Mortgage Broker vs Bank: Which Should You Use?

Mortgage Broker vs Going Direct to Bank

Getting a mortgage is one of the biggest financial decisions you'll make. Should you go straight to a bank or use a mortgage broker?

How Each Option Works

Going Direct to Bank

You approach one bank (often your existing bank), apply for a loan, and negotiate directly with them.

Using a Mortgage Broker

A broker compares loans from multiple lenders on your behalf, handles the application, and negotiates rates for you.

Mortgage Broker Advantages

1. Access to Multiple Lenders

Brokers typically work with 10-20+ lenders, including:

• Major banks (ANZ, ASB, BNZ, Westpac, Kiwibank)
• Second-tier lenders (TSB, SBS, Cooperative Bank)
• Non-bank lenders (Resimac, Pepper, Liberty)

2. Better Rates (Often)

Brokers can:

• Compare rates across all lenders instantly
• Negotiate special rates not advertised
• Access broker-exclusive deals

3. Save Time

Instead of visiting multiple banks, one broker does all the comparison work.

4. Expert Guidance

Good brokers help with:

• Structuring your loan optimally
• Understanding your borrowing capacity
• Navigating complex situations

5. Free to You (Usually)

Brokers are paid commission by lenders—typically 0.5-0.85% of loan value.

Going Direct Advantages

1. Existing Relationship

Your current bank may:

• Offer loyalty discounts
• Have your financial history (easier approval)
• Provide package deals

2. Direct Communication

No middleman means:

• Faster responses sometimes
• Direct access to decision makers
• Clearer accountability

3. Some Exclusive Products

Certain products are only available direct:

• Some cash-back offers
• Specific package deals
• Relationship pricing

Cost Comparison

FactorBank DirectMortgage BrokerApplication feeOften waivedUsually waivedInterest ratePublished rateOften 0.1-0.3% lowerBroker cost to youN/AFreeTime investmentHigh (multiple banks)Low

Rate Example on $600,000 Loan

ScenarioRateMonthly Payment30-Year InterestBank rate6.50%$3,792$765,129Broker rate6.30%$3,721$739,518Saving0.20%$71/month$25,611

When to Use a Mortgage Broker

✅ First home buyer - Navigate the process with guidance ✅ Complex situation - Self-employed, multiple properties, variable income ✅ Time-poor - Let someone else do the legwork ✅ Rate shopping - Want to compare deals across all lenders ✅ No strong bank relationship - Nothing to leverage

When to Go Direct

✅ Strong existing relationship - Significant assets, long history ✅ Simple straightforward application - PAYE income, good deposit ✅ Bank-specific product - Want something only they offer ✅ Already have a great rate - Refinancing with current bank

Questions to Ask a Mortgage Broker

1. How many lenders do you work with?
2. What's your process for finding the right deal?
3. How are you paid? (Commission structure)
4. What happens if I want to refinance later?
5. Can you show me comparisons across lenders?

Questions to Ask Your Bank

1. What's your most competitive rate for my situation?
2. Can you match rates I've seen elsewhere?
3. What loyalty benefits do I qualify for?
4. Are there any exclusive offers available?
5. What's the cash contribution for legal fees?

The Hybrid Approach

Many smart borrowers do both:

1. Get a broker quote first - Understand the market
2. Approach your bank - Ask them to match or beat
3. Compare total packages - Not just rates, but cash-backs, flexibility
4. Make informed decision - Choose what's right for your situation

Important Considerations

Broker Limitations

• May not access all bank products
• Commission could influence recommendations
• Quality varies significantly

Bank Limitations

• Only show their own products
• May not offer the most competitive rates upfront
• Less incentive to find creative solutions

Making Your Decision

Your SituationConsiderationFirst home buyerBrokerSelf-employedBrokerSimple refinance, happy with bankDirectInvestment propertyBrokerComplex lending needsBrokerStrong bank relationship, significant assetsDirect, but get broker quote

Bottom Line

For most people, using a mortgage broker makes sense:

• Free service
• Access to more options
• Often better rates
• Expert guidance

But if you have a strong bank relationship and a straightforward situation, getting a direct quote costs nothing and might surprise you.

A sensible approach? Get quotes from both and compare.