What is a mortgage broker and why do you need one?

70% of Australians use the services of a mortgage broker.  The reality is banking is becoming more impersonal.  And, unfortunately, there is little loyalty from the banks to their long-standing customers with new customers get better mortgage rates than existing ones. That’s where a mortgage broker comes in.

So, what is a mortgage broker?

A good mortgage broker will find you the perfect combination of low rates, maximum borrowing power and loan features.

A mortgage broker is a financial professional who brings together borrowers and lenders. They act as intermediaries, helping you compare options by bringing you a variety of loans from different lenders at one time.

The best way to start this process is by discussing your goals, needs and financial situation with your broker.

The broker then gathers important information and documents that lenders require from you, including your payslips and financial statements, ID and bank statements. This helps them evaluate and verify how much you can afford to borrow and then apply for a loan on your behalf.

A good mortgage broker should be able to bring valuable information to the table, such as which lenders loan money in certain areas, which ones offer a specific type of mortgage, and which welcome or avoid applications on loans for certain types of homes.

In some instances, lending can be a little more complicated and a good broker can help you navigate these situations. This can include borrowers who have a hard time getting approved through direct lenders due to being self-employed, recent bankruptcy, poor credit, or unsteady employment.

Mortgage brokers provide the convenience of, not only analysing and presenting the best options out of many lenders, but also submitting all the paperwork for you.  This eliminates the time-consuming process of visiting multiple lenders to try to get the best rate and, ultimately, approval for your mortgage.

How much does a broker cost?

Nothing. Zero. Zip. Nada.

If any broker wants to charge you for their time for a residential mortgage, then find another one. Quick smart.

In most instances, a broker is paid by the lender once the mortgage is settled. There is no need to charge a client.

There are very few instances where a broker may charge a fee, such as if there is no end debt on a bridging loan. It is different for commercial and small business lending where brokers may charge a fee for service.

In my case, I am paid directly by the lender for all home loans settled.  I am paid the exact same percentage by all lenders so there is no incentive for me to recommend one lender over another.

How do I know if the broker is recommending the best product for me?

In Australia, mortgage brokers are bound by the National Consumer Credit Protection Act 2009 (NCCP) that includes the Best Interest Duty test, which requires:

“…mortgage brokers to act in the best interests of consumers when providing credit assistance. Where there is a conflict of interest, mortgage brokers must prioritise the interests of consumers.”

A good broker will always be transparent about your options, offering you a range to select from and explaining the pros and cons of each.

How do I pick a good broker?

A good broker will always have you, your goals, and your best interests at heart. 

It’s important that you choose a broker that you feel comfortable with. 

Make sure you feel confident to ask them questions and that they are willing to take the time to answer your questions.

A good broker is available to speak to you and support you through the process and genuinely cares about you and your outcomes.

Like with any service, working with someone that genuinely cares about you and helping you achieve your goals can have a profound impact on your financial success.

If you would like to chat about purchasing a property or refinancing an existing loan to a lower rate, please get in touch, I’d love to support you in achieving your financial goals.