Both have advantages and disadvantages and it’s important to consider what suits your personal circumstances. This is particularly pertinent to property investors wanting to create a property portfolio. Getting your financing set up property from the outset is a must.
Banks:
Existing relationships can be advantageous
If you have an existing property and are looking to refinance, use your existing relationship to negotiate the best interest rate. You may also be able to extract equity faster when working with your existing bank.
Like most businesses, banks do not want to lose customers and you should put forward a strong case for retaining your business and ask for the best possible interest rate. You’ll be dealing with bank officers familiar with their home loan products of the bank which can make this an easy process.
Personal Bankers can offer superior outcomes
Banks are terrific for expats, business owners and high net worth individuals who have their own personal banker. The private banking section of a bank works differently to the normal home loan section. A small team of banking professionals work one on one with certain types of customers who have many and varied financing needs over their lifetime. A private banker will have more authority to sign off on loans compared to a loan manager within the same bank.
Shopping around
If you choose to go through a bank, you will need to shop around and compare both the products on offer as well as the lending amount available to you.
This can become tricky however, because you need to be properly assessed by the bank’s credit assessor to gain accurate information. If you are only assessed based on some basic figures you provide the mortgage manager, then you will get a borrowing limit based on what you have told the mortgage manager. However the figure may change once you hand in all of your documentation and move through the process of formal approval because at this stage, your entire financial situation is going to be scrutinised by a credit assessor.
Lending amounts will vary between banks
It is important to remember that banks can only offer their specific products and wont compare their offering to others on the market, meaning you may not get the best deal on the market. Their specific lending policies can limit the amount you can borrow. This can be as much as a $100k to $300k difference between lenders which makes a huge difference to your available property options and purchasing power.
A tip for comparing banks
If you do opt to shop around yourself between banks, always be mindful of not applying for finance with multiple lenders because your credit score will be impacted and banks will suspect you have been declined elsewhere and wonder why. Using a mortgage broker will avoid this from occurring.
Mortgage Brokers
Mortgage brokers work with a wide range of lenders and stay up to date on the latest options and interest rates. Their prime focus is matching your needs to the best financing option for your circumstances.
Quick comparison of many banks in one location
This is an advantage if your personal circumstances do not fit the norm – a less than perfect credit history, being self employed are just two examples of situations that banks may not be able to work around. Mortgage brokers will know which lenders they can work with to improve your chances of securing financing and improve the amount of money you can borrow.
While they do have a wider range of lending options, mortgage brokers won’t necessarily be across all offerings on the market as they work from a selected panel of lenders. However, their panel of lenders is often vast and all the major banks will be on their panel of lenders to choose from.
Check the panel of lenders you will have to choose from
Not all banks work with mortgage brokers, so if there is a specialist bank you want to work with, you will need to go directly to that bank.
During the process of working with a mortgage broker, you will have one contact point who can quickly compare the loan offerings and throughout the life of your loan, they will regularly review your interest rate and update you on a better deal as they arise.
Will I pay more if I use a mortgage broker?
Most brokers do not charge you fees for their service, they are paid commission by the bank or lender. This does not increase the cost to you as the borrower. The price you pay directly with the bank can sometimes be more than you would pay directly through a broker due to special deals available exclusively to brokers.
Find the right broker to suit your needs
Not all mortgage brokers are created equally and you’ll need to do some research on who has the experience and depth of knowledge to align with your goals. For example, a first home buyer will have very different needs to a property investor who is building a property portfolio.
Conclusion
Securing finance through a mortgage broker will not cost you additional money, and will save you a lot of time. You will be able to access the maximum amount possible to open up your property purchasing power and options.
Importantly you will be dealing with a mortgage expert who will work with you over the lifetime of your loan to ensure you are getting the best deal.
If you have access to a personal banker, are an expat, high net worth individual or a business owner with a long relationship with a bank, your bank will usually be able to offer you the very best rates and solutions for your circumstances.
Additionally, if you are a bank employee and have access to the 90% loan to value ratio offering, without having to pay lenders mortgage insurance, dealing directly with your bank will usually be your best bet.
Our final thoughts and tips
- If you are looking to build a portfolio of property seek out a strategic mortgage broker who specialises in this space. If you are a client of Parker Buyer Advocates or wish to be, we can refer you to a number of outstanding brokers we trust and highly recommend. It is important to note, we do not earn any fees from our recommendations.
- If you are an expat, business owner or higher net worth client with a designated personal banker, it is likely you will benefit most by going straight to your own personal banker.
- Lastly, sticking with a bank because you have always been a customer of theirs, or because you have all your bank accounts with them will not guarantee you the best lending solution.
If you are looking to partner with us on your up and coming purchase,you can tap into our proven and trusted referral partners. Contact us today to find out how you can get onto the property ladder without stress and fuss.
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