Guide · Broker or bank Mortgage broker vs bank
A bank can lend you its own money and nobody else’s. A broker compares a panel of lenders and, by law, has to recommend a loan that’s in your best interests. Here’s how each one works, how brokers are paid, and when going straight to a bank may make sense.
Key takeaways
- A bank offers its own loans. A broker compares a panel of lenders, and must act in your best interests by law.
- Most brokers are paid by the lender: an upfront commission when the loan settles and a smaller ongoing trail. You see the amounts in writing.
- Since 1 January 2021, commissions tied to a broker’s sales volume are banned, and upfront commission is worked out on the amount you draw down.
- Going direct can make sense if your bank already offers a sharp rate and your situation is simple.
Broker vs bank, side by side
The differences that matter, in plain terms.
| Going to one bank | A mortgage broker | |
|---|---|---|
| Loans compared | That bank’s own | A panel of lenders. Mine has 30+ VERIFY |
| Legal duty | Responsible lending: the loan must not be unsuitable | Responsible lending, plus the best interests duty |
| Who pays them | You pay the bank through interest and fees | Usually the lender, through commission. You see how much |
| Government schemes | Only if that bank is a participating lender | Can compare participating lenders on the panel |
| If the answer is no | That bank’s policy is the end of the road | Another lender’s policy may read the file differently |
| Direct-only products | Available | Not available through a broker |
| After settlement | Up to you to ask for a better rate | Many brokers review the loan. I do it every six months |
Mortgage broker vs bank: the pros and cons
A broker
- Pro: one conversation compares many lenders’ policies, not just their rates.
- Pro: a legal duty to act in your best interests.
- Pro: useful when your situation isn’t simple: self-employed, a past credit issue, a smaller deposit, buying again.
- Con: the panel isn’t the whole market, and direct-only products aren’t on it.
- Con: quality varies. Some brokers compare thoroughly, some don’t.
A bank
- Pro: simple if you already bank there and the offer is sharp.
- Pro: access to products only sold direct.
- Con: one lender’s policy. A no from them can feel like a no from everyone.
- Con: every bank you try separately can leave an enquiry on your credit file.
How do mortgage brokers rip you off?
It’s one of the most searched questions about brokers, so here’s a straight answer. The concern is real: a broker paid by lenders could steer you to a lender that suits the broker. That’s why the rules changed.
Since 1 January 2021, brokers must act in your best interests and put your interests first if there’s a conflict. Commissions based on how much a broker sells are banned. Upfront commission is worked out on the amount you actually draw down, net of any offset balance.
The rules help, but the best protection is asking. Ask any broker, including me:
- How many lenders are on your panel, and which did you compare for me?
- Why this lender over the others?
- What commission do you receive, upfront and ongoing?
A good broker answers all three in writing without being asked twice.
How are mortgage brokers paid?
Most brokers are paid by the lender in two parts. An upfront commission when the loan settles, worked out as a percentage of the amount you draw down. Then a smaller trail commission, usually paid monthly while the loan stays open.
Rates are set by each lender. Before you apply, you get the dollar amounts for your loan in writing. How it works and what it costs has the detail.
When going direct to a bank may make sense
- Your bank has already offered a rate you’re happy with, and your situation is simple.
- You want a product your bank only sells direct.
- You’re asking your current lender to lower your rate. That’s a phone call, not a new loan.
- You enjoy comparing policies yourself, and you know what to compare.
If one of those is you, go direct. If you’re not sure, a free session will tell you whether a broker adds anything for you. If it doesn’t, I’ll say so.
What Reddit says
Threads on this question tend to split two ways: people a broker saved a lot of time or money, and people who felt pushed. The difference is usually how open the broker was about the comparison and the commission. That’s the standard to hold any broker to.
FAQ Questions clients ask
Is it better to use a mortgage broker or go to a bank?
It depends on what you need. A bank can only offer its own loans, while a broker compares a panel of lenders and must act in your best interests by law. If your situation is simple and your bank already offers a sharp rate, going direct can work. If it isn’t simple, a broker’s comparison is usually worth more.
How do mortgage brokers get paid in Australia?
Most are paid by the lender, not by you. The lender pays an upfront commission when the loan settles, worked out on the amount you draw down, and a smaller ongoing trail commission while the loan stays open. Your broker must tell you the amounts in writing.
Do mortgage brokers rip you off?
The honest answer: a broker can steer you badly, and that’s why the law changed. Since 1 January 2021, brokers must act in your best interests, put your interests first when there’s a conflict, and commissions tied to sales volume are banned. Ask any broker which lenders they compared and why they chose the one they did.
Does using a broker cost more?
Usually not. The commission comes from the lender, not from your loan.
Can a broker get a better rate than my bank?
Sometimes. A broker can compare rates across a panel and ask lenders to price a loan. Some bank products are only available direct, though, so a good broker will tell you when your bank’s own offer is the better one.
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