The high popularity and demand for home loans have encouraged many banks and non-banking financial companies to add home loan schemes to their offerings. As a result, there is a wide range of home loan schemes available with varying interest rates. The question remains, which is a better option between a lender and a bank.
Both the mortgage lenders and banks provide loans with attractive benefits, but both these options have their pros and cons, and to make the right choice, it is a must that you are aware of them.
The decision to take a home loan depends on your current financial status. You can either choose one option between mortgage loan and bank, and you can also go for both of them. However, mortgage lenders offer more options for borrowers than banks. But it would be best if you considered your long-term goals, current financial status, and housing needs before applying for the loan anywhere.
Here are the features of mortgage lenders and banks and their pros and cons for an accurate comparison. Also you can compare home loan interest rates for better results.
Mortgage Lenders
A mortgage lender provides a loan to a borrower to buy a home. It can be a financial company or a mortgage bank and can offer both a loan and a mortgage service. A mortgage lender will fund the loan amount initially, but later they sell the loan to a more critical financial institution. This is also their reason for providing loans on lower interest rates than banks.
The government has issued enough guidelines for home loan servicers that directly work for the protection of borrowers. These guidelines allow the borrowers to transfer the loan from one company to another. So if you are not happy with your home loan lender’s services, you can switch to another company, whether from mortgage to bank or vice-versa.
Some borrowers also believe that mortgage lenders are not strictly regulated by the government, like banks. They often impose different terms and conditions to make more money from their customers. But this is usually not the case. All the mortgage lenders follow the government guidelines that are issued for borrower’s protection. So it would be wise if you consult with a financial advisor and compare all your options before taking the loan.
Mortgage Lender: Pros
- They usually offer lower interest rates on the loan amount.
- They provide various loan options to a borrower.
- Their closing time is faster than the banks.
- They provide you with in-depth knowledge of the entire process.
- You can consult with the local advisors and weigh all the options before applying for a loan.
Mortgage Lender: Cons
- The mortgage lender will provide you their services online, which many people don’t prefer to a large sum of money.
- There are chances that your servicer may change during the loan tenure.
Banks
Many people pick their existing bank to take home loans. Their current bank seems like a comfortable choice because the bank already knows their financial profile, and there’s also a plus point of having an existing business-consumer relationship. But it is not wise to think that this relationship will also benefit in the long run. You can save a significant amount of money by choosing the right lender according to your loan type and time period.
It would be best if you considered your existing bank for a home loan because sometimes they offer discounts and other benefits to their current customers. These include several services related to special saving schemes, checking accounts, new credit cards, etc. The best way to know about these offers is to go to the bank branch and ask what they can offer you if you take a home loan from them.
One major thing that does not favor the bank here is that they follow stringent guidelines for lending home loans. The mortgage lenders also follow all the necessary procedures to ensure everyone’s security, but as we often see, the banks take longer to close a loan. So if the bank thinks that there are chances of adverse financial events, like bankruptcy and foreclosure, the bank will take a long time to close the loan.
Banks: Pros
- Customers have an existing relationship with them.
- They may offer discounts and other benefits to their customers.
Banks: Cons
- Banks do not have much mortgage lending experience.
- Their loan closing time is also longer than other companies.
- Banks follow strict lending standards to distribute home loans.
The final decision should be based upon your financial requirement. Also, do a little research and narrow down your options. Then, compare them to find the suitable one.
