The short answer
A bank offers its own loans. A mortgage broker compares loans from a panel of lenders, must act in your best interests, and handles the application through to settlement. Most brokers are paid commission by the lender rather than charging you. Going direct can suit you if you already know the lender and loan you want.
How going to a bank works
When you apply with a bank, its lending staff can only offer that bank’s products. They’ll assess your application against that bank’s policy, and if it doesn’t fit, you start again with another lender. It can suit you if you already have a strong relationship with the bank, know the loan you want, and are comfortable comparing the market yourself.
How a mortgage broker works
A broker looks at your situation, compares loans from the lenders on their panel, and presents options based on your goals. They then prepare the application, deal with the lender and follow it through to settlement. Lenders have different rules on things like self-employed income, rental income and property types, so knowing which lenders fit your situation can save time and declined applications.
Brokers don’t have access to every lender in Australia. Ask any broker which lenders are on their panel. We work with a panel of 40+ lenders, from the major banks to specialist lenders.
The duty a broker owes you
Under Australian credit law, mortgage brokers must act in your best interests when they provide credit assistance, and must prioritise your interests if there’s a conflict. This is the Best Interests Duty. Lenders have their own responsibilities under responsible lending rules. The Best Interests Duty is the extra obligation placed on mortgage brokers. It has applied since 1 January 2021, and ASIC explains it in Regulatory Guide 273.
How mortgage brokers are paid
Most brokers are paid by the lender, not by you:
- Upfront commission, paid by the lender when your loan settles, worked out as a percentage of the loan amount.
- Trail commission, a smaller ongoing payment from the lender while your loan stays open.
A broker must tell you how they’re paid. Our credit guide explains how we’re paid, and we go through the commission with you before you decide. Commission rates vary by lender, which is one reason the Best Interests Duty and conflict rules exist. We don’t charge you a fee for our service. Lender fees, such as application or valuation fees, apply whichever way you go.
Broker or bank: a quick comparison
| Bank direct | Mortgage broker | |
|---|---|---|
| Loans offered | That bank’s own | From the broker’s lender panel |
| Best Interests Duty | Lenders follow responsible lending rules; the duty applies to brokers | Applies |
| Paperwork and follow-up | Mostly you | Handled by the broker |
| Cost to you | Lender fees | Lender fees; many brokers charge no fee |
| After settlement | Depends on the bank | Many brokers review your loan over time |
When going direct can make sense
If you’ve already compared the market, know the loan you want, and your situation fits that lender’s policy, applying directly can work well. Some people also ask their current bank for a lower rate before refinancing. A broker can still help you see whether that rate is competitive. General information only.
Mortgage broker at My Finance Consultants. Daniel compares home loan options from a panel of 40+ lenders for refinancers, investors and home buyers, by phone or video, evenings included. About Daniel
General information only. It doesn’t consider your objectives, financial situation or needs, and it isn’t tax, legal or financial product advice. Lending criteria, fees and charges apply.