different lenders have different:
- Interest rates
- Product fees
- Affordability calculations
- Lending criteria
- Income requirements
- Approaches to self-employed income
- Policies around credit history
- Loan-to-value requirements
- Rules around particular property types
However, that does not mean an independent broker will necessarily find a better deal than your bank. It merely means there may be more options to consider.
MoneyHelper highlights that independent mortgage advisers may be particularly helpful for people with smaller deposits, recent employment changes, or self-employed income.
Why your circumstances matter
One of the biggest mistakes people make is assuming that mortgages are simply about finding the lowest interest rate. They’re not. Lenders will look at your individual circumstances when assessing an application. This usually includes your income, expenditure, employment situation, existing financial commitments, deposit, and credit history. This is particularly important if your circumstances aren’t completely straightforward.
For example, you might be:
- Self-employed
- A contractor
- Recently employed in a new role
- Receiving bonuses or overtime
- Buying with a small deposit
- Carrying existing credit commitments
- Dealing with previous credit issues
- Buying an unusual property
- Applying later in life
Don’t panic. None of these circumstances automatically mean you won’t be able to get a mortgage. However, different lenders may have different criteria for assessing them. That’s one of the reasons people choose to speak to an independent mortgage adviser.
A mortgage broker doesn’t just find the lowest rate
This is worth emphasising. A mortgage broker isn’t simply there to search for the lowest percentage rate. Why? Because the mortgage with the lowest initial rate isn’t necessarily the most appropriate for your circumstances.
You also need to consider things such as:
- Arrangement or product fees
- Early repayment charges
- Overpayment options
- The length of the initial deal
- The overall cost
- What happens when the initial deal ends
- Whether the mortgage fits your future plans
For example, imagine you were comparing two mortgages.
Mortgage A
4.5% interest rate
£999 product fee
Mortgage B
4.4% interest rate
£1,999 product fee
At first glance, Mortgage B looks more attractive because the interest rate is lower. However, the overall cost depends on the amount you’re borrowing, how long you have the mortgage, the fees involved and the other features of the products. That’s why it is important to look beyond the headline rate.
Mortgage Broker or Bank: A Summary
There isn’t a right or wrong answer when it comes to choosing between a mortgage broker or bank. It often comes down to your circumstances, how much choice you want and how much support you would like throughout the process.
| Going Directly to Your Bank May Suit You If… | An Independent Mortgage Broker May Be Useful If… |
|---|---|
| Your circumstances are straightforward – You have stable employment, a good credit history, a reasonable deposit and relatively few financial commitments. | You’re self-employed – Different lenders can have different approaches to assessing self-employed income, so understanding the criteria can be important. |
| Your bank offers a suitable mortgage – You’ve compared the mortgage carefully and are happy that the rate, fees and features meet your needs. | You have a smaller deposit – The options available to you may differ from those available to someone with a larger deposit, so it can be useful to understand what’s available. |
| You’re happy to do your own research – You feel confident comparing mortgage rates, fees, terms and features yourself. | You’ve recently changed jobs – Employment circumstances can form part of a lender’s assessment, and different lenders may have different criteria. |
| You’re happy with your existing lender – If you’re remortgaging and your current lender offers a suitable product, you may decide that changing lenders isn’t necessary. | You have existing debts or credit commitments – Car finance, credit cards or personal loans don’t automatically prevent you getting a mortgage, but they can affect affordability. |
| You prefer keeping things simple – You like dealing with an organisation you already know and are comfortable managing the process yourself. | Your credit history isn’t perfect – Previous missed payments, defaults or other credit issues don’t necessarily mean you can’t get a mortgage, but lender criteria can vary. |
| You don’t feel you need additional advice – You’re comfortable making your own decision after researching the options available to you. | You don’t have the time – A mortgage involves research, paperwork and decisions. Having someone explain your options and guide you through the process can make it more manageable. |
Mortgage Broker or Bank: Let’s Talk About Fees
We mentioned fees above, and it’s an important consideration. Mortgage advisers that work for a bank do not typically charge fees. However, some independent mortgage brokers do charge a fee for their advice. Others receive commission from the lender, making their advice free. However, many use a combination of both fees and commission. The exact arrangements vary between firms.
The FCA (Financial Conduct Authority) requires firms to provide clear information about their charging structure and fees. So if you are considering using a mortgage broker, don’t be afraid to ask the following questions:
- How much will your advice cost?
- When will I have to pay it?
- Do you receive commission from the lender?
- Which lenders can you consider?
- What does your service include?
A reputable adviser should be happy to explain the costs and the service you are receiving.
At Harbour Mortgage Solutions, we aim to make our fees and the costs associated with arranging a mortgage clear from the outset. The exact fees and charges applicable to you will always be confirmed by us before proceeding.
Does using a mortgage broker guarantee a better mortgage?
No. And we’d be cautious of anyone who tells you that the biggest difference between a mortgage broker or bank is that a mortgage broker offers the best options.
An independent mortgage broker cannot guarantee that you’ll receive the lowest mortgage rate, that your application will be accepted, or that using a broker will save you money.
What a mortgage broker can do is consider your circumstances, explain your options and, where providing a recommendation, recommend a mortgage that is suitable based on the information available. Remember, mortgage rates and lender criteria change, and a mortgage that is suitable for one person may not be suitable for another.
The FCA requires financial promotions and communications to be clear, fair, and not misleading, including when firms make comparisons or communicate potential benefits. We think that’s a good principle for mortgage advice generally.
What if I Speak to My Bank First?
You don’t necessarily have to choose between a mortgage broker or bank. You might speak to your bank first to find out what it can offer, then seek independent advice so you can understand how that compares with other available options.
Remember, if you’re doing this, don’t simply compare the initial interest rate.
Look at:
- The interest rate
- Product or arrangement fees
- The overall cost
- Early repayment charges
- Overpayment flexibility
- The mortgage term
- Any incentives
- Whether the product suits your plans
Additionally, get clarity about whether you’re receiving a personalised mortgage recommendation, or simply being given information about a lender’s products. The key is always to make an informed decision based on your own circumstances.
Why Speak to Harbour Mortgage Solutions?
At Harbour Mortgage Solutions we pride ourselves on getting to know each and every client behind every application. Whether you’re buying your first home, moving house, remortgaging, or looking at your options for the future, we’ll take the time to understand your circumstances and explain the options to you.
We’re also directly authorised by the Financial Conduct Authority, giving our clients the reassurance that we’re operating within the UK’s regulatory framework.
Our approach is simple:
Friendly advice. Clear explanations. No unnecessary jargon.
As you can see. We are not here to tell you that you must choose between a mortgage broker or bank. We are here to help. There’s no charge for your initial conversation with us and you don’t need to have all the answers before you call us. That’s what we’re here for.