When you’re buying or refinancing your home, there are a lot of different lenders to choose from. Picking the right lender can have a significant impact on the terms of your home loan, including the amount of interest you’ll pay over the years.
This is particularly important in the wake of COVID-19, when misinformation is rife, and lenders and banks are constantly changing their policies.
A mortgage broker can help you navigate the complexities of the market to find the right home loan — one that meets your needs and offers you the best value for money. Rateseeker recently sat down with Phillip Donaldson, one of the top-performing Business Development Managers at Finsure, to shed some light on the value of having a broker in your corner.
Read on to find out what a mortgage broker is, what they do and why it’s more important than ever to work with a broker in light of the pandemic.
For more on lender policies right now, check out our post on how banks are helping clients impacted by COVID-19.
What is a mortgage broker?
A mortgage broker is a middleman between lenders and borrowers. A broker will work on your behalf to deal with banks and other lenders, to secure the sharpest home loan interest rate for you. They also assist with the home loan process to ensure everything goes smoothly, from application to settlement.
What does a broker do?
Mortgage brokers guide you through the home loan process from start to finish. They understand the complexities of home loans in Australia and can provide you with advice and guidance.
Brokers are also in constant contact with lenders and banks, so they’re across the latest lender policies, interest rates, and campaigns such as cash rebates.
A good broker will:
- Work with you to understand your needs and your property goals
- Work out how much you can afford to borrow
- Explain how home loans work, the different options out there, and the fees involved with each
- Help you find the best options to suit your goals and your situation
- Manage the home loan application process for you once you find a property, from applying for the loan to final settlement
- Conduct an essential home loan health check, where they compare your existing mortgage with other lenders and check if it’s still the best option for you.
How much does a mortgage broker cost?
Mortgage brokers are paid by the lenders or banks, not the borrower. A broker typically earns a fee or commission for recommending home loan products, which means in most cases, you don’t need to pay anything as a borrower.
However, there are some instances where brokers will charge a fee to the buyer. This could be instead of, or as well as, the commission they earn from the lender.
5 reasons to use a mortgage broker
1. They’re across the different changing lender policies
COVID-19 has meant that many lenders are adjusting their policies on a far more frequent basis than before. Many banks and lenders are tightening up in terms of who they are lending to, adjusting their lending criteria, and asking for additional supporting documentation for applications.
If you apply directly with a lender without understanding these changes, it could result in a delay with your home loan application. Worse yet, you may risk not getting approved altogether.
From Phillip: Brokers are in constant contact with lenders, so they’re the first to know about any changes to lender policies.
Working with a broker removes the guesswork and anxiety of dealing with lenders directly — ensuring the application process goes as smoothly as possible and you get approved for your home loan.
2. They can help you find the sharpest home loan rate
The RBA cash rate is at a historic low, which means banks and lenders are currently offering highly competitive rates on home loans. With the economy set to slow in the coming years, it’s important to ensure you’re getting the most bang for your buck.
From Phillip: A broker has access to over 30 different lenders in their lending panel. They’re across all the different rates and offers out there and can offer impartial home loan advice to help you find the best home loan solution and a competitive interest rate. This can save you thousands, or even tens of thousands in the long run.
Brokers also have access to exclusive home loan products for clients.
3. A broker can cut through the noise
COVID-19 has caused a lot of confusion in every industry, and the home loan market is no different. There’s plenty of misinformation floating out there online, which can make the entire application process extremely confusing.
From Phillip: A mortgage broker can help you sift fact from fiction, and provide you with accurate information regarding home loan products, fees, and interest rates. This will save a lot of headaches and bank-xiety for you as a borrower.
4. Expert advice and recommendations, tailored to you
Mortgage brokers are legally required to work in your best interest — not in the interest of the bank or lender. Good brokers will work with you to understand your goals and your financial situation, in order to provide the best product to meet your needs.
Many borrowers end up going with the lender that’s easiest or most convenient. However, it may not be the best product for their needs.
From Phillip: A mortgage broker will support you with the guidance and options you need — helping you to make an informed decision about the best home loan product for your future. They can also help you apply for home loan repayment holiday or refinancing if you need it.
5. It simplifies the home loan application
Buying a home is exciting, but it’s incredibly stressful. There are a lot of moving parts to manage, from going to open home inspections to sorting your finances, finding the best home loan deal, managing the paperwork and contracts, packing up your home, buying new furniture, disconnecting utilities, setting up the internet…and the list goes on.
From Phillip: Mortgage brokers take a huge part of that weight off your shoulders.
They do the research for you to help you work out how much you can borrow, find the best option for you, then handle the application process all the way until settlement. This means you have more time to focus on preparing and getting everything in order for the move.
Checklist: what to look out for when choosing a broker
There are plenty of mortgage brokers out there, but as with anything, not all brokers are created equal. Working with the right mortgage broker can make a huge difference.
If you’re looking out for a broker, here’s a list of things to keep in mind:
- Pick a broker that’s licensed with ASIC Connect’s Professional Register, like Rateseeker. Type in the name of the broker to confirm they have a license and is legally qualified to give you credit loan advice.
- Do your research. Look into their credentials, ask for references, and check their reviews online to make sure you’re working with a trusted and reputable broker.
- Ask for multiple options. A broker should present you with a number of options that might suit your needs. If a broker is recommending you one option and refusing to help you find alternatives, it’s time to consider going elsewhere.
- Don’t be afraid to ask questions. If you’re not sure about the difference between fixed-rate or variable loans, or if you’re wondering if you’re eligible for any concessions, ask! A good broker will take the time to answer your questions and make sure you have the right information on hand to make an informed decision.
- Work with an actual broker (not a website). There are plenty of home loan aggregator websites out there. But when you’re trusting someone to help you with the biggest purchase of your life, it’s important to be working with an expert — not just a site that makes commissions from your clicks.
At Rateseeker, we have a team of experienced home loan experts who provide you with personalised help. Get in touch with us today to find out more, and get the sharpest home loan rate available.