How to Choose a Mortgage Broker in Your Area
If you are venturing into a field you know little about, it is usual to take people with you who have been there before. Choosing a home loan is no different because whether you are a first home buyer and have literally never been in the home loan market before, or if you are a next home buyer or looking to refinance, these are all new experiences as well and things can change so rapidly in the home loan market, you need the help of someone whose job it is to keep up with those changes.
Therefore, before you get too stressed about choosing the right home loan, take a step back and follow these five steps on how to choose the right mortgage broker in your neighbourhood, because with the right broker the rest of the home loan processing will be easy.
1 – Understand mortgage broking
A mortgage broker has access to a range of loans from a panel of lenders with whom they are accredited. However, a broker does not work for the lender, they work for you and their primary aim should be to find a loan which perfectly matches your needs.
Your broker will do this by asking you questions about your home loan needs and your future goals, to make sure your loan suits those needs now and into the future to save you costly refinance fees. A broker should also receive the same commission no matter which lender they recommend as this ensures you have a truly unbiased comparison.
A finance broking agreement will be presented to you before you begin the home loan application and this will outline the expectations of the broker and the client regarding the home loan. This does not guarantee the loan will be approved, but covers clauses such as the Privacy Act.
2 – Compare brokers
There is a lot of competition in the mortgage broker market, which means as the customer you have the power and can take the time to shop around to find a broker you are happy with and comfortable to work with. Start by asking friends and family about their experiences with mortgage brokers to narrow down your choices. Then make appointments with your short list because meeting your broker face to face will give you a good indication of whether you want to work with them.
As you compare brokers, ask them how long they have worked as a broker, and ask them which lenders are on their lending panel for you to choose from. Ideally, in order to match you to the right product for your needs your mortgage broker should have:
- Several years of experience as a mortgage broker.
- An Accredited Mortgage Consultant or a Certified Mortgage Consultant.
- A Certificate IV in Financial Services Mortgage Broking.
- Preferably a Diploma in Financial Services Mortgage Broking.
- Membership to the Mortgage and Finance Association of Australia.
- Membership to the Credit Ombudsman Service which allows borrowers to seek independent dispute resolution services.
Make sure your broker is focussed on finding the best loan for your needs, and has up to date industry knowledge to work from. During your meetings also take note of whether the broker is punctual and organised and whether you go away feeling confident in their knowledge and advice.
When comparing mortgage brokers look for a good product knowledge, good people skills, patience and the ability to discuss lenders and loan products without relying solely on their computer programs. If your broker is unsure of the information they are providing, they are probably inexperienced in the business.
You can also ask to see testimonials from other clients, to see whether they are happy with the same services and features of a mortgage broker you are looking for. Other questions to ask your mortgage broker include:
- Do you have a strategy for the current interest rate outlook?
- What are the establishment fees, legal fees, valuation fees on the chosen loan and are there any other fees charged?
- Do you have a mortgage? If so which lender are you with and why? Is your loan fixed or variable?
- How is your business going?
- Have you ever lost any clients and why?
- What is your customer service promise?
- What can you provide that other brokers can’t and I wouldn’t get from going straight to a lender?
- How does your mortgage broking service work?
- Do you specialise in a certain type of client?
- What services will you provide through the loan application process?
- What do I do once the loan is settled?
- What happens if the lender makes a mistake with my loan.
3 – Which lenders can you choose from
This information should be readily available from your lender, and at the same time your broker should be able to explain how many lenders are on their panel, how many they regularly use and why.
The lenders on the panel should be reputable, and the mortgage brokers should choose lenders from that panel for the right reasons. For example, if a broker only uses a few lenders for most of their clients ask why, because they may not be exploring the breadth of home loan options for their customers. This also means that a bigger lending panel isn’t always better, but the broker with access to the right loan for you is what you want.
Your broker should have access to a wide range of both traditional lenders including banks, building societies and credit unions, as well as non-traditional lenders such as wholesale or non-conforming lenders. Also make sure to ask whether your broker will be comparing loans from their entire panel of lenders.
You will also want to ask for a hard copy of the comparison rate table for the loans you are considering as a comparison rate takes into account the cost of the interest rate, plus any fees, not including exit fees, to give you a true cost of each loan product.
When your broker has matched you to a lender, make sure you know exactly who your loan will be with as many borrowers aren’t fully informed about their loan product and some aren’t even told who their lender is. Therefore, make sure you ask for a loan product factsheet which will have in writing all of the features your broker has discussed. This helps you understand the loan you have signed up for, and means you can avoid any surprises down the track.
4 – Be assertive
Don’t sit back and let your broker do all the talking in your meetings as this is not how they will get to know you and your needs. Instead, ask a lot of questions and ask the broker to come up with the best product for the type of loan you need.
Also don’t be afraid to ask your broker to explain any terms and conditions you don’t understand because there are a lot of new concepts to get your head around when buying a home. A good broker will be able to explain everything as many times as you need.
5 – Know the fees and costs
Most mortgage broker services will be free to you because your broker is paid a commission by the lender they sign you with. If there are fees payable, these are often charged up front but can be paid at the completion of the broking process, and it is also worth noting that upfront fees are not allowed to be charged by brokers in the ACT, New South Wales, Victoria or Western Australia.
All MFFA accredited brokers must disclose the commissions they are paid as part of the finance broking contract but you should always be able to ask your broker what commissions they are paid and what benefits they receive from the lenders. Consider whether the fees and payments are reasonable compared to the services provided because you can also shop around for a more affordable broker.
Also keep in mind that if your broker sources a loan product for you according to your needs, and you decide not to go ahead with the loan, you may still have to pay any fees to your broker.
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- Homeside Mortgage Broker
- Mortgage Brokers Disadvantages
- How to Avoid the Tricks & Games Played by Certain Lenders/Brokers
- How to Avoid Lurking Lenders
- Far North Mortgage Brokers – South Australia
- Switch Your Home Loan And Save
- Best Home Loan Deals
- Aussie Mortgage Brokers
- Concern Over Motivations For Home Loan Lender Choice
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