Broker vs Bank

Hello. It’s the battle of the mortgages. It’s the broker versus the bank. Who is the better one to use when you’re trying to get a mortgage as a self-employed person, as a business owner, or an entrepreneur?

My name is Stephen Dickinson, and I’m the owner and founder of Momentum Mortgages. We’re the home for self-employed mortgages in the UK, and we help self-employed people and business owners to master their mortgages.

Now, you’ll have to forgive me, but I’m a broker. So, I’m going to potentially be partially biased here, but I will try and keep it as fair as I possibly can when we make our comparisons between broker and bank.

So, let’s start off with the bank. So, what kind of advantages and what kind of disadvantages are there of going to a bank direct, or also going to your own bank, and using them for your mortgage? Well, I think, the first thing to mention here, number one is going to be trusted, especially if you’re using your own bank as well, and you’ve used them for a long time and you’ve got your accounts with them, then you are going to trust that bank to do your mortgage, and you will probably have a lot of built-up trust with them. You are going to trust them to be able to do your mortgage with them. And you might feel very safe with that lender as well.

Then, we’ve got benefit number two, which is documents, fewer documents. Now, the Financial Conduct Authority state that the lenders only have to ask for the documents that they actually need to be able to assess the case. And there’s a certain minimum level of documents and evidence that they would normally ask for. So, when you go direct to a bank, you might need to provide fewer documents because they might not need to ask you for the same level of documents that a broker might ask you for because they’re not assessing your documents and your data against multiple different lenders. But, also, if you’re with that bank as well, they might not need to ask you for things like bank statements, because they’ve already got them. So, sometimes it can be fewer documents that you might need to provide to that lender.

And then, advantage number three has definitely got to cost. With going to a lender directly, or using your own bank, you’re not going to be paying a broker fee because you’re not using a broker. So, definitely in terms of the cost side of things, you’re not going to have to pay that. So, that’s definitely an advantage there as well.

Then, we’ve got some of the disadvantages. Mainly speaking, they’re just one bank, so they’ve only got one set of criteria, so they might not be the right lender for your circumstances. Also, some lenders will offer exclusive rates to intermediaries that they won’t offer in their own direct branches. So, sometimes you might be losing out on a better rate or a certain type of product that only an intermediary, only a broker would be able to get access to.

On the flip side of that, though, there are some products that lenders only offer direct. But, generally speaking, they’re mostly for existing clients. And there are some banks out there that brokers can’t get. For example, First Direct. The clue’s in the name. They are direct, but they’re part of the HSBC Group and brokers usually have access to HSBC, for example. So, I wouldn’t generally call that a disadvantage to brokers.

Then we’ve got brokers. What are the advantages and disadvantages of a broker? Well, one advantage of a broker is going to be the access to a panel of lenders that will be reflective of the marketplace. For example, Momentum has access to 69 different lenders that are reflective across the marketplace.

That’s going to give brokers access to a broad set of criteria, which means that for a self-employed person, most definitely where the cases generally aren’t as simple, they’re more complex than say, someone who’s just employed, would mean that you’ve got more chance of getting the mortgage that you want because there are more lenders that will have acceptable criteria to your circumstances.

Then there’s service. Now, I’m not saying that every employed individual within a bank doesn’t care, because I’m sure that they actually do, but at Momentum, all our brokers, and including myself, we’re all self-employed. So when it comes to self-employed people, we understand exactly the kind of pain that you go through when it gets to your mortgage, because we’re self-employed too. And because we’re self-employed, our business operates on repeat business, developing long-term relationships with clients, and you don’t do that unless you provide good service and bespoke five-star service. So service is all part of what a broker offers.

Because we have access to that leading panel of lenders and that broad set of criteria, generally that means that we can maximize your borrowing. So, I think generally advantage number four here is going to be maximizing your borrowing as a self-employed person. Then there’s getting the best possible, most suitable rate for your circumstances. If you’re going to one single bank, as opposed to many different lenders, then you might miss out on the best possible rate available to you. Whereas brokers are going to check the whole market… Whereas brokers are going to check the market and they’re going to… Whereas brokers are going to check the market and are going to make sure that they give you the best possible advice. And that’s generally the mortgage that you’re looking for, that fits with your circumstances, that’s also at the lowest cost.

Then we’ve got benefit number five, which is a relationship for life. Brokers generally will not just be there for you for this initial mortgage, but also for any subsequent mortgages in the future and remortgages. And once you get to know your broker and the broker gets to know you, then it becomes easier and easier as the years go on. So it’s a relationship for life. If you’re going to a bank direct, then let’s face it, you are more just of a number to them and they may not necessarily remember you from last time. So using a broker can have that unique advantage in that, if you then want to do any future business, it becomes a lot easier. You have that relationship already with your broker, and that can really help things going forward.

Advantage number six here is going to be that brokers are specialists in mortgages, especially Momentum Mortgages, who are specialists in self-employed mortgages. So there’s no one better to be able to get the mortgage that you’re looking for. Banks have got a whole lot of other stuff that they’re doing. They’ve got taking deposits, looking after other clients. They’ve got investments. They’ve got lots of other things, like taking cash in for example, that they’re focusing on doing as well as mortgages. This is actually why they prefer to let the intermediaries do it because we are doing it day in, day out, so we’re best placed to be able to give the right advice.

A couple of downsides really for mortgages through brokers is going to be the fees, of course. So if obviously, you are using a broker, you are getting all those advantages, but then most specialists self-employed mortgage advisors will charge a fee. We certainly do at Momentum, which is a fair, reflective fee of the service that we offer. But it has to be mentioned because it is going to be an increase in cost. But most of the time, most people will see that as a price worth paying to get the mortgage that they’re needing to get the right advice.

And then downside number two is that potentially there’s just going to be more documents you might be able to provide because we’re going to be checking and providing a broader spectrum of advice across a lot of different lenders. So normally most brokers, especially us here at momentum, want to be prepared. We want to make sure that we give you the right advice. And that means having as much data and as many documents so we can look at every single lender and look at exactly what it is that they’re going to need so that we’re able to give you the most suitable advice possible.

But it’s not really a major downside because it doesn’t take that much to get documents over, but it does involve a little bit more work on your part. But it all pays off. So that’s the main thing.

So there we have it. That’s brokers versus banks, the advantages, the disadvantages. I think when it comes to self-employed, people most will choose to get a broker to do their mortgage, mainly because their circumstances generally are more complex and a broker is really the best place to actually deal with that and provide the most suitable lender and maximize the borrowing. So I definitely think, and of course, I was always going to say this, but I think the broker wins when it comes to getting a mortgage as a self-employed person.

My company, Momentum Mortgages, offers a free initial strategy call.

Contact Momentum Mortgages today to see how we can help with your mortgage requirements.

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