5 things to consider when choosing a mortgage broker
When selecting a mortgage broker for your home loan, it’s critical to protect your interests by choosing the right one for your needs. If this is your first home purchase, this may be foreign territory. A mortgage broker should be able to guide you through the process, help you choose the right loan to finance your home, and facilitate the whole process. However, it’s essential you do your due diligence before choosing a mortgage broker.
Below we outline five key things you should take into consideration.
1. What are your available options?
Taking out a home loan is a big commitment, no question. You aren’t just going to go with the first result on a google search. Taking into account your financial situation, you need to carefully consider your available options to determine the type of loan you will need.
- How big is your deposit? The size of your initial deposit determines the type of home loan and interest rates you can qualify for. If your deposit is less than 20% of the purchase price of your prospective home, you will also have to pay Lender’s Mortgage Insurance.
- What loan features do you need? Do you require an offset account, extra repayments, or a redraw facility? Features such as these may save you money and provide flexibility.
- Fixed or variable interest rate? A fixed-rate home loan means your repayments will be the same for a set period; usually up to 5 years. This may help you with budgeting or save you from potential interest rises. Alternatively, a variable rate home loan is subject to the current interest rates in the market.
- Can you afford the monthly repayments? Take stock of your monthly finances. Go over all of your incomings and outgoings and be realistic about what you can afford.
2. Have you researched your broker?
Ask your mortgage broker about their qualifications and experience. Ideally, they will have many years of experience and a portfolio of satisfied customers. Make sure they are licensed to provide you with a loan. They should have their own Australian Credit Licence or be qualified to act as an authorised Credit Representative, as required by the Australian Securities and Investments Commission (ASIC). Some other accreditations to look out for include:
- Have a Certificate IV in Finance and Mortgage Broking
- Accredited under the National Consumer Protection Act
- A member of the Mortgage & Finance Association of Australia (MFAA) and/or the Finance Brokers Association of Australia (FBAA)
If any of your family or friends have recently gone through this process with a broker, you should ask them about their experience. Were they happy with their broker? What they would do differently next time? What are some things they would look for in their next broker?
3. Who is on your broker’s lending panel?
Brokers are restricted by a list of banks they can access loans from, this is known as their “lender panel”. A good broker will have a range of lenders on their panel and regularly engage the services of the full range, depending on the borrower’s circumstances.
Check if the broker has a range of reputable institutions. If not, you may miss out on better deals. Make sure your broker can explain how many lenders they have on their panel, how many they use, and why.
4. What are the fees, charges & commissions?
A broker is required by law to clearly explain and demonstrate how they are remunerated. Most brokers receive a percentage-based commission for their work, paid by the bank that is providing the loan. There is no cost to you.
5. Do you have a list of questions ready to go?
It’s always a good idea to have a list of questions for your broker handy to help you make your decision. Here’s a list to help you get started:
- What is your ownership structure? Ask your broker who owns them. Some are owned or part-owned by banks. Research shows that broker companies owned by big banks send more loans back to their parent company. A good broker won’t be influenced by their ownership structure and will recommend a wide range of loans from across the market.
- Can you provide a credit assessment? A broker is legally obliged to follow responsible lending laws and should never sell you an inappropriate loan. They must assess your income and expenses along with your financial objectives and expectations. This is all contained in a document called a credit assessment.
- Can you supply me with a credit guide? A broker is legally required to provide you with a credit guide. It encompasses the broker’s contact details and a record of the commission the broker will receive if you go ahead with the loan.
- How many lenders are on your panel? This will let you know how many loans a broker can look at for you – some have lots of options but others offer a surprisingly limited selection.
If a broker can’t answer basic questions about charges, commissions, and ownership structures, this could be a warning sign. A good broker should always be transparent about their business and services.
When it comes to obtaining a home loan the Geelong-based brokerage team at the Hrkac Group is there to help you with practical, effective financial advice.
We will help you find the best home loan solution for your particular needs. Our honest, knowledgeable mortgage brokers will give you the confidence to negotiate for your future so together, we can develop and maintain your wealth.
Make an appointment today via contact us, or phone 03 5224 2366.