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Mortgage Broker vs Bank

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 6, 2023

Mortgage Broker vs Bank in the UK

When taking out a mortgage, you’d want only the best of the best. That best is Loan Corp, as we offer competitive interest rates and the best terms; however, it’s always best to weigh your options between a mortgage broker and a bank in the UK.

Both options offer a variety of products, advantages, and disadvantages. Let’s look at the two in more detail.

What’s the difference between using a mortgage broker or going directly to a bank?

The main difference is that a mortgage broker will get you the best mortgages, deals and rates from multiple banks, whereas a bank will only offer you the best products that they offer at that bank. They will not offer you better mortgages from competitors like other banks.

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What Do Mortgage Brokers Do?

Mortgage brokers learn about your financial situation and connect you with a suitable lender. They are the intermediary between the borrower and the lender. Mortgage brokers collect the important documents needed for a mortgage to see if you can be accepted for financing.

The mortgage broker will estimate the type of mortgage and amount, as well as the loan-to-value ratio. The broker submits the application to the lender and awaits approval.

Once approved, the funds are transferred to you, and the broker collects a small fee from the lender OR you for the services. Usually, they only receive payments after the loan has been accepted.

When you use a mortgage broker, you don’t do any of the work. Since they know best about the mortgage market, they will connect you with the best lender. A good mortgage broker will also follow up with you even if your deal is closed to offer financial advice or let you know a better deal came up.

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Advantages Of Mortgage Brokers

There are many advantages to using a mortgage broker over a bank. While the bank has its benefits, mortgage brokers have access to more resources.

Help with prep

You can start working with a mortgage broker as soon as you start the homebuying process. They will give you mortgage advice and help you get all the necessary documents and information needed for the process.

Tailored assistance

When you use a mortgage broker, they can help you find lenders who are suited for special situations, such as a bad credit report or gaps in employment. Even if you have perfect credit and will not have trouble getting a mortgage, a mortgage broker will review loan options, highlight necessary comparisons and help you make a good decision.

Increased access to mortgage products

The bank can only give you mortgage products that they have; however, most mortgage brokers can help you get any home loan. If you are looking for a less common mortgage, then working with a broker will save you the hassle, and you will get straight to the right mortgage lender.


Starting the mortgage process takes a lot of time, from getting the necessary documents to filling out forms. Banks are always asking for documents that you could swear you already provided! A good mortgage broker will handle all the paperwork and keep track of the mortgage application for you. They will save you time and stress.


Disadvantages Of Mortgage Brokers

Brokers have their drawbacks too, but these drawbacks are easy to work around.

Tending to many clients

Brokers usually have a list of borrowers who want to take out a home loan. This might prevent them from prioritising you and slow down the process, especially if you’re a unique client. A smart broker will know how many clients they can handle, not one who wants more clients for more money. Make sure to research your broker before hiring them.

They do not make the decision

Although brokers have connections and professional relationships with certain lenders, they are still the middleman and do not have a hand in the final decision of approving your mortgage. However, they can negotiate better deals and get discounts.

Brokers may not get the best deals

Brokers can get good deals on the market, but this is not always a given. You still have to do a bit of research to determine if your broker is giving you a good deal.

Some unethical brokers work more for the paycheck than your interests and will opt for mortgage lenders with high rates to get more fees. You have to be cautious and choose the broker wisely.


What Is A Mortgage Lender?

A mortgage lender is a bank or company that gives home loans to you (the borrower). Some lenders also offer personal, student or auto loans, while others stick to mortgages and home-related loans. The mortgage lender gives you the necessary funds to purchase your dream home. You repay the money by making monthly payments to the lender.

When you want to take out a mortgage, the lender will ask you to complete an application to assess your financial situation, such as your credit report, to see if you can afford the loan. Based on this information, they will decide whether you’re a good candidate or not. If you are, the lender will set the maximum loan amount and the interest rate they provide.

In the home buying process, mortgage lenders also arrange for an assessment to determine the value of your house and manage the closing of the transaction. When the deal is done, the direct lender will manage your repayment options, such as helping you through relief options, etc., or an outsourced servicer will help with this.


Advantages Of Working Directly With A Bank

There are many benefits of working with your bank to get your mortgage. If you want full control of your mortgage and want to speak to loan officers independently, then working with the bank is your best bet.

Potential discounts

It may feel like the easiest route to go to your existing bank for your mortgage; however, shopping around is always advised to find the best deals. Make your bank one of your options, though, as they will usually offer discounts to you if you use services such as savings, checking, or credit accounts.

For example, if your bank already offers you favourable terms and a low rate, you can get a discount on closing costs.

Fewer fees

Mortgage brokers work for a fee and are often paid by the lender when added to the cost of the mortgage. Generally, they charge 1% or 2% of the total cost of the mortgage amount. If you pay this, it may be a part of the closing cost or the cost of the load itself.

Although the lender will pay the mortgage broker, they may build it into your loan. Broker fees must be disclosed upfront, and they cannot be paid by you and the lender.

Direct connection

Since the mortgage broker acts like the middleman in the mortgage deal, you do not have any connection with the lender. By working directly with the bank loan officer, they can immediately address any concerns you may have in the loan process.

Less management

By working directly with the bank, you may be able to reduce the usual hardships of the mortgage process. However, not working with a broker means you have to do your own research to find a lender with the best mortgage deal.


Disadvantages Of Working With A Bank

Banks also have several disadvantages that cannot be worked around.

The mortgage terms may vary

Some mortgage banks in the UK offer competitive loan terms, but others can offer higher fees and interest rates. The terms can vary significantly across these banks. Some banks compete on the basis of their brand and customer service, not on their price, which usually means you have to pay a higher price.

Mortgage deals may be limited

Some banks do not offer a wide range of mortgage programs. For example, the bank may not offer a low-down payment program or an energy-efficient program. Not all banks offer home improvement loans, home equity loans, or reverse mortgages.

They only focus on standard programs and prefer uncomplicated borrowers with good credit scores, employment, and financial profiles. If you have unique circumstances, you might have to do more research to find a lender suited for you.

May not service your mortgage after closing

Usually, the bank will sell your loan to a third party after it’s closed, which means that they may not serve it for you. You would make the monthly payments to the servicer instead of the lender who gave you the loan.

If you have a concern with your loan terms or personal circumstances that causes you to miss payments, you have to contact the servicer, not the bank, which can be a hassle.

Banks are strict and will not approve just anyone

Although most banks say they are direct lenders, they usually do not keep your mortgage and will sell it to a third party. While it gives them more capital to offer more mortgages, it also means that they have less discretion over the qualification process compared to other big banks or credit unions.

The banks have to ensure that the mortgages they offer meet the standards made by the third parties that buy the loans after closing. This makes the mortgage application process less flexible and will usually accept uncomplicated borrowers.



Is it easier to get a mortgage through a broker?

Deciding whether to use a broker is your decision; however, having someone educated in the market can bump up the chances of you getting the mortgage. They save you much of the work since they do all the research and are less likely to miss anything in the application.

Do small banks have an advantage in lending?

Yes. A small bank gets more involved in the mortgage process, leading them to try their best to get you approved. They are more likely to do the necessary digging to get your mortgage approved.

What is the average credit score in the UK?

Your credit score is measured using three main Credit Reference Agencies (CRA) in the UK: TransUnion, Experian, and Equifax. The average is 383 with Equifax and 759 with Experian. Make sure to check one, as each CRA uses a different scale.


Mortgage brokers vs banks: Who’s better?

While working with the bank may seem easier, getting a mortgage broker is less hassle with the same outcome. They have more benefits, eliminating the legwork of you trying to figure out which bank is right for you.

Independent brokers have your best interests and can even get you accepted if you don’t have the best credit report so contact us now as Loan Corp offers this and more!