Nila Sweeney

Q. I'm in the process of refinancing my home loan. I've spoken to a couple of brokers and mortgage managers. What's the difference between the two and who will deliver the best home loan?

A. In brief, a mortgage broker is someone who sources funds from a panel of about 30 or so lenders. This does not represent every lender in the market, merely the ones with whom they are accredited and have commission agreements in place. The broker packages your loan application and submits it to the lender for approval. Once your loan has settled, the broker has little more to do with it. Your on-going relationship is with the lender. As a general rule a broker will receive a once-only upfront fee from the lender on settlement of your loan and an on-going 'trail' income (on average 0.20% p.a.) until the loan is repaid in full. A mortgage manager, or non-bank lender, sources funds from those Australian finance wholesalers who do not have a retail presence. Non-bank lenders can often offer more competitive rates because they specialise in mortgages, they are not subsidising less profitable businesses and they do not have high overheads of bank branch networks. As the name suggests, mortgage managers do just that, they process your loan application through to approval and settlement, and then manage it until such time as the loan is repaid in full. The mortgage manager receives an upfront fee for their processing of the loan and an on-going management fee for their 'retail' role. The mortgage manager has a long-standing relationship with you - should you have any queries about your account or wish to vary your mortgage, the manager is your point of contact. You should do your own research and even check with family and friends who they have used. There are a number of websites available where you can compare loans and providers to find one that best suits your needs.

Related: Home Loan Calculator

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