Should I Use a Mortgage Broker or a Bank?
Short answer? You should use a mortgage broker, of course! Specifically, MMPI. But of course we would say that, so let’s examine the main benefits of using a mortgage broker versus applying to a bank directly.
1. Advice on Multiple Options
Quite simply, a bank will only advise you on its range of products. This will only represent a small fraction of the options available to you in the market. On the other hand, a mortgage broker who has agencies with all of the lenders in the broker market will advise you on a wide array of options. This will greatly increase your chances of arranging a mortgage that is most suitable to your needs and unique circumstances.
2. Save Time
Applying for a mortgage is a time-consuming process. The initial stages usually involve some combination of phone calls, emails and meetings. This is followed by gathering and providing a substantial amount of documentation to be reviewed, queried and explained. Repeating this process for multiple lenders is an option, but it would involve a huge amount of time and effort. Instead, you can discuss your requirements with a broker once, and provide the required documentation once. The broker will assess multiple options and will present you with a summary of options and a recommendation for which lender is most suitable to your unique circumstances and requirements.
3. Application Screening
Many mortgage applicants are unsure whether their application will be approved. There are many potential reasons to be concerned about this. Issue include: how long you are employed, recent savings records, other loans, and general account operations (use of overdrafts, missed direct debit payments, referral fees, etc. See our ‘10 Red Flags to Avoid‘ article for more details). It is not a good idea to submit a mortgage application without being highly confident that it will get approved, as getting declined would not help the chances of getting approved by the same lender in the future. A good mortgage broker will begin by carrying out a thorough assessment to decide whether an application meets all of the preferred lender’s criteria and quality measures. If it is clear that an application is unlikely to be approved, then we advise our clients exactly what they need to do to prepare themselves to increase the chances of approval, and for how long they need to stick to the recommended measures.
4. Lowest Interest Rates
At the time of writing (26/6/2019), the lowest mortgage interest rate in every single rate category is available through lenders that operate through mortgage brokers. No matter what your loan to value or which type of interest rate is best for you (e.g. variable, or fixed for 1-10 years), the lowest rate applicable can be obtained through a mortgage broker*. (Update: this is still the case as of 11/10/2019)
5. Wider Choice of Options
At the time of writing, there is one mortgage lender in the market that operates exclusively through brokers, namely Finance Ireland. With some of the lowest mortgage interest rates available in the market*, this is an option that should definitely be included for consideration. In our opinion, it is likely that future new entrants to the mortgage lending market may also launch exclusively through brokers, as brokers provide a ready-made distribution channel for mortgages. (Update: ICS Mortgages launched in the owner-occupier mortgage lending market on 3/9/2019, operating exclusively through brokers. MMPI is one of only seven mortgage brokers nationwide to be selected for the launch phase. Contact us below for more on this new mortgage lender, and to compare ICS with the competition).
6. No Differences in Products Offered Through a Broker
Borrowers may assume that they might get a better deal by applying directly to a bank, as the banks pay brokers a commission for arranging mortgages. While this is an understandable assumption, the good news is that it is not the case. At the time of writing (26/6/2019), all of the mortgage lenders that are available through a broker offer exactly the same terms to borrowers whether they apply directly or go through a broker. This means that borrowers get the same interest rates, cashback offers and any other applicable incentives. The reason why this is the case is that brokers create significant cost savings for the lenders. Brokers gather all of the required documentation, thoroughly assess the details against lender criteria, and then prepare and submit mortgage applications. We also handle all communications and queries, right up to the point when our clients draw down their mortgage funds and move into their new homes. The cost savings for the banks are plain to see, so it’s fair to say that brokers provide an extremely valuable service to both applicants and to mortgage lenders.
7. Choice of Insurance Providers
This is a very important point that most people don’t even consider. Mortgage approval is always the main priority when people are buying a property. However, life insurance (also known as mortgage protection) and house insurance are mandatory requirements for owner-occupier mortgages. Each bank is tied to a single provider for life insurance and house insurance. Although borrowers are not obliged to arrange life cover and house insurance through the bank, many do so, as it seems to make things more straightforward to arrange everything through the same contact. This is not how it works with brokers. After a broker gets you approved for a mortgage with a lender, they will then shop around with multiple life insurance companies. The process is then repeated for house insurance. This approach provides a wider choice of options for the required insurance policies. Naturally, this frequently results in lower costs and/or improved policy benefits.
8. Project Management
Anyone who has bought a property knows that the process quickly turns into a project that requires a lot of management. There are multiple third parties involved, including estate agents, solicitors, multiple departments in the mortgage lender, valuers, surveyors, life insurance company, house insurance provider, etc. Time pressure is a constant factor, as deadlines approach for key milestones. Examples include providing documentation, signing contracts, paying a deposit, applying for and starting insurance policies, and ultimately drawing down your mortgage on time to close on the sale on the agreed date. An experienced mortgage broker will sit in the middle of the process, communicating with third parties and advising you on exactly what needs to be done next, and by when. In fact, project management is by far the biggest part of the process for a mortgage broker. We drive the entire project forward until your key is in the door.
9. Ongoing Reviews
Mortgage lenders are now obliged to inform existing mortgage customers about the lowest rates that they offer. While this is a welcome development, they are not obliged to tell customers if they can get a better deal by switching to a competitor. A broker will review your mortgage at any time in the future, and will advise whether they can arrange a switcher mortgage that will save you money in the long-term.
*Source: bonkers.ie mortgage comparison 26/06/2019. Terms and conditions apply.
MMPI is an award-winning Irish broker offering expert mortgage advice all residential mortgages. Our qualified team of mortgage consultants will guide you through the various options available and will advise you on the best options to match your specific requirements.