A bank can only offer you its own home loans. A mortgage broker can compare options from the lenders on their panel.
That’s the core difference, but it isn’t the whole decision. How your options are compared, how the loan is structured and the support you get along the way matter too. Neither approach suits everyone, so here’s how each works, what to compare and how to decide.
What’s the difference between a mortgage broker and a bank?
A mortgage broker acts as an intermediary between you and lenders, helping you understand and compare home loan options from the lenders they work with. If you go to a bank directly, you deal with that bank and the home loans it offers.
ASIC’s Moneysmart explains that a broker can help you understand your needs and goals, work out what you can afford to borrow, identify suitable options, explain how different loans work and assist with the application through to settlement.
A broker doesn’t necessarily have access to every lender or home loan in Australia, because lender panels vary. Ask which lenders a broker can and can’t access.
| Mortgage broker | Bank | |
|---|---|---|
| Lending options | Can consider options from multiple lenders available to the broker. | Offers home loans from its own product range. |
| Comparison | Can compare rates, fees, features, lender policies and structure across available lenders. | You compare options within that bank, or research other lenders yourself. |
| Application | Can help prepare the application and manage the process with the lender. | You deal directly with the bank through the application. |
Costs, features, repayment arrangements and loan structure all affect whether a loan suits you, so the choice isn’t only about lender access. It’s also about how much comparison, guidance and support you want.
What does a mortgage broker actually do?
Who does a mortgage broker act for?
Depending on their service model and your circumstances, a broker’s role can extend beyond finding a loan.
Understand your position
A broker typically gathers details of your income, expenses, debts, savings or equity and goals, to identify which factors may affect the loan options available to you.
Compare suitable options
Lenders differ in products, policies, fees and assessment criteria. A broker can compare options from their panel and explain the differences that matter.
Manage the application
Once you decide to proceed, a broker can prepare and submit the application, coordinate supporting documents and communicate with the lender. The lender, not the broker, decides whether to approve the loan.
Plan beyond the application
Some brokers provide ongoing support and mortgage reviews after settlement. This varies by service model, so ask what’s included.
What happens when you go directly to a bank?
The bank assesses your application against its own lending policies and considers products from its own range. You deal with the bank throughout the enquiry, application, approval and settlement process.
A bank can explain and assess the loans it offers, but it isn’t comparing them with competing lenders for you. That doesn’t make its option unsuitable. If you want to see how it stacks up on rates, fees, features, policies or structure, you’ll need to make those comparisons yourself or ask a broker to help.
Who does a mortgage broker act for, and how are they paid?
In Australia, mortgage brokers have a legal duty to act in the consumer’s best interests when providing credit assistance. Where there’s a relevant conflict of interests, the consumer’s interests must be given priority.
This is the Best Interests Duty. ASIC describes it as principles-based, so it doesn’t mean every broker will recommend the same loan. What’s in your best interests depends on your circumstances, needs and objectives.
Brokers are generally paid a commission by the lender when they arrange a loan. ASIC’s Moneysmart explains that this typically includes an upfront commission and an ongoing, or trail, commission. Some brokers also charge you a fee. Where they do, the proposed fee should be set out in a written quote for you to accept before the service is provided. Brokers also have disclosure obligations covering commissions and other payments they may receive.
Does commission affect which loan a broker recommends?
It can create a potential conflict, which is why the Best Interests Duty and disclosure obligations exist. Being paid by a lender doesn’t remove a broker’s obligation to act in your best interests. You can ask any broker how they’re paid and why they’re recommending one loan over the alternatives.
Does The Finance Architect charge a broker fee?
For standard mortgage broking, we generally don’t charge a broker or service fee and are paid by the lender. In some circumstances a fee may apply where additional work or time is required. If so, we’ll disclose it and agree it with you in advance.
Separate service fees apply to the Blueprint and Accelerator tiers of our Debt-Free Home Strategy, which include additional strategy and ongoing support.
Mortgage broker vs bank: what should you compare?
Look beyond the lowest advertised interest rate.
Choice of lenders. A bank offers its own range. A broker can compare options across their panel.
Lending policies. Lenders assess income, existing debts, deposit or equity and the property differently, so the options available to you can vary.
Rates and fees. Compare the interest rate alongside establishment, ongoing and other applicable fees.
Features and structure. Consider which features you’ll actually use, such as an offset account, redraw facility, fixed or variable rate and repayment options, and how the loan is structured.
Support. Ask who will handle documentation, the application and communication during assessment, and what happens after settlement. Mortgage reviews can help check the loan still suits you.
Can a mortgage broker get you a better interest rate?
Not necessarily. A broker may identify competitive rates across the lenders available to them, but using one doesn’t guarantee a lower rate than going directly to a bank. Fees, features, repayment options and structure all affect the overall cost.
So rather than asking “Who can get me the lowest rate?”, ask “Which home loan offers the right combination of cost, features and structure for my circumstances?”
When does each approach make sense?
Going directly to a bank
It can make sense if you already know which lender or loan you want and feel comfortable judging whether it suits you. For example, you may value an existing banking relationship, want a specific bank product, have straightforward requirements or have already compared alternatives. If you’re comfortable comparing options and managing the process yourself, that may be all the help you need.
Using a mortgage broker
A broker can help whenever you want support understanding and comparing your options, not only when your circumstances are complex.
- First home buyers: borrowing options, lender requirements and the steps before making an offer.
- Next home buyers: an existing mortgage, equity and the timing of buying and selling.
- Refinancing: comparing your current loan with alternatives, and whether to switch, restructure or stay.
- Property investors: loan structure and the effect of one lending decision on future borrowing.
A broker can be particularly useful where lender policies could materially affect your options, such as if you’re self-employed, have multiple debts or loans, or have less straightforward circumstances.
Are you choosing a loan or planning your mortgage?
A home loan needs to do more than get the property financed. Think about the features you’ll use, how the mortgage should be structured, how today’s decisions could affect future property plans, when the loan should be reviewed and where you might reduce debt sooner.
At The Finance Architect, arranging the loan is part of the process, not the end of it. We start with your current position and goals, plan the approach, structure the mortgage around your circumstances, arrange the finance and review it as things change, with the longer-term goal of helping you own sooner. For clients who want to go further, the Debt-Free Home Strategy provides a more structured approach to mortgage strategy and ongoing support.
Whichever route you take, ask how this mortgage fits with where you want to go next.
Questions to ask before choosing a bank or mortgage broker
- Which lenders can this broker access, and which can’t they?
- How are you paid, and will any fee be disclosed in writing before I commit?
- Am I comparing overall cost and structure, or mainly the advertised rate?
- Who will manage the application and communication with the lender?
- What support will I receive after the loan settles?
- How does this mortgage fit with what I may want to do next?
Mortgage broker vs bank FAQs
Is it better to use a mortgage broker or a bank?
Neither is automatically better. A broker can compare options across the lenders available to them, while a bank can only offer its own products. Your choice may come down to how much comparison and support you want, and whether you’re comfortable researching alternatives yourself.
Do mortgage brokers have access to every bank?
No. Brokers generally work with a panel of lenders, and panels vary between brokers. Ask which lenders are on their panel and which they can’t access.
Does commission affect which loan a broker recommends?
Brokers are generally paid by lenders, but they must still act in your best interests when providing credit assistance. Ask how your broker is paid and why they recommend a particular loan over the alternatives.
Do I have to use the lender my broker recommends?
No. You decide whether to proceed. A broker should be able to explain why they recommend a loan, and you can ask about the alternatives they considered.
Is it more expensive to use a mortgage broker?
Not necessarily. Brokers are generally paid by lenders, although some also charge a client fee, which should be disclosed in advance. For how we charge, see the fee section above.
Can I speak to a mortgage broker and my bank?
Yes. Speaking to both can show you what your existing bank can offer and how that compares with a broker’s options. Before submitting multiple applications, check whether credit enquiries will be recorded and discuss the implications with the broker or lender.
When should I speak to a mortgage broker?
You can speak to a broker before you’re ready to apply. Starting earlier helps you understand your borrowing position, lender requirements and anything worth addressing before you buy, refinance or invest. For a purchase, that may mean starting months before you expect to make an offer.
Where to start
Whether you use a broker or go directly to a bank, the goal isn’t just to get a loan approved. It’s to compare your options properly and choose a mortgage that suits where you are now and what you want to do next.
Planning a purchase or reviewing your current mortgage? Book a Discovery Call with Dale to discuss your position, what you’re working towards and the next steps.
