Mortgage Broker or Bank? How to Avoid Paying More Than You Need To

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When you’re buying a home or your current mortgage deal is ending, speaking to your bank can feel like the obvious place to start. You already know the name, perhaps you’ve banked there for years, and it’s one less company to deal with. Choosing a mortgage broker or bank deserves a closer look, though, because the mortgage you’re offered, the advice you receive and any fees can differ.

Neither route is automatically cheaper. A broker might find a suitable deal your bank can’t offer, while going directly to a lender could avoid a separate broker charge or give you access to a product the broker doesn’t arrange. The useful comparison is what each option will cost overall and whether it suits your circumstances, rather than simply which has the lowest advertised interest rate.

This guide provides general information about UK residential mortgages, rather than personal financial advice. Eligibility and suitable borrowing depend on your circumstances. Your home may be repossessed if you don’t keep up repayments on your mortgage.

What does a mortgage broker do differently from a bank?

A mortgage broker helps you find and apply for a mortgage, using information about your income, deposit, spending and the property you want to buy. They can recommend a suitable product from the lenders they work with and help manage the application. That can save you time, particularly when you’d otherwise be explaining your circumstances to several lenders separately.

A bank or building society adviser normally discusses that lender’s own mortgage range. A broker may compare several lenders, although the range varies between firms. Going directly to a bank can still involve regulated advice, so it doesn’t automatically mean you’re making the decision without professional help.

For example, your bank might not accept the way your self-employed income is recorded, while another lender may assess it differently. A broker familiar with that situation could help you find a more suitable lender. They can’t guarantee acceptance, but knowing which criteria apply can help you avoid pursuing a mortgage that was unlikely to work.

How much does a mortgage broker cost?

Some brokers charge you nothing for their mortgage advice because they receive commission from the lender, while others charge a customer fee or combine fees and commission. A free initial conversation doesn’t necessarily mean the whole service is free. Ask for the charging terms in writing before agreeing to proceed. For example, AS Mortgages is a fee free mortgage broker that confirms it doesn’t charge a broker fee in around 95% of cases. A fee can apply to particularly complex applications involving a poor credit history, with charges of up to £995 depending on your circumstances. Ask for confirmation of any broker fee before proceeding, and remember that separate lender fees and other mortgage costs may still apply.

MoneyHelper’s guide to adviser fees gives an indication of £300–£1,000, or 0.35%–1% of the mortgage amount, for mortgage advice where a customer charge applies. Those are examples of charging structures, not a compulsory tariff or a maximum. On a £200,000 mortgage, a 0.5% broker fee would be £1,000, so a percentage that looks small can still mean a substantial bill.

Find out when the fee becomes payable and what happens if the application is declined or your purchase falls through. A charge due when you apply may leave you in a different position from one payable only when the mortgage completes. Upfront broker fees can be lost if you don’t proceed, so the cancellation and refund terms deserve checking alongside the amount.

A fee-free broker doesn’t mean a fee-free mortgage. The lender might still charge a product or arrangement fee, and legal or valuation costs may apply separately. If a fee is added to your borrowing, you’ll also pay interest on it, so avoiding an upfront payment doesn’t make the charge disappear.

Is a mortgage broker cheaper than going directly to a bank?

Either can work out cheaper, depending on the deal and the charges attached to it. If a broker charges £500 to arrange exactly the same mortgage you could obtain directly, that fee is an extra cost unless something else about the offer differs. You might still value the advice and paperwork support, but it helps to separate that service from a claim that the mortgage itself saves money.

Equally, avoiding a broker fee isn’t a saving if the direct mortgage costs more elsewhere. Compare the same borrowing amount, repayment method and mortgage term, looking at the period you expect to keep the deal. Changing those assumptions can make one monthly payment look cheaper without making the borrowing better value.

Does a whole of market mortgage broker compare every deal?

“Whole of market” doesn’t mean you can assume every possible mortgage is included. Some mortgages are available only by applying directly to the lender, and a broker’s service may exclude those products. Ask which lenders and types of mortgage the firm considers before relying on the description.

You can use comparison sites and lenders’ own websites to check alternatives, then discuss any promising options with the adviser. Make sure you’re comparing deals you could actually qualify for, rather than a rate intended for a much larger deposit or a different type of borrower. A broad search is useful, but the mortgage still needs to fit your application.

Why the lowest interest rate may not be the cheapest deal

A lower rate can come with a larger product fee, which might outweigh the saving during a short introductory deal. Mortgage fees and moving costs can include lender charges, valuation costs and legal work as well as any advice fee. Ask for those costs to be included in the comparison rather than treating them as something to deal with later.

As an illustration, saving £20 a month for two years reduces your payments by £480. If that option has an extra £999 fee paid upfront, you’d pay £519 more in fees and instalments over those two years. That isn’t a complete mortgage-cost calculation, because the balance remaining on each loan also matters, but it shows why a smaller monthly payment alone doesn’t settle the question.

The Annual Percentage Rate of Charge, or APRC, combines interest and relevant charges into a yearly comparison figure based on keeping the mortgage for its full term. It’s useful, but you should also examine the cost over your initial deal period if you expect to switch afterwards. Ask the adviser to explain both the payments and the outstanding balance at that point, along with any charges for leaving.

Can a broker help when you remortgage?

A broker can compare a new lender’s mortgage with the options available from your existing lender. Switching to another deal with the same lender is usually called a product transfer, while remortgaging generally means moving the borrowing to a different lender. Don’t assume moving is automatically better value or that staying rewards your loyalty.

Before switching, include any early repayment charge on your current deal and the costs of setting up the new one. Some remortgage offers cover certain fees or provide cashback, but the full package still needs comparing. A cash payment or free legal work can help with costs without necessarily making that mortgage the cheapest suitable option.

Put your deal’s end date in your diary and give yourself time to explore the alternatives. Ask when a new mortgage could start and whether that timing avoids an early repayment charge. You’ll be in a better position to choose if you’re comparing options before the current deal ends.

Will using a broker affect your credit score?

Talking through your circumstances with a broker isn’t the same as submitting a mortgage application. An agreement in principle, which gives an initial indication of what a lender might offer, can involve a soft or hard credit check. Ask which applies before proceeding, particularly if you’re approaching more than one lender.

Formal mortgage applications involve more detailed checks, and several applications close together can affect your credit score. A broker may help identify suitable lenders before you apply, but their involvement doesn’t remove the credit-check process. If an application is declined, establish why before immediately trying elsewhere.

When might a broker be worth paying for?

You might value a broker’s help if you’re self-employed, have irregular earnings, a small deposit or circumstances that don’t fit a lender’s usual application questions. First-time buyers may also appreciate someone explaining the choices and keeping track of the paperwork. The service can be worthwhile even when the benefit is time and support rather than a lower rate.

Ask what the fee buys you, including whether the broker will chase the lender and remain involved until completion. Find out how you can contact them and what happens if your circumstances or the available deals change before the mortgage starts. Paying for advice makes more sense when you understand the work being provided.

Your home-buying budget also needs room for costs beyond the mortgage. Our guide to choosing a family home that works for your finances considers the wider spending involved. Legal work, surveys, moving and ongoing upkeep can all affect what you can comfortably afford.

What documents should you prepare?

Lenders need evidence of your identity, income, spending and deposit, with the precise requirements depending on your circumstances. Common mortgage application documents include payslips, bank statements and proof of deposit, while self-employed applicants may need business accounts and other income evidence. Ask for the lender’s requirements before gathering documents so you don’t spend time supplying the wrong period or format.

Make sure the information is complete and accurate, including existing borrowing and regular commitments. A broker can explain what’s needed, but you remain responsible for the information you provide. Checking your credit reports for errors before applying can also give you time to address problems.

How do you check a mortgage broker is regulated?

The Financial Conduct Authority, or FCA, regulates UK financial-services firms, and you can use its Firm Checker and Financial Services Register to check a business before sharing financial information. Look at its permissions and whether it operates as an appointed representative of another firm. Match the contact details too, rather than relying only on a familiar name or a registration number shown in an advert.

When you receive regulated mortgage advice, the recommendation should be suitable for your needs and circumstances. If you believe the advice was unsuitable, you can complain to the firm and may be able to take an unresolved complaint to the Financial Ombudsman Service. These protections relate to the advice provided, rather than being a promise that every recommendation will prove cheapest.

Buying without advice is often called an execution-only sale. That’s different from going directly to a bank and receiving advice from its mortgage adviser. Ask which service you’re receiving so you understand who is assessing suitability and what responsibility you’re taking on yourself.

What changes if you’re buying a property outside the UK?

Mortgage rules and consumer protections differ between countries, so a UK comparison doesn’t automatically apply to borrowing abroad. For example, someone searching for mortgage brokers Newcastle through the linked Australian firm is looking at Newcastle in New South Wales, rather than Newcastle upon Tyne. The relevant lending rules, permissions and property costs need checking in the country where the purchase is taking place.

The same applies when considering a home elsewhere in Europe. Our guide to buying a house in Spain introduces some of the different costs and legal steps involved. Treat overseas borrowing as a separate research task rather than assuming the UK process carries across.

Mortgage broker or bank: which should you choose?

Start by finding out what a broker will charge, which lenders they cover and what help they provide. Compare their suitable recommendation with direct options and, when remortgaging, your existing lender’s offer. You don’t have to decide that brokers or banks are always better to work out which route suits this particular mortgage.

Before agreeing, ask for the costs and recommendation in writing and have anything unclear explained. Keep the comparison focused on the same borrowing amount and term, with fees and relevant exit charges included. The right result is a mortgage you understand and can afford, with any advice charge justified by the service you receive.

Frequently asked questions

Is it cheaper to use a mortgage broker or go directly to a bank?

Either route can be cheaper once all fees and mortgage costs are included. Compare suitable deals using the same borrowing amount, mortgage term and expected deal period.

How much does a mortgage broker cost in the UK?

Some brokers charge no customer fee, while others use a fixed charge or a percentage of the mortgage. Ask for a written quote, including when the fee is payable and what happens if the mortgage doesn’t complete.

Does a whole of market mortgage broker compare every mortgage?

Not necessarily, particularly where products are available only directly from lenders. Ask which lenders and deals the broker’s service includes.

Can I get mortgage advice directly from my bank?

Yes, a bank can provide regulated advice on its own mortgage range. Going directly to a bank isn’t automatically the same as buying without advice.

Can a mortgage broker help if I’m self-employed?

A broker familiar with self-employed applications may help identify lenders suited to your income evidence. They can’t guarantee approval, and the lender will still assess your application.

Should I use a broker when remortgaging?

It can be useful to compare a broker’s recommendation with your existing lender’s product transfer and other direct deals. Include advice fees, lender charges and any early repayment charge before deciding.