An image of two men shaking hands and agreeing to a loan.

What is the Difference Between Bank and Broker Loans?

If you need to get a home loan, you can generally go about it in three ways – applying directly with your bank, consulting a mortgage broker or shopping around for a loan yourself. Many Kiwis go with a major bank as it seems like a safer option because they are familiar, trusted and you may already have an account with them.

However, home buyers should look at what deals are available rather than going straight to your bank because it seems easier. A mortgage is one of the biggest debts you can incur so it’s important to find one with minimal interest payments, fees and terms and conditions that suit your circumstances.

Banks May Not Be the Best Source of Expertise

The problem with banks is that their policies can be black and white and their staff may not always know it very well. They can only offer you the bank’s products and adhere to their lending policies. They can’t tell you that you can get a better deal elsewhere. Not only can you miss out on finding potential savings by shopping around, but you might not qualify for that loan. Bank staff may not have the best idea about whether a home loan product is right for you.

Applying for a loan you shouldn’t have qualified for is a hassle and leads to unnecessary enquiries on your credit file. In many cases, bank staff don’t understand complex loan situations and how to assess them as well as independent mortgage brokers. Brokers understand a range of lenders and products and will happily choose an appropriate one for each client, ensuring you only apply if they are sure you’ll get approved. They can also identify policy exemptions and negotiate on your behalf.

Do Mortgage Brokers Get Better Deals?

Your bank will definitely try to give you a good interest rate. If you have a good credit history, stable income and if you’re an existing customer, there’s a good chance you will. But you may still not get the best discount you can. Another common issue is that if you’re refinancing, banks tend not to pass on rate cuts to existing customers.

Using an independent mortgage broker has multiple benefits in certain situations, for example:

  • There can be more options for people with bad credit or income issues
  • It can save time and money compared to applying with multiple lenders yourself
  • Brokers are easier to get a hold of quickly than a big bank
  • Brokers can find the best rates and lowest fees for your specific circumstances including features like fixed, variable and split rates and offset accounts.

If your bank does offer the best deal for your circumstances, your broker will know that and recommend them. You should also keep in mind that using a mortgage broker is free so cost shouldn’t be a deterrence. The lender typically pays the broker commission for finding them business. In most cases, you’ll pay less than going directly to a bank as brokers can negotiate a better deal for you.

Contact Mortgage Masters – Independent Brokers in Auckland

Mortgage Masters are your independent mortgage brokers in Auckland, servicing the community in home loans since 1998 to find our clients the best deal on the market. If you need tailored financial advice or help finding the right home loan for your needs, please get in touch with our team today.

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