Is it better to get mortgage from a bank or broker?
Whether you apply for a mortgage directly through your bank or choose a mortgage brokers, it’s likely you’ll use a mortgage broker either way as many banks employ their own in-house brokers. So the real question is, should I use a bank or building society tied mortgage broker or a whole-of-market mortgage broker?
Whether you’d be more comfortable using a mortgage broker than applying directly with a lender will come down to your individual needs and circumstances:
Where should I get my mortgage from?
There are a few different types of mortgage lenders in the UK, and which is best suited to you depend on your needs. You might get your mortgage from:
A high street bank
Mainstream banks such as Santander, HSBC, NatWest, and Barclays that offer general banking services also offer mortgages. Some people prefer to approach their own bank when it comes to getting a mortgage.
However, it’s useful to know that already being a customer of a bank will not usually have any impact on the acceptance of your application, though some may be willing to offer exclusive rates to existing customers.
A building society
Building societies offer similar services to a bank, but are often more flexible. That’s because they are structured as a cooperative, so there is more focus on member needs. Building societies can sometimes offer preferable rates, or consider applicants/properties that a bank may deem too risky.
Some of the most popular building societies in the UK are Nationwide, Yorkshire, Skipton, Coventry and Leeds.
A specialist mortgage lender
Specialist lenders tend to focus purely on mortgage lending, and often cater to a specific type of borrower. For example, some offer mortgages purely to self-employed and contract workers, or people with bad credit.
Some specialist lenders only accept customers through what’s known as an intermediary (in other words, a broker) – and there will usually be a particular group of brokers that they work with.
A credit union
Credit unions are nonprofit, community-based organisations often used by people who are turned down for a traditional bank account. Mortgage lending through a credit union is not too common in the UK, but is more so in Northern Ireland than the mainland.
Usually you’ll need to be a member of your local credit union for a minimum length of time before you could take out a mortgage with them. Their interest rates are typically less competitive, but they can be more flexible with financial difficulties, should you experience them.
Getting a mortgage from a bank
You can usually go directly to any type of mortgage lender to apply for a mortgage. This route can be quicker, and in some cases your own bank may reward customer loyalty by giving you a more competitive rate than non-customers.
However, any lender you select won’t necessarily have the best rates available to you – even your own bank. It’s important to compare mortgages across a number of different lenders – or ask a broker to do that for you.
Getting a mortgage through a broker
Whole-of-market brokers have good working relationships with banks, building societies and specialist mortgage lenders, meaning they can assess your circumstances and immediately know which lender might be the best fit for your situation.
Brokers also generally provide more detailed advice than a lender, which can be particularly helpful for first-time buyers. They usually also provide more services, such as completing the application and managing communications on your behalf.
How to get the best mortgage deal for me
The interest rate is the most important factor when comparing mortgages, but always look at the APRC (annual percentage rate of charge) to get a better idea of the overall cost. The APRC must legally be shown by all lenders, and takes into account the fees involved with taking out a mortgage, as well as the interest charges over the mortgage term.
That said, it’s fairly unusual to take out a mortgage and stay on the same product for the full term, which is typically 30 years in the UK. Most people take advantage of a lower initial rate, and then remortgage when it ends to ensure they keep the lowest interest rate available to them.
When it comes down to finding the best mortgage deal for you, whether you use a bank or mortgage broker will depend on your personal circumstances and preference. Either way, it’s always best to compare deals across the market, rather than just opting for the first lender you find.
