This is everything you need to know about mortgage brokers.
Buying or building a home is a complicated process — even if you’ve done it before. There are many details to consider to ensure you’re getting the home you want at the price you want. Luckily there are professionals who can help.
From solicitors to agents, each plays a part in simplifying this pretty complicated process. One such person is a mortgage broker.
While it’s true that with a bit of research and fortitude, you can navigate the buying process largely on your own, but this can open the door to costly mistakes. Did you get the best possible loan with the best possible terms?
Even the smallest difference in mortgage rates can end up saving you thousands in interest over the lifetime of a home loan. This is where a mortgage broker can help …
What is a mortgage broker?
A mortgage broker is a financial adviser who specialises in finding home loans for their clients. Depending on your mortgage broker’s services, they may also manage the application process for you.
Their focus is firmly on you and your situation as a client, and their goal should be to find the best possible financial options for you.
What does a mortgage broker do?
When you employ the services of a mortgage broker, they will spend a bit of time with you to fully understand your finances, your needs and your home ownership goals. Their aim is to find a home loan that you will realistically be able to afford.
They will research all of the options available to you, finding choices that will be suitable for your situation. A good broker will examine market trends and fluctuations to determine how much you should borrow as well as how much you can borrow.
Your broker will then take the time to present you with the best possible options and fully explain each one to you, taking care to ensure you understand all the benefits and any drawbacks. Once you’ve settled on the right loan for you, they will work with banks or other lenders, acting as a go-between to secure your home loan.
What are the costs of a mortgage broker?
The costs of working with a mortgage broker vary depending on the broker you decide to work with.
In many cases, they earn a commission for selling certain lenders’ products or loans, so they will not charge their clients anything. In other cases, they will charge a client fee in addition to the commission they earn.
It’s important to do a bit of research before engaging the services of a mortgage broker to ensure you’re happy with any associated costs.
Should you employ a mortgage broker?
Whether or not you decide to work with a mortgage broker will depend on your individual circumstances, and how much control you want to take throughout the buying process.
It’s worth noting that brokers focus solely on home loans, so it stands to reason that they will be able to get you a better deal than if you walked into your nearest bank branch. They stay on top of fluctuating markets, and understand the breadth of loan options available to any given buyer.
There are a few things to keep in mind when seeking out their services though, to ensure you’re getting the most out of their services:
- Only work with brokers accredited by the Australian Securities and Investments Commissions (ASIC) with an Australian Credit Licence to ensure the best standards.
- Find a broker that works with a high number lenders to ensure a better chance of finding a loan that will suit your needs.
- Ask about their commission structure to ensure they’re presenting you with the best possible options rather than the options from lenders that pay the highest commission.
If you do decide to work with a mortgage broker, make sure to choose wisely. If you’re unhappy with your broker, changing to a new broker can degrade your credit rating. Credit bureaus make a note of each time a loan application is submitted on your behalf — too many submissions will raise a red flag, which will harm your credit rating.
It’s also important to understand that a mortgage broker can only find you the best deal if they have all the information they need to do that. In preparing to meet with a broker, you should put together as much financial information as you can.
You should be prepared to discuss what you want and what you definitely don’t want. It’s also a good idea to share your future home ownership plans, even if it’s only a rough outline of what your goals are.