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Should you get your mortgage from your bank?

When it comes to getting a mortgage, the bank vs mortgage broker debate is perhaps the most common. Getting a mortgage from your bank might seem like an easier option, but is this limiting your options, and if so, how? In this guide we look at the benefits and downsides to getting your mortgage both directly from a lender, and with the help of a mortgage broker, so you can make an informed decision about the best path for you.
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Is a bank or mortgage broker better?

Whether you would be more comfortable using a broker or going directly to a lender will come down to a few personal factors:

What your financial circumstances are - There are a few categories of people who will have limited choices when it comes to which lenders will approve their application, either due to low income/affordability, poor credit score, less straightforward employment history, or being older. 

These people will benefit from using a broker purely because they have access to a wide range of deals, including some that won’t be available to the public. 

This means that if you’re unsure that you’ll be accepted for a mortgage, they can give you a good idea of your chances and steer you away from lenders that are more likely to reject your application based on your circumstances.

What type of property you want to buy and why - If you’re looking to buy a unique property, perhaps a non-standard construction property, listed building, or you want to build your own home, it can also be more difficult to find a lender. 

The majority of high street lenders prefer people to buy straightforward bricks and mortar houses that retain value well, so if that’s not your goal, a mortgage broker could be a better route.

How important it is for you to get the most appropriate deal for you - If your major concern is simply getting a mortgage as quickly as possible, going to your own bank can be the simplest option for some people. 

On the other hand, if you are keen to get the most competitive rate for your circumstances and have specific ideas about the terms you would like, it’s probably best to have a look at the wider market.

This is something that you could do independently, but using a mortgage broker to compare deals for you can be easier, quicker and more thorough. It’s also worth bearing in mind that they sometimes have access to deals that the public do not.

Personal preference - Another consideration is simply your own preferences of control over your own application and the level of assistance you want or need. 

If you’re quite confident in your mortgage knowledge and like to be fully in control of every step of the process, a mortgage broker may not be the right choice for you. 

Mortgage brokers tend to take care of a lot of the negotiations between parties (i.e solicitors, vendors, the lender) for you, so if you prefer to retain control of this, then going directly to a lender may be more suitable.

Who provides mortgages?

There are a few different types of mortgage lenders available in the UK, and which is best suited to you will depend on your needs and circumstances. You might get your mortgage from:

A high street bank

Mainstream banks such as Santander, HSBC, NatWest, and Barclays that offer generally 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.

A building society

Building societies offer similar services to a bank, but are often more flexible, as they are structured as a cooperative, so there is more focus on member needs. This means that they 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 mortgage lenders tend to focus purely on mortgage lending, and will often cater to a specific type of borrower. For example, there are those who offer mortgages purely to self-employed and contract workers, or people with bad credit. 

Sometimes these lenders will 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 will 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, although tends to be more so in Northern Ireland than the rest of the country. 

Usually you will need to be a member of your local credit union, and there may be a limit on how long you’ll need to be a member before you could take out a mortgage with them. Their rates are typically less competitive, but they can be more flexible with financial difficulties, should you experience them.

What’s the process for getting a mortgage from a bank?

You can go directly to any mortgage lender to apply for a mortgage, it doesn’t have to be your own bank. 

Going directly to a lender 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, your own lender, or whichever individual lender you select won’t necessarily have the best rates available to you. It’s important to compare mortgages before selecting a bank or other direct lender, if you’re hoping to find the best rates for your circumstances.

Advantages of getting your mortgages from a bank

  • The application process can be shorter and slightly simpler with your own bank or building society, as your income is easier to assess

  • There are no broker fees when you go directly to the lender

  • Sometimes your own bank may offer you preferential rates for being a customer

  • It’s easier to set up an offset mortgage, if that’s something your bank offers, given that you already have an account with them

  • You can ask the lender questions directly as there is no ‘middleman’ - i.e broker

Disadvantages of getting your mortgages from a bank

  • Your choice will be limited to the products of that one lender, which may not offer the terms you are looking for, or the most preferential mortgage interest rates

  • Not all lenders accept all types of applicants. Approaching a random lender without knowing if you meet their criteria can lead to being declined, which can affect your credit score, and impact future applications

  • You won’t get tailored or impartial advice directly from a lender, as their goal is to sell you a mortgage, not to ensure you get the product that best suits your needs 

  • People with busy lives may struggle to manage the personal communications between solicitors, estate agents and the lender alongside a busy career and/or family life

  • If you choose to compare mortgages online before selecting a lender, it can be very time consuming and there’s a chance you’ll miss out on certain offers. Internet rates tables and comparison tools aren’t able to take your individual circumstances into account and some promote sponsored products that won’t necessarily be the best for you

What’s the process for getting a mortgage from a mortgage broker?

Mortgage brokers tend to work with a wide variety of different lenders, especially whole-of-market brokers like our partner, Mojo Mortgages. They usually have good working relationships with banks, building societies and specialist mortgage lenders, meaning they can assess your circumstances and immediately know which have criteria that will suit your circumstances.

Brokers provide more detailed advice than you would generally get directly from a lender, which can be very helpful for first-time buyers. They also usually provide a more complete service, such as completing the application and managing communications on your behalf.

Advantages of getting your mortgages from a broker

  • As mortgage brokers deal with different lenders’ criteria on a daily basis, they know which lenders you should avoid and can discourage you from applying if you’re likely to get declined. This helps to keep your credit score intact, not to mention saving you wasted time and potentially wasted money

  • Brokers are impartial, whereas a lender that you approach directly will be focussed on selling you one of their own products

  • Mortgage brokers can help complete your application, the associated paperwork and the ongoing communication that is necessary throughout your mortgage application

  • Lenders have existing relationships with lenders and can sometime sway a borderline application in your favour

  • If you’re an expat, older borrower, self-employed, have bad credit, or are looking to buy a property that many lenders will shy away from, a mortgage broker may be able to help you find a lender that you wouldn’t be able to access by yourself

  • Mortgages can be complicated and the industry is renowned for using jargon. Speaking to a broker can give you a better understanding of what you’re taking on and how to get the best out of your mortgage

  • Using a mortgage broker to compare deals on the market can save you a lot of time compared to doing this yourself. They have knowledge of the most recent rates and products readily available, whereas websites can be out of date

  • Some brokers can negotiate deals that are not available to the public, and in fact, some lenders are only available through a broker

  • Many mortgage brokers are also able to advise on relevant insurance products to support your mortgage

  • Advice given by mortgage brokers is regulated by the Financial Conduct Authority (FCA) which means that you have more legal recourse if you experience a significant loss due to poor advice

  • If you’re not able to get a mortgage in your current circumstances, they can provide advice about how to prepare your credit file and general finances for a successful future application

Disadvantages of getting your mortgages from a broker

  • The major disadvantage of a mortgage broker is the additional fees involved. Most brokers will charge a fee, although some take their fee from the lender, rather than the customer, so it’s a good idea to understand what the payment structure is before selecting the right broker for you

  • It can take a bit longer to get to the application stage when going through a broker, because they search the market for the best deal for you, rather than putting an application in straight away

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 25-30 years in the UK. Most people take advantage of a lower initial rate for a defined period of time, and then remortgage once that period has ended, to ensure they maintain 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.