Most of us have an everyday bank.
It’s where our salary or wages are paid, our bills come out, and our debit or credit cards are held. We may have been with the same bank for years, so when it comes time to apply for a mortgage, it can feel natural to start there.
But does your mortgage actually have to be with the bank you use every day?
The short answer is no, not necessarily.
You may be able to take out a mortgage with another lender, even if your everyday accounts are held somewhere else. The important thing is finding the lender and loan structure that best suit your circumstances, rather than assuming your own bank is your only option.
There is nothing wrong with approaching your existing bank for a mortgage.
They already have a relationship with you and can see how you manage your accounts. You may also like the convenience of keeping everything in one banking app.
However, being an existing customer does not automatically mean that your bank will offer you the best mortgage solution.
Every lender has its own criteria for deciding how much someone can borrow and whether an application will be approved. They can look at income, expenses, debts and different types of employment in different ways.
This means one bank may decline an application or approve less than you need, while another may be more comfortable with your circumstances.
It is easy to assume that all banks will look at your application in much the same way, but that is not always the case.
One lender may be more comfortable with overtime, bonuses or commission income. Another may have a different approach to self-employed borrowers or people who have recently changed jobs.
Banks can also have different rules around deposits, existing debts, investment properties and the types of homes they are prepared to lend against.
Even the interest rate a bank uses to “test” whether you can afford a mortgage can vary between lenders. This can affect how much you are able to borrow.
So, if your everyday bank says no, it does not necessarily mean every other lender will reach the same decision.
An approval from your existing bank can feel like good news, and it often is. But it is still worth understanding how that offer compares with other options.
Another lender may offer a loan structure that better suits your goals. It may assess your borrowing capacity differently or provide features that are more useful to you.
The advertised interest rate is important, but it should not be the only thing you consider. Fees, cashback conditions, repayment flexibility and the way the mortgage is structured can all affect the overall value.
The best mortgage is not always the one offered by the bank you already use, and it is not automatically the one with the lowest advertised interest rate either.
Not always, but this depends on the lender and the mortgage arrangement.
Some lenders may allow you to keep your salary/wages and everyday accounts with your current bank. You would simply arrange for your mortgage repayments to be made to the new lender.
Other lenders may ask you to open an account with them, have your income paid into that account, or meet certain conditions as part of the mortgage package.
Some loan features may also require linked accounts with the mortgage lender. For example, an offset mortgage usually needs to be connected to eligible accounts held with that same bank.
This is why it is important to understand the lender’s requirements before making a decision. Applying for a mortgage elsewhere does not automatically mean moving your whole banking relationship, but you should check what would be expected.
Familiarity and convenience play a big part.
If you have used the same bank for years, contacting them can feel like the easiest place to begin.
There can also be a sense that loyalty will count in your favour. While your history with the bank may be useful, mortgage applications are still assessed against the lender’s current policies and criteria.
Your bank can explain the mortgage options it offers, but it cannot recommend another lender if that lender may be better suited to you.
That is an important distinction. Speaking only to your everyday bank gives you a view of one lender’s products and policies, rather than a broader picture of what may be available.
A Mortgage Adviser can look beyond the bank you already use.
We can take the time to understand your income, deposit, existing commitments and future plans before considering which lenders may be a good fit.
We can also explain how different lenders are likely to assess your application, what accounts you may need to open, and whether you would be required to have your salary or wages directly credited to the mortgage account.
This can be particularly helpful if your circumstances are not completely straightforward or your own bank has already said no.
Rather than submitting applications everywhere and hoping for the best, your Mortgage Adviser can help identify the lenders that are more likely to suit your situation.
Your everyday bank can be a good place to hold your accounts, but it is not necessarily the only place you can have your mortgage.
Different lenders have different criteria, products and ways of assessing an application. Looking beyond your own bank may uncover options you did not realise were available.
You may still decide that keeping everything together is the right choice. The important thing is making that decision after understanding your options, rather than assuming your mortgage has to be with the bank you use every day.
If you are buying a home or reviewing your current mortgage, feel free to get in touch. We can help you understand which lenders may suit your circumstances and what moving your mortgage would actually involve.