The main reason people go to mortgage brokers is to get access to a greater range of mortgage options, for better service and for the mortgage broker’s ability to negotiate with lenders. A mortgage broker offers loans from a panel of financial institutions, including banks and non-banks. Using a mortgage broker is now an essential part of scouring the market for the right home loan. In simple terms, brokers evaluate your situation against secure banks and lenders on their panel for the best deal. On top of this a mortgage broker will collect and collate your loan application and liaise direct with the lender on your behalf – no more holding for your bank just to be told by a machine to select from options 1, 2, 3, etc.
In Australia, along with the well known banks and lenders there are now a whole range of specialist lenders offering a range of competitive products which may be more suitable to your needs. One of the great advantages of using a good mortgage broker is that they have access to many of these lenders and their products.
mortgage brokers usually run their own businesses. Lenders work with mortgage brokers because they effectively give the lender a bigger “shop front” without carrying a traditional employee or “bricks and mortar” overhead. The lender pays the broker fees or commissions for your business. Just as if you were dealing with a bank manager or lender, these fees do not change the interest rate you pay on a home loan. To be sure you are being recommended to the right lender, just ask your mortgage broker to show you all the lenders on their panel, and what your loan options would be, to compare against each lender’s criteria. Some mortgage brokers will be able to provide a graph comparison based on your loan amount and the different lenders rate fees and charges over the life of the loan. This will give you an overall ‘cost ‘ of each loan available including interest charged over the term of the loan.
Establishing that a mortgage broker is right for you and has experience and qualifications, as well as being committed to the industry code of practice, is vital to ensure you’re getting the best loan for your needs. Here is a step-by-step checklist that will help you know if your broker is on the level.
· For residential loans, all of the mortgage broker’s services should be free i.e. is the whole service of giving you information in relation to home loans, negotiating the loan for you and handling the paperwork through to approval
· The right mortgage broker will take the time to really understand your entire finance situation, both now and into the future
· Your mortgage broker should have a range of home loans from a wide variety of lenders, e.g. banks and non-banks, conforming and non-conforming
· Ensure your mortgage broker is not just an agent for one lender
· Check the qualifications and experience of your mortgage broker, are they a member of the professional mortgage association (MFAA – Mortgage & Finance Association of Australia / FBAA – Finance Brokers Association Australia)?
· Make sure your mortgage broker discloses all commission and payments received so you can judge whether a particular loan recommendation is being influenced by how much the broker will be paid
· Ask your mortgage broker to show you on their computer how the loans they offer compare for your situation. Good brokers should have the appropriate software and be able to clearly outline their criteria and logic
· Your mortgage broker should have appropriate insurances
· A good mortgage broker should be able to explain the most complex loans in plain English
· It is up to you, but it really helps if you actually like your mortgage broker as well!