Owner Builders have the dilemma to whether choose loans coming from banks, or to those coming from brokers. Firstly, owner builders are individuals who take responsibility for domestic building work done on their own land. These people primarily takes charge in managing the construction of their houses with congruence to building regulations and standards. Unfortunately, owner builders would carry the burden of heavy expenses in accomplishing everything. For this reason, considering to qualify for a mortgage loan would be the first thing that owner builders would be thinking of.
In addition, there are two major sources for acquiring a mortgage loan for owner builders. This would comprise the possible loans from banks and those from mortgage brokers. However, the question comes to whether or not owner builders should choose bank over brokers or the other way around. To explain, both brokers and banks have specific features that an owner builder may be interested of. For one, both Brokers and Banks similarly share the trait of checking the current situation of the borrower as well as his creditworthiness. In light of this, both bank and brokers have the capacity to lend the requested financial support especially when building a home.
Banks in particular, have an advantage in security. This makes borrowers feel safer when they are handed money compared to non-bank lenders. Furthermore, banks, especially prominent/popular ones, have the reputation as established institutions. This primarily gives the idea that banks can assure safe and quality loans generated from the borrower’s request. In Australia, banks according to the Australian Prudential Regulatory Authority (APRA), have an extra regulatory level which states that financial promises made by banks are fully met under all reasonable circumstances. In contrast to this, banks, although assures great safety to the borrowers, tolls in their stricter criteria. With this, borrowers may also experience having limited choices in getting a loan. Finally, banks may have excessive overhead costs for the borrowers from stashed fees which may or may not be fully regarded.
Brokers, on the other hand, denies the disadvantage of choice limitations and provide borrowers with various options to find a suitable loan without drilling a massive hole in everyone’s wallets. In this case, the ability to provide “choice” is a broker’s advantage. When dealing with a broker, one is getting the vibe of dealing with multiple banks and products compared to dealing with actual banks which can only provide you one specific package. Additionally, brokers are specialized in making the best deals to clients. In relation, brokers can put deeper and smarter deals that can have clients to commit long term. In comparison, banks have staff members that are most likely not concerned of creating the best deal but rather to a deal which compliments the bank’s interest. Consequently, in the industry of lending, there are good and bad brokers. Landing to a bad one may be damaging in terms of cost or may put clients into bankruptcy.
To weigh both parties, it has come to the conclusion that the most practical way to acquire loan for owner builders are from mortgage brokers. Let’s face it, although we want to be safe with borrowing money, we also want to explore cheaper and cost-efficient options to obtain loans. So, if you are an owner builder, try to consider looking for a “good” and “trusted” mortgage broker that can help you get the most appropriate loan to aid build your house.