If you’re in the market for a home loan or to refinance an existing loan and don’t know where to start, a mortgage broker can help.
Here, we take a look at what a mortgage broker does as well as four reasons why you should consider using one.
A mortgage broker acts on your behalf to help secure you a home loan. In a nutshell, they work with you to calculate the amount you can afford to borrow, then negotiate with banks and other lenders to find suitable home loan options for your situation. Mortgage brokers also take care of the home loan application itself and manage the overall process through to settlement.
Whether you’re a first-time home buyer or looking to refinance, a mortgage broker can help you find the right product based on your needs, financial circumstances and long-term goals . Here are four reasons why using one is a good option.
Applying for a home loan can be complicated and time consuming – especially for first-time home buyers. When you’re already flat-out inspecting properties and planning your move, researching interest rates, and filling out paperwork can add to an already stressful situation.
This is where mortgage brokers come in. Mortgage brokers make applying for a home loan easier by managing each aspect of the process for you. They’ll help you calculate your finances, make comparisons to find your most suitable options, and help to project-manage and complete all the necessary paperwork.
A mortgage broker can also make the home loan application process move quicker than dealing directly with a bank. Banks often have slow and long-winded internal processes for handling loan applications that can be very challenging for a potential borrower. As industry professionals, mortgage brokers may have access to potential shortcuts in a bank’s internal lending processes.
Submitting through a good mortgage broker can accelerate your application than if you’d applied directly through a bank. They also have the expertise to recommend and match you with an appropriate lender and product. Working for you and not the lender, brokers are on hand to answer your questions and update you on your application’s progress – something busy banks aren’t always able to do in a timely manner.
Brokers also work hard to build a good reputation and strong relationships with a range of lenders which works to the benefit of your application.
If you feel put off applying for a home loan because of your financial situation, it’s still worth finding a mortgage broker you trust and having a chat. In circumstances where you have less than a 20 per cent deposit, a low credit score, or an irregular income, a mortgage broker may be able to recommend other lending options. And if applying for a home loan isn’t currently viable, a mortgage broker can advise you as to what lenders are looking for, so you can start working towards your goal.
Importantly, mortgage brokers are legally bound to act in your interests and are required to recommend home loans based on what you can afford, not what benefits the bank.
Shopping around to find the most competitive home loan options on your own often means hours of research. Banks only provide information on their own home loan products so it’s then up to you to compare them with what other lenders have to offer. For many borrowers, these comparisons can become unwieldy, even before they attempt to weigh-up the nitty-gritty fees and charges involved in taking out any loan.
To make comparing home loans quicker and simpler for you, mortgage brokers have direct access to what is known as a lending panel. This panel can comprise multiple lenders, ranging from banks to other financial organisations or entities. It’s a broker’s job to keep up to date with the different home loan products from each of these lenders so you don’t have to go from bank to bank. A broker will do the research to pinpoint the most suitable products to present to you across all the available loan options, not just those from one lender. They may also be able to negotiate interest rates and the terms of the loan directly with the lender to get you a better deal.
In some cases, brokers may also have access to exclusive home loan deals that aren’t available to the public. Using a mortgage broker ensures you don’t miss out on any of these deals and helps you understand a large range of home loan options to choose from.
Finding the most suitable home loan for you isn’t just about locking in the lowest interest rate. In addition to basic repayments, mortgages often have upfront and ongoing costs that vary significantly from lender to lender as well as from loan to loan.
This is when it pays to have a mortgage broker on your side. Brokers are professionals at understanding all the fine print. By assessing your requirements and objectives, a broker can find options to suit your situation. They’ll also be able to explain how each loan works and what it costs (including key features such as whether there is a redraw facility, an offset account, or the provision to make additional repayments). The cost of these features can add up over the life of the loan, so a broker’s knowledge and recommendations can help save you money in the long run.
In terms of lending advice, mortgage brokers aren’t just for first time home buyers. Some brokers specialise in specific types of loans, such as loans for property investing, commercial properties, non-traditional properties, and construction. A mortgage broker can also help you refinance your existing home or apply for a home loan repayment holiday.
In Australia, mortgage brokers generally don’t charge fees for their services and are instead paid by commission from the bank or lender. What this means in practice can vary from broker to broker, but typically a mortgage broker is paid by the bank or lender of a credit product.
It’s important to keep in mind when looking for a mortgage broker that while some are paid a standard fee regardless of what home loans they recommend, others may receive higher commissions for offering certain products over others.
While most mortgage brokers work on some sort of commission system, they can opt to structure their business by charging a fee to their customers. Even when they’re primarily paid by commission, a mortgage broker may still charge a fee if your home loan application is especially complicated or you’re borrowing an amount less than $200,000. These fees may be in addition to any commission received from the lender and will be disclosed to you prior to incurring any cost.
Some mortgage brokers also charge administration, commitment, or complex loans fees. It’s best to ask upfront if a mortgage broker charges fees so you can factor these costs into your decision making.
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Disclaimer: Doorsteps Finance Pty Ltd ACN 648 541 879 (credit representative no.531036) is authorised under Doorsteps Solutions Pty Ltd ACN 654 334 246, Australian Credit Licence 537369. Any credit application made through Doorsteps Finance Pty Ltd is subject to approval, terms and conditions, fees and charges.