How a mortgage broker can help you refinance your home loan

Thinking of refinancing? You’re certainly not alone. The era of RBA rate rises has got many borrowers rethinking their home loan rates, features, and commitments, and seeking better options. 

But while refinancing can be a daunting task, you could have an unexpected ally: a mortgage broker. Acting as a go-between for lenders and borrowers, a mortgage broker can help you sort through choices tailored to your situation, advise you, and even apply for loans on your behalf.

There are many good reasons why you might use a mortgage broker’s service to help you, but there’s a lot to consider. So let’s dig into what you need to know about using a mortgage broker, the pros and cons, and how they could help you compare home loans.

A mortgage broker is a go-between who can help borrowers arrange home loans through banks and lending institutions. They often work as part of a larger mortgage brokerage firm. 

Mortgage brokers are supposed to act in your best interest, providing you with tailored home loan options, advice, and assistance that suits your wants and needs. 

Some things a mortgage broker can help you with include:

• Clarifying your needs and goals with a home loan and property.
  
• Calculating how much you can afford to borrow. 
  
• Comparing home loan options best suited for you.
  
• Walking you through how each home loan works, plus associated costs like interest, fees, and features. 
  
• Applying for a home loan on your behalf and overseeing the settlement process. 
  

Mortgage brokers can be useful no matter if you’re a first home buyer, investor, or refinancer. They also tend to receive commission payments from lending institutions, so you usually won’t have to worry about paying them (though some mortgage brokers may charge service fees).

Like all financial decisions, enlisting the help of a mortgage broker comes with pros and cons to consider. Let’s go through the main ones. 

Pros of getting a mortgage broker

• They receive commissions from lenders, which can make them low or no-cost. Because lenders often pay mortgage brokers for their business, most may not charge you for their services (though some fees may apply, or they may charge you if they don’t receive commissions at all). 
  
• They get to know you and your needs. A good mortgage broker will work closely with you to understand your goals, borrowing eligibility, and requirements for a home loan. They will advocate for you and match you with offers that could be right for you.
  
• They know the mortgage market, inside and out. Home loans can come with a lot of jargon and industry know-how, so it’s fantastic to have an expert on your side to break it all down into plain English. Plus, a mortgage broker’s experience can help them spot red flags and good deals that you might overlook. They might also be aware of home loan offers and lenders that aren’t as well-known, giving you a broad range of choices. 
  
• They can do the comparison for you. A large part of taking out a home loan is comparing offers, whether it’s the interest rate, features, terms, or the lender itself, which can be time-consuming. A mortgage broker can do all this for you and lay out your best options, depending on your situation. 
  
• They can apply on your behalf. Time is money, and sometimes the sheer convenience of a mortgage broker can be worthwhile. A good mortgage broker has a vested interest in getting you the best possible outcome with your mortgage application, too, which can alleviate much of the stress when it comes to dotting i’s and crossing t’s. 
  
• They can be a one-stop shop for all your home financing needs. Mortgage brokers often have additional in-house mortgage services available, like property valuations, which can enormously streamline the process. 
  

Cons of getting a mortgage broker

• They receive commissions from lenders, which can create a conflict of interest. Because the lender is paying the mortgage broker for their business, a bad mortgage broker might steer you towards loans based purely on who has given them the most money. A good mortgage broker will be upfront about any commission they’ve received and why they recommend a specific loan product to you, giving a balanced assessment of all its benefits and drawbacks. Nothing is perfect, after all!
  
• They may have limited access to loans. Some mortgage brokers may not have a diverse range of lenders they work with, which can restrict your choices. 
  
• They can take control out of your hands. Mortgage brokers are middlemen, which means you won’t be as hands-on during the home loan process as you might be otherwise. For example, you might not be in touch with your lender directly, or the broker may fill out all paperwork for you. Make sure your broker walks you through everything they want to do on your behalf and why.
  
• Their mistakes might still be yours. Mortgage brokers can sometimes make mistakes, whether it’s misrepresenting a particular home loan or incorrectly filling out a mortgage application, which can reflect badly on you or hurt your home loan application process. It is ultimately still your responsibility to provide accurate information whenever lodging a mortgage application, even through a broker. 
  
• They’re not obligated to give you the best deal – unless they say so. ASIC warns that mortgage brokers don’t have to find you the best deal for your situation unless they specifically advertise this as part of their services. This means going through a mortgage broker doesn’t guarantee you get the best deal possible.
  
• They can’t fix everything. Not everyone is eligible to take out a loan or refinance (the latter situation is called mortgage prison). While a good mortgage broker may be able to advise you on how to improve your chances of approval, they can’t fix serviceability requirements, negative equity, or property prices. It’s still up to you to make sure you genuinely meet any eligibility criteria a lender has.

If you’ve decided a mortgage broker could be the right option for you, it’s still a good idea to compare brokers. A good mortgage broker will:

• Work with a diverse variety of lenders. This gives you the broadest selection of loans to choose from.
  
• Be transparent about why they recommend loans to you. They’ll lay it all out on the table – the good and the bad – so you can make an informed decision.
  
• Have all the necessary qualifications. It’s illegal to practice mortgage brokerage in Australia without a valid license. You can verify the credentials of the firm a mortgage broker works for through ASIC Connect’s professional services register by typing the company name and searching under ‘Credit Representative’ or ‘Credit Licensee’. You can also ask for the broker’s Certificate IV in Financial Services.

Before meeting with a mortgage broker, it’s important to first research the broker properly by checking their credentials and consumer reviews. It can also help to brush up on home loan terms and do a little comparison of the market yourself, so you know the state of play.

Once you’re happy to meet with the broker, prepare a wish list of features or interest rates you’d like a home loan to have (including essentials or ‘would be nice’ items) as well as any relevant details on the property you’ve already bought or are planning to buy. 

Your broker may also ask for information to assist in the comparison process, like your income, debts, and lifestyle, so they can match you with mortgage features and borrowing limits that work for your situation.

When meeting with a mortgage broker, it’s vital to prepare questions to ask so you can get the most out of the experience. 

Important questions to ask your mortgage broker can include:

• Which types of home loans do you offer? If you’re looking for a certain type of loan, such as a fixed rate, variable, interest-only, investment, green, etc., it’s important to work with a broker who can match you with these options.
  
• Which lenders do you work with? This can give you an idea of the variety of home loan offers you can compare. 
  
• How do you determine which home loan is best for me? A good mortgage broker will walk you through their comparison process and explain why they will recommend certain loans.
  
• What fees will I have to pay during the home loan process? If your broker or the lender they apply to charges a fee, you need to know upfront. 
  

You can also ask them questions about how they deal with clients, including their level of industry experience, the success rate for mortgage applications, and how long the process usually takes. If you want, ask for references from previous clients. 

You should also check in with how they plan to keep you in the loop throughout the process, step-by-step – be wary of a broker who tells you the process is completely hands-free. 

Mortgage brokers may also have special programs or services for first-time home buyers or low-income families who may need extra guidance. Ask if they can help get you pre-approved for a home loan, too, if you’re planning on making offers or bidding at an auction. 

You can also check in with questions about your borrowing limits, such as the threshold for lender’s mortgage insurance and how you can avoid needing to pay it. 

If you’re refinancing in particular, find a mortgage broker who will check your eligibility and pair you with options that maximise the benefit to you, like cashback, lower rates, and better features. 

You don’t have to go for the first option the mortgage broker shows you; you can always ask for more options if your first meeting isn’t inspiring, or swap to a different broker. A mortgage broker should never pressure you into signing anything, let alone blank or incomplete paperwork.

At the end of the meeting, ask for a written quote of all the loans they’ve suggested for your own records. This quote should include the:

• Loan type.
  
• Loan amount.
  
• Loan term.
  
• Current interest rate with a comparison rate.
  
• Fees, such as application, appraisal, or ongoing fees.
  
• Features, like offset accounts, free extra repayments, or a redraw facility.

If something goes wrong and a problem arises between you and your mortgage broker, the first step is to get in touch, explain the issue, and see how they can straighten it out. A good mortgage broker will work with you to resolve mistakes and disputes. Otherwise, you can go through their official complaints process.

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