Mortgage brokers work with a wide range of major banks, smaller banks and non-bank lenders. They act as a go-between clients and lenders. Brokers assist the customers with the loan process, present mortgage options and and help them choose the right type of loan for their financial situation.
There are several ways to find a mortgage broker nowadays. Searching online or asking for referrals from family or friends are great ways to approach a broker. Nevertheless, it is equally vital, if not more, to research on your own.
Why Choose a Broker?
Buying a home can be one of the biggest financial decisions for many people. So it is imperative to plan correctly and find a home loan that suits your requirements and goals. It is one of the most prominent areas where a mortgage broker can provide you with assistance and help you save time, effort and money.
The most compelling reasons to consider using a mortgage broker would be:
- Proper understanding of your situation and needs
- Good knowledge of the bank’s lending criteria, credit policies and requirements
- Access to a panel of lenders and non-lenders
- Legally obliged to act in the customer’s best interests
- Free of (or nominal) charge
- Up-to-date information about the mortgage and property market
Despite this, many people still directly apply with a lender for a home loan. This approach is ideal if you are confident that you have received the best deal available to you. However, there are chances that you might have missed better alternatives in the market.
You can go through our page “Mortgage Brokers vs. Banks” to learn more about the differences between approaching a mortgage broker or a bank directly.
What does a good mortgage broker do?
A good mortgage broker assists you in navigating a maze of loan options to identify the right home loan for you. In general, they will help you with the following services:
Understand your situation clearly
A good mortgage broker will listen to your position to understand your requirements and financial goals in the first place. They will identify issues in your application if any. Then they will provide you with professional advice and guidance to work out potential lenders who can accept your home loan application. They can package your application in a way that the lender may find more appealing.
Provide multiple loan options
Mortgage brokers will calculate how much you can borrow from several lenders. Afterwards, they will identify suitable home loan options and suggest appropriate ones for you based on your borrowing power. A good broker will explain the loan features, including costs, interest rates, costs and fees for each loan product clearly from a variety of lenders.
Submission to settlement
Once you have decided on the lender and the product, they will begin the loan application process on your behalf. They will communicate regularly with the financial institution and ensure the entire process from approval to settlement goes smoothly, giving you a satisfying experience.
Post-settlement
A good broker is not done yet! Even after the loan has settled, they will touch base with your lender on a regular basis to check whether your home loan rate is competitive or not. If not, they will ask for discounts with them and make sure that you are not paying additional interest.
A good mortgage broker is not just about getting a home loan for the clients. Rather, it is the beginning of a long-term relationship.
What does a bad mortgage broker do?
A good broker will not pressure you into getting a loan. Avoid any broker who pushes you to sign anything before you have been provided alternatives.
A bad broker may misunderstand your goals and needs, over or underestimate your borrowing capacity, make assumptions and submit your application with false information. In case of a thin margin between making or breaking a deal, such inputs from bad brokers will be disastrous for your mortgage application process and your aspiration of getting your own home.
You need to check out these red flags while choosing a broker.
Wrong Assessment
It might start with a misread by the broker of your financial situation, your goals and how much you could borrow. Although there are calculators and software to assist the broker nowadays, buoyant or exaggerated estimates will produce wrong calculations and may be detrimental to the application or leave you in financial hardship down the track.
Provide limited lender options
The difference between a good and a bad broker may be subject to the number of lenders he or she holds accreditations with. Check with your broker and find out if they have access to all the Big Four banks – this might be a good starting point.
Make unsuitable recommendations
Any home loan recommendation must take into account your goals, the solutions you are interested in, and other key aspects. If these things are overlooked, your now-suitable home loan may turn out to be a trap later on due to changed circumstances. Many home loan consumers may become mortgage captives if interest rates rise, property prices fall, or lenders implement strict requirements that make refinancing impossible.
Overpromise
Not all people who enquire about a home loan may qualify for it in their current financial scenario. Still, a bad broker (over-optimistic) may give false hopes about your chances of getting qualified for a mortgage. It is wise to wait for some time and make yourself eligible for a home loan rather than fall prey to the exaggerated hopes of a bad broker.
Doing the bare minimum
Getting all relevant documentation, performing credit checks and serviceability calculations, and submitting the application are all examples of doing the bare minimum. A skilled broker understands that credit assessors may enquire about the tiniest of facts, such as a three-month-old visit to a casino. A professional broker would foresee and explain such scenarios.
Choosing a Broker that Suits you
Finding the “right broker” for your needs can be tricky. However, it is not all that gloomy either. Give sufficient time and effort to do your homework and do not rush the process.
Look around. There are specialist brokers, too! Try to find brokers who have already helped clients in your position; they can be of great help to you. Check their reviews on several platforms, narrow down your choice to a workable minimum and ask the right loan questions.
Regardless of your situation, communication is the key. Find a broker who is patient. A good broker is empathetic to your circumstances and aims for your satisfaction with their smart and tested methods of finding a solution.
Speak with us today to find out how we can help you on your mortgage journey.
What questions should you ask a mortgage broker?
Asking questions is the most crucial part of identifying and determining whether the broker is the best fit for you. Some questions you may ask are:
What are my chances of getting qualified for a home loan?
Firstly,you want to confirm your financial circumstance is under the right condition to obtain a mortgage. You have to be completely honest about your finances or any issues (e.g. bad credit score, work or income problems, excessive debt payments, or a bankruptcy or foreclosure) with your broker.
You do not want to get your hopes high by falsifying or hiding your real financial condition from the broker, which will hurt you later.
How do brokers get paid?
Most brokers usually get a percentage-based commission or fee for every type of home loan they write – upfront and trail commission. The former is a percentage value of the loan amount, and the latter is a percentage of the loan that brokers continue to receive during the life of the loan.
As a result, many brokers do not charge clients. However, there is a risk that the broker will encourage you to take out a larger loan than you need or will choose a lender that will pay them a greater commission.
What are the broker’s qualifications and experience?
Look for brokers who have a long industry experience under their belt. The longer their involvement in the sector, the better their knowledge is likely to be. Also, check for their association membership, such as MFAA (Mortgage & Finance Association of Australia) or FBAA (The Finance Brokers Association of Australia).
Brokers must hold their Australian Credit Licence or be authorised to function as an authorised credit representative.
Who is on the broker’s lending panel?
Ask them what types of lenders they work with, and whether they provide loans from different lenders or not. You should also ask them what types of lenders they are unable to access as well. If a broker has access to only a few banks, it could indicate that they are just working with a small number of lenders, limiting your possibilities.
There are around 50 plus lenders and non-lenders in Australia, so this broker should have at least one-third of them in their panel to choose their products.
What fees will I have to pay for the loan?
You should ask about the fees and other costs of the loan. Apart from brokers’ fees, there are other associated costs with the mortgage, such as lender’s mortgage insurance (LMI), specific fees with the product, etc. You have to be very clear about such costs and any other charges. Before committing to anything, you need to ask about them and understand them properly.
What separates you from other mortgage brokers??
Ask them about their areas of expertise, and what things they bring to the table for you. Usually, the answer could be their experience, good contacts with a wide range of lenders, their abilities to deal with complex deals, etc. This is the “unique selling point” that differentiates them from the pack, and they must have one.
There are no right or wrong questions to ask a broker. After all, buying a house, and getting a mortgage are important financial decisions in your life. So you will want to be assured that you have the right partner to assist you in this journey.
Where to find a Good Broker?
There are many brokers in the market these days. But is the broker reliable? Now, that is an entirely different question.
You can use some of the below sources to find potential mortgage brokers:
- Recommendations from family or friends
- Online reviews and searches
- Mortgage broker professional association
Get it in Writing
Once you have shared your story with your broker, they will come up with a detailed analysis for your scenario. Based on their understanding, you can ask for a quote from the broker. A written quote mentions the:
- type of loan
- loan amount
- loan term (duration)
- current interest rate
- fees you have to pay (for example, broker’s fee, loan-application fee, ongoing fees)
Please ensure you are happy with what you are agreeing to with the broker. Ask more questions if you are unsure about anything.
If you feel pressured into signing the document, request extra time to think about your options. You may even try a different broker.
What Next?
After researching for a bit, you might have shortlisted a few of the mortgage brokers. Now you need to speak with them about your financial situation and goals. You can proceed with the mortgage application process if he or she ticks all the boxes.
Conclusion
Some brokers might use pressure sales tactics, inappropriate loan advice, inadequate disclosure of commission, and upselling with little or no regard of risk for borrowers. This is where a good and a bad broker differentiate.
Talk to other people who have recently used a broker and ask about their experiences. Narrow down your objectives and determine what you seek in a home loan. It could be the cheapest loan available or features such as extra repayments. It is beneficial for you to identify your requirements before having a conversation with a broker.
