When looking for a loan it can be a bit of a minefield with so many different options available. It’s crucial you do your research so you can find the best deals out there! However if you feel unsure about making this life changing decision alone, there is the option of enlisting a Mortgage Broker.
So who is a Mortgage Broker and what do they do?
To put simply, a Mortgage Broker will do all the hard work for you! They will research the market, compare rates of various banks and lenders and negotiate the loan on your behalf, helping you secure the best loan to suit your specific requirements and circumstances; right through to settlement.
What are the benefits of using a Mortgage Broker?
- They will do all the hard work and researching for you.
- They are loan experts and are far more likely to find the best deals and therefore saving you money.
- They have regular contact with a variety of lenders, some whom you may not have even known about.
- If you have been refused a loan in the past your broker can help you find a lender that is more lenient. All lenders have different credit policies and a good broker will know each lender’s lending criteria.
- They give you professional advice and guidance and can explain all the technical terms, small print and answer all your questions.
Are there any disadvantages?
With benefits there are normally disadvantages and with mortgage brokers it’s no different. Firstly it’s important to remember that brokers do not have access to all credit providers, so you should take the time yourself to make sure the loan they have selected for you is suitable and competitive - or you could end up paying more than you need to!
Secondly, some brokers may not work with lenders who do not pay commissions and therefore you might be missing out on a great deal. On the flipside, some brokers may recommend a certain loan to you because they like dealing with a particular lender because they receive a higher commission from them.
Another potential disadvantage is that if you try several different brokers each will submit an application on your behalf. Each time they submit an application, it’s sent to the credit bureau for checking and if a high number of enquiries have been submitted it raises a red flag. So if you have been working really hard to make sure your credit rating is sky-high you could end up being refused because multiple applications have been made on your behalf. The moral of the tale is if you are going to use a broker, try and work with just one.
So what should I look out for when selecting a Mortgage Broker?
- Ensure your broker has the right accreditation and is registered with the Australian Securities and Investments Commissions (ASIC) and have an Australian Credit License. You can check if they are registered with ASIC.
- Check if your broker belongs to a reputable industry association such as the Mortgage and Finance Association of Australia (MFAA), the Mortgage Industry Association of Australia (MIAA) or the Credit Ombudsman Service (COSL). Be careful if there not registered with a professional body as it may mean they are dodgy!
- Check how many lenders your broker deals with? If they only work with a few lenders then you may miss out on some really good deals. A broker with a range of lenders is your best bet.
- Check what fees do they charge you? Make sure you know up front and in writing what fees, if any, you may incur.
- Know what commissions are they getting paid? Some lenders will pay higher commissions and this can potentially influence what loans your broker recommends to you.
- Understand how does your broker work? How do they find the best deal for you? A good broker will have a standard methodology for selecting the best loan.
- When your broker recommends a loan to you, ask them why they have selected that loan. What features does it offer? Is it the cheapest option? Does your broker receive a commission?
- Make sure your broker is very clear about all the costs and terms so you know the amount of the loan, the term of the loan, the current interest rate and fees you have to pay. The fees could include your brokers fees or commissions, fees to the lender for setting up the loan and early termination/or exit fees.
- Speak to friends and family. Find out if they have worked with a broker in the past. If they highly recommend someone to you, then you have a good chance of enjoying the same experience.
The Bottom Line
As with any life changing decision, it’s really important to do your own homework. A broker can save you time and money and may be able to find you the loan of your dreams but you should still do your own research and find out what’s available.
Spend some time contacting lenders directly to obtain an understanding of what loans are available to you and be prepared to ask plenty of questions to help your broker find you the best loan that meets your needs and offers value for money.
So now you’re armed with some more information, you should be well on your way to finding your dream loan!