When you’re looking for a home loan, you’ll often hear the terms broker and lender. While both play a role in helping you get a mortgage, they’re not the same. Understanding the difference between a mortgage broker and a lender can help you decide which option suits your needs best.
In this guide, we’ll explain what both roles involve, how they work together, and when it makes sense to choose one over the other.
What is a mortgage lender?
A mortgage lender is a bank, building society, or financial institution that lends you money directly to buy or refinance a home. When you take out a mortgage, the lender gives you the funds, and you agree to repay them over time with interest.
Lenders set their own rules for who can borrow, what rates they offer, and how much they’re willing to lend. If you apply directly, you deal with the lender throughout the process.
How do they provide mortgage funds?
Mortgage lenders offer home loans using their own funds. They check your income, credit history, and other factors before approving your loan. Once approved, the lender transfers the funds either to your solicitor or directly to the seller to complete the purchase.
Since lenders provide their own products, they will only offer you options from their own range. This is one of the biggest points of difference between a mortgage broker and a lender. Brokers can show you more choices, while lenders focus only on what they offer.
Types of lenders
Lenders come in many forms. Some are large banks with hundreds of thousands of customers. Others are specialist lenders who focus on people with unique circumstances, such as bad credit or irregular income.
Many mainstream lenders are suitable for buyers with strong credit and steady income. Specialist lenders may offer more flexible criteria, but the interest rates could be slightly higher.
What does a mortgage broker do?
A mortgage broker helps you find a loan by comparing deals across different lenders. They don’t lend money themselves but act as a go-between. A broker’s job is to match you with the right lender based on your income, credit history, and the type of mortgage you need.
How do they compare products across lenders?
Brokers use tools to search a wide range of deals from banks, building societies, and specialist lenders. They assess your needs and help you apply for a mortgage that fits your situation.
How do mortgage brokers find lenders? They usually work with a panel of approved lenders, some of whom may not deal directly with the public. This gives brokers access to a wider range of deals than you might find on your own.
Key differences between a broker and a lender
Is it better to use a mortgage broker or a lender? Though both help you get a mortgage through an advised sales process, there are a few key ways they differ. Your choice depends on how much support you want, what kind of deals you’re after, and how complex your situation is.
Access to products
Lenders only offer their own mortgage deals. Brokers, on the other hand, can show you products from many lenders. This can help you find better rates or terms, especially if your situation doesn’t fit the usual profile.
The application process
When you apply directly with a lender, you handle everything on your own—from comparing rates to filling out forms. This can be straightforward if your income is simple and your credit is good. But it may take time, especially if you’re not familiar with the process.
With a broker, the steps can feel easier. They gather your details, help you choose the right deal, and complete much of the paperwork for you. They can also spot issues early, which helps avoid delays or rejections.
Fees and commissions
Lenders may charge an arrangement fee for the mortgage, and you’ll pay this whether you go directly or through a broker. However, brokers might also charge a separate fee for their advice and service. This can be a flat rate or a percentage of the loan.
In many cases, a mortgage broker receives a commission from the lender, which means the lender pays them for bringing in a customer. Even so, brokers must recommend what suits you best, not just what pays more.
It’s always a good idea to ask upfront how your broker is paid and whether any of their advice is based on commission.
When should you use a broker instead of a lender?
Not everyone needs a broker, but there are times when it can really help. If your income or credit history isn’t straightforward, or you simply want someone to handle the process for you, a broker can be useful.
First time buyers
Buying your first home can feel overwhelming. You’re learning about deposits, credit checks, property searches, and legal steps all at once. A broker can guide a first time buyer through the mortgage part of the journey and explain each step in plain terms.
Self employed
If you run your own business or work freelance, your income might not follow a fixed pattern. Instead of payslips, you may rely on contracts, dividends, or a mix of sources. That’s where a broker can help. They understand which lenders are more flexible and what documents you’ll need.
They also know how to find lenders who are open to different income types, like retained profits or irregular payments, which some lenders might view differently.
You can find more details in this guide for those who are self employed, including what information you may be asked to provide.
Remortgaging or looking for the best deal
If you’re switching to a new mortgage to save money or borrow more, it’s smart to compare your options. Brokers have access to many deals, including some that aren’t advertised directly to the public.
They can help you find a lower rate, reduce fees, or move to a product with more flexible terms.
This is also where the mortgage broker commission from lenders may come into play, as the lender often pays brokers after arranging the new deal, though some may still charge you a fee, so it’s worth checking.
Advantages of going to a lender
Dealing directly with a lender can be quicker and more straightforward if your situation is simple. If you have a steady income, good credit history, and know what you want, going straight to a lender may help you move faster.
You’ll also have a direct line to the people offering the loan. This can make communication easier if you already have a relationship with a bank or building society.
Benefits of using a mortgage broker
Using a broker gives you access to a wider range of options. This is helpful if your income varies, you’ve had credit issues, or you simply want someone to do the legwork for you.
Brokers understand what different lenders are looking for and can match your profile to the right loan. This often saves time and helps reduce the risk of your application being rejected.
If you’re not sure which route to take, understanding the difference between a mortgage broker and a lender can make the choice clearer. It’s not just about who gives the money, it’s about how much support you get along the way.
Potential drawbacks to consider with a broker
While brokers offer many benefits, there are things to consider. Some brokers charge a fee for their service, which adds to your costs. Others may only work with a limited group of lenders.
And although most brokers are paid a mortgage broker commission from lenders, they must still give advice that puts your interests first. Even so, it’s good to ask if any lenders they recommend are paying them more than others.
You should also check whether the broker covers the whole market or only a select number of lenders. This affects how many options you really have.
Final thoughts
Choosing between a broker and a lender comes down to your personal situation. If you want a simple, hands-on process with fewer steps, going directly might work well. But if you need more guidance or have unique circumstances, a broker can add real value.
Understanding the difference between a mortgage broker and a lender gives you the power to make a decision that fits your needs and confidence level. Either way, the goal is the same: to find a mortgage that works for you, both now and in the future.