Should I use a broker or a lender?
Now that you're ready to apply for a mortgage it's important to decide if you want to work with a broker or go directly to a lender or bank. Both brokers and lenders provide the same services to people who are looking for mortgage loans but they are some key differences between them. Here's a guide to help you choose which one is best for you.
Mortgage brokers are financial professionals who act as an intermediary between individuals choosing to borrow and lenders. Mortgage brokers help homebuyers in the process of getting a mortgage by performing actions such as gathering and organising information and documents from the lenders. This can include important details on income, tax returns, credit reports, and pay stubs.
Brokers have excellent working relationships with each bank - meaning they can get an “off the record” meeting and advice from the bank official on any mortgage application. This ensures a smooth hassle free journey to approval for you. They also won't submit a customer application unless they are 99.9% certain it will be approved. Brokers are independent, and not aligned with one particular bank, which means the customer gets full choice of all mortgage options on the market.
After collecting all the relevant information from clients, they then bring it to lenders to seek loan approval, while trying to find the best rates and quotes possible for their customers. A good broker will provide you with expert advice on rates, conditions and offers. They can help you choose a lender based on your individual needs.
Direct lenders are banks or financial institutions that provide the actual loan for a mortgage. Some lenders may even be private companies that deal exclusively in financing mortgage loans, and can only operate online. Many people choose lenders that they already have a pre-established relationship with, for example the banks they've already been a customer of. In some cases a history with a certain lender can help you secure a better, bigger mortgage loan with a more favourable interest rate. Some banks in Ireland such as KBC even provide a lower interest rate for customers who already have accounts. You can set up a bank account with them as you apply for a mortgage.
Important things to think about
Mortgage brokers allow you to contact many different banks in order to find the best rates, lenders do not.
Some brokers work exclusively with specific lenders and vice versa.
Brokers are paid a universal 1% commission rate from all lenders, so it doesn't matter which lender you pick. They do all the work and present options to the customers, so you can decide which options (lender & rate) best suits your needs.
Increased regulations and consumer protection laws mean that a mortgage broker is a trustworthy alternative to going directly to a lender and they can help make sense of the whole mortgage loan process.
Using a mortgage broker eliminates the need to shop around and look for the best rates from many different banks.
Brokers have the same skills & lending knowledge as bank advisors and are also regulated by the Central Bank. They are one and the same. So no need to fear them or worry about making the wrong choice to go with a broker, instead of direct to a bank.