An increasing number of borrowers are seeking the services of a mortgage broker, especially after the banking royal commission revealed poor business practices among the major Australian banks.
Using a broker doesn’t necessarily cut the banks from the picture but it can provide reassurance that you’re getting the most suitable deal in the market.
A broker can save you time on research, find the best product across a range of lenders, and guide you through the application process which can include significant amounts of paperwork.
Mortgage brokers work on a commission basis which they need to explain to you however, this compares to a bank loan officer who is an employee of the bank that would finance the loan and who will only offer you lending products from that bank.
In principle, the broker’s commission-only structure should ensure they focus on achieving the best outcome for you as the borrower. Your broker’s fees must be listed in a credit quote, which you should request before finalising any transaction.
Good mortgage brokers will have a large network of lenders and be well versed in relevant loan products for your situation.
They should be able to explain the obligations of each product and assist in comparing the benefits of fixed-rate mortgages against adjustable-rate mortgages. They will also be able to provide advice on an appropriate length of a loan, such as a 15-year or 25-year term.
Once your needs are understood, a mortgage broker will seek interest from several lenders, negotiate an interest rate based on their own buying power, or the buying power of their franchise, and then close the deal on your behalf.
They may also be able to find a lender if your credit history has been less than perfect, if you have poor income records, or if you have been refused credit from your bank. Sometimes, this can involve an additional fee.
A mortgage broker should
- Be the honest middle-man between the homeowner and the mortgage lender
- Listen to your needs, not force-fit you into a loans product
- Have access to a wide variety of financial products
- Negotiate the best available interest rate directly with the lender, leveraging their own buying power
- Advise on a suitable repayment period to meet your lifestyle
- Prepare the loan application, financial documents and issue mortgage pre-approvals
- Be a good resource on the best place to find finance if your credit rating or income records are imperfect
This article is of a general nature. Readers should seek professional advice.