Despite the threat posed by the Royal Commission into banking several years ago, the mortgage broking industry in Australia has emerged stronger than ever. In the June quarter of 2022, mortgage brokers facilitated 68 per cent of all new residential home loans - smashing the previous record in Australia.
With more borrowers opting to use a mortgage broker, you might be asking yourself; what’s the big deal?
Well, there are a few important reasons for this. In this article, we’ll break down the role of a mortgage broker, why you should use one and what you need to look out for.
Who is a mortgage broker?
A mortgage broker acts as a vital link between lenders and prospective loan applicants. The mortgage broker (should) act in the applicant's best interests and use their expertise to broker the best possible loan for their client.
Applying for a loan is no simple task, as lenders require detailed information to determine a potential borrower's ability to repay their mortgage. A mortgage broker will be able to simplify this process and put forward an application that gives the borrower the best chance of getting home loan approval.
Equally important, good mortgage brokers will present a client with the best home loan options available based on their individual needs and goals. A good mortgage broker will have access to many different lenders and will sift through all the rates and deals on the market to find you the best option available.
What are the roles and responsibilities of a mortgage broker?
Ultimately, it's a mortgage broker’s responsibility to communicate with banks and other lenders to arrange the best home loan for their clients. As part of this, there are several other roles that your mortgage broker should also perform:
- They should work closely with you to understand your financial needs and goals.
- They should use your financial information to help you accurately understand your borrowing capacity.
- They should communicate with many different lenders to find the best rates and deals on the market.
- They should select the home loan options that best meet your needs and goals and present these to you.
- They should help you understand the financial jargon and loan information, such as your deposit requirements, the application process and all costs and fees involved.
- They should arrange and put forward the application to your chosen lender, managing the process until settlement.
- They can also help you find better alternatives to your current mortgage agreement to ensure you’re getting the best home loan rate available. This is called refinancing.
What are the pros of using a mortgage broker?
Provide you with the best loan options: Mortgage brokers (should) be looking at all of the home loan offers on the market and present you with the best options available. This can save you substantial mortgage costs in the long run, plus provide assurance that you’re getting the best possible home loan for your current circumstances.
Negotiation power: A broker’s job is to negotiate the best deal for their client. Due to their extensive understanding of home loans and access to many different rates and packages, brokers have strong negotiating power when dealing with a lender. Without a mortgage broker, borrowers will need to communicate with lenders themselves, making it harder to achieve the best rate and terms for your mortgage.
They’re independent: Most brokers are independent, meaning they will be open-minded and unbiased when finding a lender which offers a home loan best suited for your situation. (It’s important to make sure a broker is entirely independent before working with them.)
Saves time and effort: Home loan applications can be a tedious and time-consuming experience, involving plenty of paperwork and communication with lenders. Mortgage brokers do much of this on your behalf, ensuring that your application has all the necessary information and details required to get your mortgage approved.
It doesn’t cost you anything: Most home loans facilitated by a mortgage broker don’t actually cost the client a thing. Considering a broker can save you significant time and money, using one should be a no-brainer!
What are the cons of using a mortgage broker?
Some brokers may be biased or untrustworthy: One of the biggest dangers of hiring a mortgage broker is choosing one that doesn’t act in your best interests. Sadly, some mortgage brokers have agreements with certain lenders or will pick the lender who pays them the best. This is why it is essential to research your mortgage broker first to ensure you get one that will do what is best for you.
The loan process may take time: Brokers may have a long list of clients and are searching for many home loans simultaneously. Choosing a broker that doesn’t prioritise time for you and your interests can be incredibly frustrating and a waste of your time.
How does a mortgage broker get paid?
Most brokers are paid a fee or commission from the lender for selling their product to the client. This means you may not have to pay your mortgage broker a thing!
In cases where you require an incredibly complex home loan solution, an additional fee may be attached.
Some brokers, however, will charge you a fee regardless, so it’s important to check with them first.
What should I consider when choosing a mortgage broker?
- Make sure that your broker is fully licensed and accredited. As a bare minimum, they should hold an Australian Credit Licence and be registered with the Australian Securities and Investments Commissions (ASIC).
- Make sure your broker is fully independent, and ask how many lenders they work with. Brokers with access to a high number of lenders will be in a much better position to compare all of the best rates and deals on the market.
- Ask how your broker charges for their services. If they charge a fee for facilitating a standard home loan, you should be able to find another experienced broker who doesn’t.
- Reach out to friends and family for recommendations. It can be hard to determine a broker’s credibility solely through online testimonials. The best way to ensure you’re getting a broker you can trust is to learn about positive experiences from people you know.
If you are looking for a mortgage broker to help you find the best rate for your next home loan, reach out to Elephant Advisory’s finance team.
With a stellar record for customer service and quality of work, we’ll work closely with you through the entire loan application process. To book a free consultation with one of our professionals, visit our website or give us a call today.