Broker or Bank - Who should I go to for a loan?
by Mark Causer
Who has the time to research all the banks in the market for their loans, let alone understand each one of their loan products? You could spend weeks if not months searching for the best deal that ultimately may or may not meet your needs and probably come away even more confused than when you started.
This is why many people simply head straight to their bank when it comes time to apply for a home loan or any other finance for that matter. Is this the smartest thing to do? Many experts warn, that you may be missing out on significant savings and benefits if you do.
There are countless reasons why it pays to use a qualified finance broker when shopping for your home or investment property loan. However, if you want to stick with your own bank for your mortgage, you can still use a mortgage broker to negotiate the best rate (better than the actual rate quoted to you by your banker), process paperwork and manage the application end to end on your behalf. Many finance brokers have worked inside the banking system and know how to get the best possible deal for their clients. They understand what discounts are being offered by all lenders and use this information to get you the best deal with your preferred Bank.
If like most people, you don’t have the time or your heart set on using a particular lender, a Finance Broker can be your best beat in getting you the right loan solution.
In uncovering some of the myths surrounding mortgage brokers, I recently interviewed an independent broker with 20 years of lending experience. I asked the broker to give me FIVE compelling reasons as to why EVERY borrower should as a minimum, seek out a qualified finance broker when considering a home or investment property loan, to refinance to a better product and rate or grow their property portfolio:
“The biggest advantage of a broker over a bank is choice,” says The Broker. “When you sit in front of a broker you are sitting in front of 30 plus banks and 100 plus products. Compare this with a visit to your local bank that has access to only one bank’s products only. That bank or your own bank is NEVER going to tell you that you can get a lower rate with another lender now are they? More importantly, not all banks have the same lending criteria. You may be knocked back by your bank or they just won’t lend you the amount of money you need. This is especially important at times like now, when the banks are saying ‘no’ more often due post GFC tighter lending criteria. By having more choices you’re more likely to get a ‘yes’.” says The Broker.
The Broker suggests “Ask your bank lending manager how long they’ve been helping people with home loans. Many bank loan managers have little to no experience what so ever and may find some of the more complex lending situations all too hard. They can be dictated to by their internal credit managers who sign off on the deal. The end result may be a product that does not ultimately meet your needs. Good Brokers often own their own businesses and are committed to their clients in the long term and generally have many years of industry experience,” The Broker says. “Banks are big companies; they move their staff around and reward good performers with promotions away from their customers. So you never know who you’re going to get next let alone someone who knows you well”.
If you’re looking for specialised assistance with your loan, it pays to talk to a specialised broker. “For example if you’re starting property investing, look for a broker who specialises in property investors. Bank staff often don’t have the training or experience in one area, but service whoever happens to walk into the branch,” The Broker says. “In particular, as property prices increase the banks are fighting for the bigger dollar loans and this is where Private Banking plays a hand. Does the Broker have this top end of town experience? Do they have direct access to the Private Banks? Does your Bank Loans Officer even know what their Private Bank does?”
4. Follow Up
“Clients are finding it harder and harder to manage all the requirements a lender needs to satisfy a loan approval. How many pay slips do they want ? Do they need your tax return? What about building insurance? Let’s not even get into actually building a home where the list of documents needed is enormous!” The Broker goes on to say “Getting everything in order before the loan is submitted is a major factor in getting a ‘yes” from the bank the first time. Additionally, following up the progress of your loan application is time consuming and frustrating. A good mortgage broker will have a system for chasing you up, keeping you informed and saving you time and energy”.
5. Personal Banker
Your mortgage broker is “like the perfect personal banker,” The Broker says. “They know what needs to be done, they make sure it happens and because it’s their own business, they’re in for the long haul. Bank staff change often, so even when you find a good one they change jobs before you know it. Sticking with a good quality, trusted Broker who owns and operates their own business is going to value every single client”. The Broker goes on to say “Brokers are becoming more like a bank. They work with Financial Planners, general insurance companies and Accountant’s to name a few. They are becoming a one stop shop that can offer a wide range of services across the market. Not one bank’s offering”.
Why use a mortgage Broker?
The Broker offers a recent example – A Barrister was advised by his bank that they would not advance any additional funds to clear an outstanding tax debt. The Barrister’s Accountant contacted The Broker desperate for assistance. Not only did The Broker source a major bank that would fund the tax debt, move all the loans, he achieved a lower interest rate than his old bank and he placed the client within their Private Bank for ongoing service.
A high profile client approached his current bank (whom he was very happy with) for a home loan of $3,200,000. The local loans officer at Double Bay was very keen to win the business and offered the client an additional 0.20% discount over and above the standard 1.00%. The client was very happy with this. However, his Financial Planner suggested he seek advice from The Broker to see if this was in fact the best deal given his loan size. The Broker contacted various banks and was offered a much lower rate. The Broker advised the client to go back to his current bank and ask for a further discount. The client was advised that it was the lowest they could go. After coming back to the Broker with the bad news, The Broker (using his inside knowledge) spoke with the bank and negotiated a further discount of 0.25%. It was a win/win for the client as he got to stick with his bank and he got a much lower rate.
Financial Keys is not a mortgage broker, but we do have strong relationships with suitable brokers who will be able to assist you with your queries. We recommend you spend the time to consider your lending and as a minimum have this reviewed by one of our specialists.
If you should have any further questions, please contact the writer in the first instance.
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