Guide To Mortgage Brokers
If you are thinking about taking out a home loan, then you might want to consider using a mortgage broker. A mortgage broker can save you time and offer expert advice, and what’s more, their services are usually free. However, you need to remember that mortgage brokers make their money from commissions and only offer a limited number of home loan products.
This MoneyBuddy guide explains what mortgage brokers do, the benefits of using a broker, and tells you the most important considerations when dealing with a broker.
What Is A Mortgage Broker And What Do They Do?
A mortgage broker is very much like an insurance broker in that they will:
- identify your requirements;
- identify mortgage options that meet your requirements;
- act as your advocate in negotiations with lenders; and
- arrange all paperwork necessary to secure the mortgage.
Effectively, in a market where you are literally spoilt for choice, the role of a mortgage broker is to wade through the good, the bad and the ugly and ultimately arrive at a solution that best meets your current and future needs.
What Are The Benefits To Me?
There aren’t many things in life that are free, but mortgage brokering (for the most part) is one of them. Brokers earn their living via commissions on each mortgage they secure. This benefits the customer who does not have to pay a cent for expert advice and assistance.
There are literally hundreds of lenders in the market today. If you don’t have the time to wade through the fine print of each one, why not let a mortgage broker do the leg work for you? Once you have your loan confirmed, most brokers will continue to manage all your paperwork, in conjunction with your conveyancing agent, until settlement.
Mortgage brokers, like doctors and dentists, are experts in their field. As subject matter experts, they know the mortgage market inside and out and are able to provide you with expert advice regarding the options available to you.
Capitalise On The Broker / Mortgager relationship
Because of their close relationships with lenders, you may be able to get your answer faster than if you submitted the application yourself. In one case a couple had submitted a home loan application to a bank, but were rejected. As a last resort, they turned to a mortgage broker who secured them a loan within 48 hours with the same bank.
Your Rights As A Client Of A Mortgage Broker
The National Consumer Credit Protection Act (NCCP) sets out many laws relating to the mortgage broker profession. This act and the laws within apply to the whole of Australia. One main area that aims to protect the consumer when applying for a home loan with a mortgage broker is a law regarding the suitability of the loan that a mortgage broker suggests to a consumer.
Since 2009 a mortgage broker cannot give an 'unsuitable' loan to a consumer, the suitability of the loan takes into account the consumer's specific requirements and requests in regards to the loan, and also the consumers ability to repay the loan. The mortgage broker not only has to assess the consumer's financial situation, but also verify these facts, so that the consumer will be able to repay the loan without any financial hardship.
This means that when you obtain the services of a mortgage broker to find you a loan, you can be sure that the loan will match all your requirements and also not have to worry that the loan will be too hard for you to repay.
An amendment to the NCCP act made in 2011 gives out even more protection for you as a client of a mortgage broker. Under this new law a mortgage broker must provide you with a 'Key Facts Sheet' stating all the relevant information about any loan the mortgage broker suggests to you. Including any information relating to your specific requests or requirements, as well as all the information regarding payments, the loan amount, the length of the loan etc.
As you can see, using a mortgage broker to help find you a loan is a very reasonable option. These laws protecting your interests as well as all the other benefits mentioned above lead to the assumption that using a mortgage broker is one of the best possible options when trying to find and secure a loan.
Hints And Tips When Dealing With Mortgage Brokers
Before you think, ‘Wow, mortgage brokers sound great’, here are some questions you should ask before you select a broker:
- How many lenders does the broker deal with? If a broker has only two lenders that they have relationships with, you may miss out on other options that might meet your needs. A broker with a range of lenders is always a better bet.
- How does the broker get paid? Some lenders will pay greater commissions than others. Make sure you know the commission the broker is getting as this may cloud their judgment when obtaining a solution for you.
- What fees do they charge you? Make sure you know up front and in writing what fees, if any, you may incur using a broker. Don’t ever rely on a verbal agreement as you could find yourself in a ‘he said, she said’ scenario.
- How does the broker identify the best solution? A good broker will have a standard methodology for selecting mortgage solutions.
- Find out the actual cost of the loan (including the amount being borrowed and ongoing costs). That way, you can do your own comparison of the solutions being offered to you. Some loans may seem wonderful at first but their ongoing costs can be crippling. Be sceptical if the broker can’t provide this information.
- Is the broker a member of the Mortgage Industry Association of Australia (MIAA)? This body regulates and applies stringent standards to its members and has a defined complaints process. Always be sceptical of a broker who shuns away from professional bodies as this may suggest that their activities are not above board.
- Do you know anyone who has used the broker? Speak to friends, family and colleagues about their experiences with brokers. If a broker comes highly recommended, then you've got a better chance that your experience with them will be equally positive.