People are often loyal to their bank. This can be for nostalgic reasons (your grandparents set up a savings account when you were little) or practical reasons (they offered a good rate or a special incentive when you needed an account).
This loyalty can often lead to people doing everything through their bank, including loans, insurances and – the topic of this post – mortgages. It is easy to see the temptation: your bank already knows about your finances, it won’t charge you a fee for mortgage advice, you can keep everything in one place, and so on.
In this post I have set out some downsides about taking out a mortgage through a bank instead of speaking to a whole-of-market adviser such as me.
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1. Banks are limited to their own criteria
All mortgage lenders have “lending criteria”. This sets out who they are and are not willing to lend money to.
When you speak to your bank’s adviser, they will try to get you the best deal available. But they will only consider their own products and criteria.
Are you self-employed? Do you get a bonus and/or overtime? Do you have enough deposit? Did you miss a payment on a credit card? Any of those points could lead to your bank rejecting your mortgage application, even though other lenders could be happy to accept it.
We use special software to look at all mortgage lenders that deal with mortgage advisers. Then we use another piece of software to see if you will meet each lender’s criteria. We have helped countless people who were initially rejected by their bank.
Speaking to an untied adviser like me is like getting a first, second and third opinion all in the one meeting.
2. Banks do not (normally) reward you for your loyalty
Banks know that longstanding customers might not shop around and they offer mortgage products accordingly. Some banks offer special deals for existing customers, but they often make these same deals available through mortgage advisers. Then, even if the deal is “special” compared with its own mortgage products, another lender might offer something even better.
In addition, some banks offer special deals that are only available through mortgage advisers like me. This is because they know mortgage advisers can send a great deal of business their way, and they offer special products accordingly.
3. Banks are not always the fastest option
It can be tempting to think that going to your existing bank – which already has all your details and access to important documents such as bank statements – will be the fastest route to taking out a mortgage.
However, many banks have reduced their mortgage advice teams in recent years. One of the reasons for this is they have focused more on the mortgage adviser market as a key source of customers. This is great for us, but not so good for existing bank customers, who can often wait weeks for an appointment with an adviser.
4. Mortgage advisers might charge a fee
We typically charge a fee of £250 for mortgage applications, but this is normally only payable at the point of applying for a mortgage deal.
If we think you can get a better deal by sticking with your bank, we’ll tell you. However, given our access to dozens of lenders and hundreds of mortgage products, we can almost always save you money compared to taking out a mortgage with your bank – even if you pay us a fee.
This is because a small change in the interest rate can have a big impact on your total outgoings over multiple years. Given the typical amount of a mortgage and typical mortgage term, a £250 saving is not too difficult to recoup over the first few years.