Broker vs lender: What's the difference?
Getting a mortgage can be a confusing process. There are fixed terms, interest rates, thousands of mortgage products and a lot of terminology to understand. But one of the first puzzles prospective home buyers face is deciding whether they should use a mortgage broker to secure a mortgage or go directly to a lender.
This article explains the difference between a mortgage broker and a lender, whether buyers should use a mortgage broker or go direct to a lender, and what the pros and cons of each are.
Key Takeaways
- A mortgage broker is an intermediary who finds deals; a mortgage lender is the bank or building society that provides the actual money.
- Market access: Brokers often have access to the "whole of market," whereas lenders only offer their own specific products.
- Brokers provide impartial advice and help navigate complex financial situations or unique borrowing needs.
- Costs: Some brokers charge a fee for their service, while going direct to a lender typically avoids this specific cost but may result in a higher interest rate.
What is a mortgage broker?
A mortgage broker (sometimes called a mortgage advisor) is a go-between who matches a buyer with a lender. A mortgage broker will:
- Collects the buyer’s income, credit and deposit details
- Searches many lenders to find a loan that fits the buyer’s needs
- Submits the application and handles questions from the lender
- Never lends money directly
Related reading: Do I need a mortgage broker?
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What is a mortgage lender?
A mortgage lender is the company that supplies the loan used to buy the home, usually a bank, building society or specialist lender. A mortgage lender;
- Assesses the buyer’s credit, income and deposit
- Sets the interest rate, fees and repayment term
- Sends the funds to the seller’s solicitor on completion
- Collects monthly payments until the loan is repaid
Lenders offer only their own products, so comparing several lenders (directly or through a broker) is essential.
What's the difference between a mortgage broker and a lender?
Think of the broker as the matchmaker and the lender as the source of money.
- Broker: Searches across their panel of lenders (ours contains over 100 lenders!) recommends a suitable loan, submits the paperwork, but never lends cash.
- Lender: Approves the application, sets the rate and term, releases the funds and collects the repayments.
A whole-of-market broker (like us) can compare hundreds of lenders, while a single lender can only offer its own deals.
Read more: How to find a good mortgage broker
Related reading: How much does a mortgage advisor cost?
How do mortgage brokers get paid, and will it cost me extra?
Most brokers earn a commission from the lender once the mortgage is completed. This does not add to the interest rate you pay. Some brokers also charge the buyer a flat or percentage fee (for example, £499 or up to 1% of the loan). These brokers can often deliver a more tailored, personalised service, which, when you’re going to make one of the largest purchases of your life, can be worth it!
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When should a buyer use a mortgage broker instead of going straight to a lender?
A mortgage broker can be helpful when a buyer:
- Has a complex income (self-employed, multiple jobs or bonuses)
- Needs a higher borrowing limit than high-street lenders offer
- Wants to compare many deals quickly without multiple applications
- Faces credit issues or needs a guarantor
- Is short on time and prefers an expert to handle paperwork
Pros and cons of using a mortgage broker
Pros
Variety of options: Access to the whole market or a wide panel of lenders.
Expert advice: Brokers offer impartial, professional guidance tailored to your needs.
Lower rates: Potential access to exclusive deals or lower interest rates not available to the public.
Cons
Broker fees: Some advisors charge a fee for their services and expert advice
Limited panels: Not all brokers are "whole of market," so verify their lender list.
Pros and cons of going direct to a mortgage lender
Pros
Speed: Can save time if you already know exactly which product you want.
No broker fees
Cons
Limited choice: You are restricted to only that specific lender's products
Market volatility: You might miss out on better daily rates available elsewhere.
Complexity: Harder to navigate if you have a unique situation (e.g., self-employed or guarantor needs).
As you can see, there are quite a few differences between mortgage brokers and lenders. For those looking to start their journey to homeownership and needing an expert mortgage broker to help make home happen, Tembo can help.
Our award-winning team can help you work out the best options for you and your family from over 20,000 mortgage products and over 100 lenders.
To get started,create a free Tembo plan for a free, personalised mortgage recommendation. You can then book in a free, no-obligation call with one of our mortgage experts to talk through your options.
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