Why Use A Mortgage Broker
Why Use A Mortgage Broker?
With a wealth of information at all our fingertips thanks to the internet, you might wonder why use a mortgage broker? I can research the best deals myself. Can’t I?
While it is true you can find good deals via the internet, using a mortgage broker can take this research one step further, and find the best deal for your personal circumstances. Let’s take a look at what mortgage brokers do, how to find one, and what to keep in mind when working with one.
What Does A Mortgage Broker Do?
A mortgage broker is a professional who liaises with banks and other financial institutions to arrange a mortgage on any kind of property, whether it be a home, investment property, commercial or retail property.
They are experienced in evaluating and comparing loan products, which allows them to make recommendations based on the best match between the needs of their clients and what lenders are offering.
A mortgage broker will also help you understand how much you can afford to borrow and what lenders are likely to approve.
Benefits – Why Use A Mortgage Broker?
There are a range of ways using a mortgage broker will benefit you:
- It will save you time. A mortgage broker has a deep knowledge of the mortgage market, saving you time on research.
- It can save you money. With their knowledge of the market, and understanding of the ins and outs of the products on offer, a mortgage broker can ensure you don’t get stuck paying unexpected fees, or paying for bells and whistles you don’t need or want
- A mortgage broker will advocate for you with the lending institutions, and may be able to negotiate you a better deal than you will find on the internet.
- A mortgage broker will be able to explain the intricacies of each offering, including fees and features, helping you to make the right choice for you now, and into the future.
- A mortgage broker will manage the loan process from application right through to settlement, freeing you up to search for the perfect property.
How To Choose A Mortgage Broker
As with most service providers, the key is research. Ask around and see if friends or colleagues have used a broker they were happy with. Your accountant and financial advisor are also great sources of recommendations. You can also approach the Mortgage Broker Professional Association.[i]
Once you have a shortlist, do a bit of googling. Check out any online reviews. Research the list of financial institutions each broker deals with. Generally speaking, the more comprehensive this list, the more likely you are to get the best deal for your personal circumstances.
Before arranging a meeting, you will also need to do your due diligence. This includes:
- What are their qualifications and do they have the requisite licencing and insurances. This information can be found at ASIC Connects Professional Registers.[ii]
- Which institutions do they work with
- What are their fees and remuneration arrangements
- What is the bulk of their business – do they have a focus on home loans, property investment, commercial or retail mortgages, and does this match your needs
- Which lenders receive what percentage of their business. A good mortgage broker will have a balance between lenders. If all their business is going to one lender, it’s a good idea to ask why that is.
Cost Of Using A Mortgage Broker
Most mortgage brokers are paid via commission from the lender you sign with, and they are obligated to disclose this up front. Generally, commissions are around .65-.7% of the mortgage value.
Occasionally, brokers will charge an upfront fee. This may be instead of or as well as the lenders commission. Be sure to check this before you meet.
What A Mortgage Broker Will Need From You
Before you meet with your chosen mortgage broker you will need to:
- Gather the appropriate documents
- Have your list of needs clear in your mind
You will need:
- Recent payslips, or proof of income. If your pay varies with overtime, you may need a number of payslips
- Details of any additional income, like rental returns
- Previous year’s tax return
- Bank statements – ideally 12 months’ worth so the broker can see a pattern of spending and saving
- Details of any credit or loan accounts
- Photo ID
Have answers to these questions clear in your mind:
- Is this loan for a home or an investment property of some description?
- Are there any special features you require, like an offset account?
- What is most important to you; the cost of the loan, special features, flexibility?
- How you plan to manage your loan; your life plans may affect which loan is best for you. Do you plan to pay out early? Would you like to have the flexibility to drop to minimum payments if or when you have a child.
You might like to break this list down into essential and non-essential features. All these things can impact the best choice of loan for you.
What To Ask
Ideally, your mortgage broker will present you with a number of mortgage options, with one being their recommendation. There are a few key questions you should ask:
- What are the fees associated with this loan?
- Why are you recommending this loan above others?
- What is your remuneration on this loan?
- Will I need LMI (Lenders Mortgage Insurance) and is it avoidable?
Ensure you get a written document with all your questions answered for future reference.
If you meet with a broker and you just don’t gel, don’t be afraid to look for someone else. You need to feel comfortable with any professional you work with and a mortgage broker is no different, so keep looking until you find someone you feel you can trust.
If you need a mortgage broker and would like advice on someone who might suit your needs, Manly Financial Service has a number of brokers on hand who can help you. Please give us a call on (02) 9976 3388, or contact us via the below link.