What are mortgage brokers: What are they good for?
Okay, that’s not true. Catchy song though.
There are a lot of good reasons why you might use a mortgage broker’s service to help you when you’re searching for a home loan. And we’re going to lay them out for you, so you can decide whether you need a guide to the wonderful world of home loans, or if you’d rather go it alone on comparing home loans.
What does a mortgage broker do?
Essentially, a mortgage broker acts as a go-between for you and a lender, to help you choose a suitable home loan, and then negotiate the best possible deal.
Mortgage brokers are held to ‘responsible lending obligations’, which means they have a duty to suggest only home loans that will suit your budget. So when you choose a mortgage broker and start the process of finding a home loan, there are a few steps you should go through:
1. Assessment of your financial situation
Your mortgage broker is there to find the best home loan option to suit your situation and budget. Which means to start off, they should take some time to discuss your needs, wants and circumstances, to get a feel for what kind of loan might suit you.
At this stage, you should try to have all your financial documents in order to make this easier. That means I.D., bank statements, tax returns, pay slips or anything else you might need when taking out a home loan. Having these ready will mean your mortgage broker can get a clear idea of your borrowing power and needs.
2. Finding a suitable loan
Once your mortgage broker has an idea of where you stand, they can start searching for a home loan that suits you. Generally speaking, the wider the range of lenders and products your broker deals with the better, because it means you’re not missing out on huge chunks of the market and therefore potential savings.
Your broker should also be able to give you comparisons of all the loans on offer and let you know all the details and costs that are involved, to give you the clearest idea possible of what you’re getting into. Tools like the comparison rate are useful in making sure you’re comparing ‘apples with apples’, but your broker should take into account your individual home loan needs and calculate costs that way.
3. Management of the home loan process
When you’ve picked the home loan you want, your mortgage broker can negotiate with the lender on your behalf, and walk you through the process of applying for the loan. There are a few steps to getting through a home loan application, from pre-approval to settlement, and a good mortgage broker will see you all the way through from start to finish. A great mortgage broker will even check in after everything’s done and dusted to make sure it’s all running smoothly.
Why should I use a mortgage broker?
The number one goal when working with a mortgage broker is to find a home loan that will suit you and save you money. But guess what? You could do that yourself, by using our home loan comparison table, our search tool and our handy home loan guides.
So why bother with a mortgage broker? Well, there are a few instances in which you might need a little extra help, or where a mortgage broker may be the best way to find discounted rates. For example:
Your situation is… tricky
If you’ve got assets scattered across the board, or if you’re credit rating is not as good as it could be, or even if you’re just having a bit of trouble pulling everything together for a home loan application, it might help to have a mortgage broker to guide you through the home loan process. In the case of a bad credit rating, a mortgage broker can also considerably up your chances of getting a home loan at all.
You’re a first time buyer
You’re fresh to the market, ready to dive in a buy your very first home. Good for you! But between the property jargon and banks trying to make the most profit - not to mention choosing your dream home - it can be a bit overwhelming out there for first home buyers. A mortgage broker can help smooth the process and keep the stress levels manageable. You can also check out our first home buyers hub for a wealth of tips, tricks and advice to help you out.
You’re investing - for the first time, or the fifth
Whether this is your first investment property, or you’re wrangling a portfolio that looks like a street directory, a mortgage broker can help to keep everything under control and find you the best deal. Home loan interest rates tend to be higher for investors, so if your mortgage dealer can snag you a great rate, it's well worth the time of getting in contact. If you’re more of a D.I.Y investor, check out our comparison of investment home loans.
You don’t have time to shop around
Time poor? Happens to the best of us. If you just don’t have time to compare home loans and shop around for the best deal, a mortgage broker can be a great service. They can do all the legwork, and then deliver you a concise comparison of a few of their recommendations. Just be careful here that you aren’t leaving your home loan in the hands of a broker who is just after a high commission, or you could end up paying way too much. It’s always a good idea to be involved in the process of picking your own home loan whenever you can.
You want to cash in on wholesale offers
Mortgage brokers have put a lot of time into forming relationships with banks and lenders, and the payoff is that they have access to some great deals and discounted rates that the average borrower wouldn’t. Alternatively, you could check out Mozo’s mystery bank deal, for some amazingly low home loan rates from the big four banks, as well as smaller and non-bank lenders.
What are the downsides to using a mortgage broker?
Here’s the thing: according to ASIC, brokers “are not obliged to find you the best possible deal unless they specifically agree to do so.” So unless you manage to wrangle a written agreement out of your broker that guarantees you the best deal they’re able to provide, there could be a lot of other factors influencing their recommendations. Not least of which is the fact that mortgage brokers work on commission and some home loan products offer higher commission than others.
The thing that makes mortgage brokers especially useful - their relationships with lenders, which can mean securing lower rates - can also be a drawback. It means that your mortgage broker's advice may not be totally objective and you might miss out on some great deals. Plus, a mortgage broker generally doesn’t compare the full market - so even if they’re being as objective as possible, there may be better products out there for you.
That’s why it’s always a good idea to get involved and do some of your own research, whether or not you’re dealing with a mortgage broker. By comparing home loans yourself, and reading up on all the essential home loan knowledge you can find, you can be sure that you’re being offered a competitive deal.
What makes a good mortgage broker?
Not all mortgage brokers are created equal. Before you start looking for the right home loan, you’ve got to find the right home loan broker. So what should you look for? Here are a few key things that make a great mortgage broker:
- They can offer a wide range of products from a variety of lenders. The best mortgage brokers can offer you deals from every corner of the market, from the big four banks, to small online lenders. That way, you’re more likely to find just the right fit for you.
- They can explain their process. Ask your potential broker how they go about researching and rating the home loans they offer. What criteria do they use? Is it general or personalised to you? A good broker should be able to give you a clear idea of why they’re offering each deal.
- They should have all the right qualifications. It’s actually illegal for mortgage brokers to practice in Australia without a licence, so check that your mortgage broker has the right credentials.
What do I do if I have a dispute with my mortgage broker?
If something goes wrong and you find there is a problem between you and your broker, the first thing to do is get in contact with them and see if you can straighten it out. There’s no sense in getting wound up over what could be a simple mistake.
If you’re still not satisfied, then there should be a complaints procedure that your broker outlined for you at the beginning of the process. Go through those channels to see if you can resolve the issue.
If you don’t have any luck with that, the last resort is contacting the Financial Ombudsman Service, who can mediate and resolve disputes that you aren’t able to.
Ready to start the process of finding yourself a red hot home loan deal? Why not start by getting in touch with Mozo’s resident property expert and home loan negotiator, Steve. He can help you out with all your home loan questions, concerns and queries.