Mortgage broker vs bank: which is right for you?

When you need a home loan, you have two main paths: approach a bank or lender yourself, or use a mortgage broker who compares options across a panel of lenders. Both can work. The right choice depends on your situation, how much time you have and how complex your finances are. This guide sets out the differences honestly, including the times when going direct may suit you better.

What is the difference?

A bank lender (sometimes called a lending specialist or home loan manager) works for one institution. They can only offer that institution’s products and must work within its lending policies. If your application does not fit, they cannot send it anywhere else.

A mortgage broker is licensed to arrange loans from a range of lenders. At RiseMore Finance, we have access to more than 50 banks and lenders, including major banks, second-tier banks, credit unions, and non-bank and specialist lenders. We assess your situation, research which lenders suit it, present a shortlist, then manage the application through to settlement.

The key difference is choice. A bank can tell you what it offers; a broker can show you how that offer compares with others and which lender’s policies suit your circumstances.

How are mortgage brokers paid?

For most home loans, the broker service is free to you. Instead, the lender pays the broker a commission when your loan settles. There are generally two parts:

• Upfront commission – paid by the lender once your loan settles, based on the amount borrowed.
• Trail commission – a smaller ongoing payment from the lender while your loan remains active, which supports the broker’s ongoing service and loan reviews.

If a loan is repaid or refinanced within a short period, the lender can claw back the commission from the broker. Some commercial or asset finance facilities involve a broker fee, and when that is the case it must be disclosed to you upfront in writing.

A fair question is whether commission creates a conflict of interest. That concern is exactly why brokers must give you a credit guide and disclose the commissions they expect to receive, and why the law now requires brokers to act in your best interests. You can read our credit guide for more detail.

Best Interests Duty explained

Since 2021, mortgage brokers in Australia have been subject to a legal Best Interests Duty under national consumer credit law. In plain English, it means a broker must:

• Act in your best interests when giving credit assistance
• Prioritise your interests if there is a conflict between yours and the broker’s
• Be able to show why the recommended loan suits your needs and objectives

Brokers must keep records of how they reached a recommendation, and they cannot accept conflicted remuneration that could influence their advice. Lenders’ own staff have responsible lending obligations too, but they are not required to compare other lenders’ products or recommend the best option across the market; their role is to sell their employer’s loans.

Broker vs bank side by side

When going direct can make sense

To be fair, there are times when approaching a lender yourself may work well:

• You have a simple situation and a strong relationship. If you are a salaried PAYG employee with a large deposit and a long history with your bank, you may be offered a competitive deal directly.
• Staff or professional packages. Some employers and professions have negotiated packages with particular banks.
• Direct-only products. A small number of lenders do not work with brokers at all, so their products are only available if you go to them yourself.
• You enjoy doing the research. Some people are comfortable comparing lenders and handling the paperwork themselves.

Even then, it can be worth getting a broker’s comparison first so you know whether your bank’s offer is genuinely competitive. There is usually no cost to ask. It is also fair to say that no broker panel covers every lender in the market, so ask which lenders a broker works with.

When a broker tends to add the most value

• First home buyers navigating schemes, concessions and pre-approval for the first time
• Self-employed borrowers, contractors and people with variable income
• Investors building a portfolio who need to structure loans carefully
• Borrowers with past credit issues who may suit specialist lenders
• Busy people who would rather hand over the legwork

What a broker actually does for you

Beyond comparing rates, much of a broker’s value sits in the work you do not see. At RiseMore Finance, our process follows four steps:

1. Understand your goals. We start with what you want to achieve, now and over the next few years, not just the loan amount.
2. Research and shortlist. We compare lenders’ pricing and, just as importantly, their policies on income, deposits and property types, then present a shortlist with the reasons behind it.
3. Manage the application. We prepare and lodge the application, liaise with the lender and valuer, and keep you updated through to approval and settlement.
4. Keep reviewing. After settlement, we check in periodically to make sure your loan still fits and to look for ways to save you money.

That last step matters. Many borrowers set up a loan and never look at it again, even as their circumstances and the market change around them.

Questions to ask any broker

1. How many lenders are on your panel, and which ones?
2. How are you paid on this loan, and will I pay any fees?
3. Why is this loan better for me than the alternatives?
4. Who will handle my application day to day?
5. Will you review my loan after settlement?

A good broker will answer all of these openly. For more on what to expect, see working with a broker, or read our guide on how lenders assess your borrowing power.

See what a broker can do for you

Whether you end up with a lender from our panel or decide to go direct, you deserve to know how your options compare. Book a free chat with our team and we will talk through your goals, explain how we are paid and show you what the market looks like for you.

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