Mortgage broker vs bank: how to choose in Australia

The old First Choice Loans shopfront in North Perth was, in spirit, a brokerage conversation: sit down, sort the file, ring a panel. This journal is not a brokerage. It still has to explain the fork in the road every Australian borrower faces — walk into a bank, or use a broker (or a handful of direct non-banks). The fork is about search costs and incentives, not virtue.

What a bank is

One credit policy, one product set, one retention desk, one app. If you are a salaried employee buying a straightforward suburban house at 80 per cent LVR, a major bank may be fine and even sharp. You will not see whether a mutual was 0.15 cheaper or whether a non-bank would count your overtime.

Going direct is rational when you already know the product, you like the institution, and your file is boring in the best way.

What a broker is

A licensed intermediary who submits to a panel of lenders. They are usually paid by upfront and trail commission. They owe you a best-interests duty and must give you a credit guide. They do not owe you magic. A good broker knows which credit team will accept your parental gift, your casual income, your inner-city studio, your HELP debt. A bad broker has three lenders and a golf relationship.

Ask:

• How many lenders on the panel, and who is missing (some majors restrict broker channels)?
• How are you paid, and is there a fee if the loan does not proceed?
• Which loan would you choose if commission were identical?
• Will you show me the comparison in writing?

Incentives are not a scandal if they are visible

Trail commission means the broker is paid a little while the loan lives. That can align with not putting you in a dumpster product. It can also align with not refinancing you away from a trail book. You can still shop. You can still refinance with a different broker later.

Upfront commission that grows with loan size is a reason to be wary of 'you can afford more'. Borrowing power is not a target.

Who should use which

Broker-first: self-employed, casual, low-doc is dead but 'alt-doc' lives, high LVR, guarantee schemes, construction, unusual property, bruised credit, time-poor.

Bank-first: simple file, existing package you like, staff deals, you enjoy doing the comparison homework yourself using our method.

Both: get a broker's shortlist, then ask your existing bank to match. This is how grown-ups save 0.20 per cent.

The file is still yours

Whether bank or broker, the statements are yours, the declarations are yours, the responsible-lending interview is yours. Do not sign a blank. Do not let someone 'tidy' your expenses into HEM if you do not live there.

A North Perth note

This publication's ancestor sold the idea that a household should not have to walk into one institution and accept the first number. That idea is still good. It is not the same as 'always use a broker' or 'never trust a bank'. Use the path that can say no to a bad fit. Then read the contract as if nobody else will.

How to interview a broker in fifteen minutes

Ask for a credit guide, two recent (anonymised) examples of files like yours, the lenders they cannot access, and whether they charge if you walk. If they talk only about cashback, keep walking. If they talk about policy, stay.

Switching brokers

You can. Your file is yours. Be decent: tell the first broker you are leaving. Do not let two people submit you to the same lender at once. That is how duplicate enquiries happen.

When the bank staffer is the better human

Some bank home-loan specialists are excellent and have discretion on exceptions. If you already live inside that bank's ecosystem and your file is simple, do not outsource for sport. Use this journal's comparison method either way.

Keep the comparison in writing

Whoever you use, ask for a one-page comparison of at least two products with rates, comparison rates, fees, LVR, and policy notes (overtime, LMI, guarantee scheme). If they will not write it down, you are in a conversation, not a process. This desk prefers processes. They survive contact with settlement day.

Commission is not a slur

People need to be paid. You need a contract that fits. Those can coexist if you ask how the pay works and you still compare the loans. The North Perth instinct was: do not accept the first box you walk into. That instinct survives whether the human in front of you wears a bank lanyard or a broker's.

Documents to bring, and a last caution

When you sit down with a lender, broker, packager or yard manager, bring the broker's credit guide, a two-product comparison, and the same comparison from your existing bank if you have one. If they will not look at paper, they are selling speed. Speed is expensive in Australian credit.

Write down the thing you are afraid to ask — the fee, the balloon, the HELP treatment, the break cost — and ask it first, while you still have the nerve. The second conversation is always weaker. If the answer is vague, you do not have an answer.

This desk would rather you delay a week than sign a contract whose comparison rate you cannot explain to a friend. ASIC's MoneySmart remains the public-interest spare brain: use it the night before, not the morning after. And if the product only works on overtime that is not in your contract, it does not work. Buy a smaller thing, or wait. Waiting is still allowed.

If you want a second opinion after a broker recommendation, take the same file to one bank you already use. If both paths produce similar contracts, pick the human who answers emails. If they diverge wildly, you have learned something about policy, not about loyalty. Loyalty is not a credit feature.