What a mortgage broker is for, and what can they do for you
Make no mistake: the property market in Australia is surging right now. And because of this surge, more and more people are considering their options and wondering whether they can make their break into the property market before it’s too late (or just plain old more expensive). If you’ve just started to look into how you can get a foot on the property ladder, you might have been advised to talk to a mortgage broker. But what are mortgage brokers, and why might you want to see one? Don’t worry, we have some answers for you.
What is a mortgage broker?
A mortgage broker’s job is to act as a kind of assistant between you (a would-be property purchaser) and lenders. They will sit down with you and help you work out what you need from your mortgage, how much you can borrow, help you pick an appropriate loan based on your needs and help you through the application process. Mortgage brokers should be licensed — you can see whether the broker you have your eye on is appropriate licensed and registered by going to ASIC Connect’s professional registers and seeing if they’re on the following lists:
- Credit Registered Person
- Credit Representative
- Credit Licensee
What does a mortgage broker cost?
One note on brokers and how they’re being paid: some brokers will be paid a flat fee, and others may get a percentage based on the loan that they sign you up for. If your broker is getting a percentage cut, they may push you towards a loan that will make them a bigger commission (even though that’s unethical—more on this later). If you’re not sure about what your broker is telling you in terms of loans and rates, or you have some reason to doubt that they have your best interests at heart, then do some research online and see what the current loan landscape looks like. It won’t take as much time as doing the same amount of research as a broker, but it should allay your concerns, or let you know to find someone else.
What do they offer that a bank doesn’t?
If you go to a bank to ask about a mortgage, they’ll discuss what they can do for you. But what they won’t mention is that every bank out there has their own rates and packages that they could offer you. And you probably don’t have time to go to all of those banks and run through their options, right? That’s one advantage of mortgage brokers: they have access to multiple lenders and potentially multiple packages from those lenders as well. For those of you who haven’t had much luck with getting approval from a bank, you may find that a broker has access to lenders who are more open to your circumstances.
What else can they do?
You might think that it’s easy enough to compare loans and expenses, but there’s more to a loan than just interest rates and totals. There are also various other fees (including establishment fees), and other issues that can arise or flexibilities that can be afforded, such as allowing early repayment on the loan, or redrawing against the loan. If you are forthcoming about your situation with a good broker, they should be able to talk you through the process and address your concerns by matching you with a loan that suits your needs.
Aren’t mortgage brokers cowboys?
Even thirteen years after the 2008 Global Financial Crisis, there are some lingering opinions that mortgage brokers were a huge part of the problem. While the GFC and subprime mortgage crisis are topics too large to discuss in passing, it’s worth knowing that sweeping lending reforms were brought in post-2008, and as such all people involved in securing loans (banks and brokers alike) are now bound by far tighter regulations. You are safer now than you were at the peak of the GFC. Of course, no system is perfect, and if you feel like the broker you’re talking to is reckless or pushy, don’t be afraid to take your business elsewhere. You’re buying a house, not a new toaster — you don’t have to go with the first one you find!
Like many professional services, you’ll get the most out of a broker if you have a good idea of what you’re looking for in terms of a loan. If you’re not sure what kind of questions you should be asking, then do your research before your meeting, and don’t be shy or embarrassed to ask them any questions that come to mind. Remember that it’s in their interests to give you the information that you need to make a good decision that suits you. If you feel like they’re pushing you into a commitment that you don’t want to make, or that they’re not listening to your needs, then don’t be afraid to look elsewhere. Brokers are legally required to help you make a decision that is best for you and your circumstances, not their commission, so it may be worth looking to report them if you feel that you’ve been treated poorly.
Hopefully that has answered some of your questions about mortgage brokers. If you’re looking to get in to the property market but you’re not quite sure how, a broker may be the next stop in your journey. But like with any decision in investing, whether for personal use or to grow your wealth, make sure that you do your research. Make sure you know what you need from your broker, and if the person you’re talking to isn’t delivering, don’t be afraid to look for someone else.