As a home buyer, you might not know everything about mortgages but if you have an experienced mortgage broker working your case, you are in safe hands. But the question is how do you find the right broker?
In a recent interview, Kathryn Sands of the Property Entrepreneurs Network opined that choosing the right mortgage broker can mean that half your work is done.
So how do you find your fairy mortgage broker who can help you get approved for your home loan?
Why do you need a mortgage broker?
First of all, there is no harm in talking to your bank by yourself, however they might not always offer you a loan product suitable for your financial situation.
One might not accept your BAS income, another might not work with mixed use properties and a third may not want to lend you $700,000 because you missed a repayment four years ago.
Mortgage brokers deal with many different lenders, and know their lending policies and hidden catches. They will work fast and effectively to chalk out different financing routes for you. They are well-tuned with the mortgage industry and are up to date with the latest trends amongst banks and lenders.
If you are an overseas investor they will find the lender who has 24/7 communication and have staff that can speak your native language. If you are working on a 457 visa they will find the lender who can accept a gifted deposit AND help you purchase a unit that you can leave to your son or daughter who is studying in university.
In the end, you are offered a number of solutions for your property purchase, be it an owner occupied house / unit or a investment for rental income.
As Sands explains, “I would definitely recommend a mortgage broker over a bank because a bank only uses their products; their products may be great but at the same time you’re limited to their services. You should go to a mortgage broker, somebody that is up-to-date with the trends, services and packages that are available.”
Should you choose a broker who works in a bank
Before we start looking for the “perfect” mortgage broker, you should know that employees who work in the mortgage department of a bank are NOT mortgage brokers. Becoming a professional mortgage broker requires going through a particular education qualification and lots of real life experience.
When speaking to a mortgage broker, if they mention that they work for a particular bank, you will notice that they will only try to advertise the loan products offered by their employer.
Professional mortgage brokers will have a list of lenders that they work with – they will match the lender to you, and not the other way around. If they don’t have a large pool of lenders to choose from, then you will also have a lesser chance of getting a deal that will really work for you.
Make your mortgage broker your friend
The first thing you should do when trying to find the right broker is see if you feel comfortable with them. You will be dealing with this person during all phases of the home loan application process, from pre-approval to settlement and post-settlement.
Pick someone who is likeable and understands your financial situation completely. Interact with them and try to see if they are trustworthy or not, after all you will be disclosing all your financial details to them soon enough.
Referrals from trusted sources like relatives and friends can be helpful here, so ask around.
Is your broker qualified?
It is obvious that a mortgage broker needs to be educated, trained and have their license in order to practice. Do not hesitate to ask them about their background because they will be handling the process that will get your dream fulfilled or delayed.
Make sure that your broker is a member of the MFAA (Mortgage and Finance Association of Australia) or Finance Brokers Association of Australia (FBAA) and has a credit license.
How experienced is your broker?
When finding service provider, you always want an experienced person handling your situation, and it is the same with your mortgage broker. Real world experience is important because all the book-knowledge in the world will not help you get approved, especially if your finances are a bit unusual.
A well connected broker with many years of mortgage broking under their belt will not only have more useful knowledge, but will also work faster since they have already done this a million times or so.
How well-connected is your broker?
Good mortgage brokers usually have a vast network consisting of banks, non-bank lenders, private lenders and mortgage insurers. They will have a deep knowledge of each lender’s lending policies.
The more lender sources a mortgage broker has, the easier it will be for your broker to offer you the best mortgage plan that you can afford.
Speak to past clients
Ask for some recent clients who have used their services. A competent mortgage broker will have no problem giving out at least three references of clients who have used the services.
Request for a quote for your home loan
After you are finished talking to the mortgage broker about your situation, ask for a comparison of loan quotes. This is a document which compares the different interest rates, monthly repayments, Loan to Value Ratio (LVR), loan fees, loan amount and other financial costs.
A side by side comparison of loan quotes will help you make an informed decision and also gives you a certain degree of flexibility in choosing a lender / loan product.
How should I deal with my mortgage broker?
- Do not use more than one mortgage broker. If two brokers find out that you are using both of their services then they might discontinue their association with you. If that is not bad enough, lenders that get too many loan requests for the same property will start to think that it is not worth their time and might even decline the mortgage application.
- Once you have found a good mortgage broker, be a loyal client because trust is very important in this business. If a person uses the same mortgage broker exclusively, they can get access to better interest rates and loan terms.
- Your mortgage broker is your guide to the mortgage industry, however be wary of any decision until they have shown to be trustworthy. Ask for reasons and alternatives for any recommendation. Discuss your exit strategy and how you can decrease your monthly repayments. Can you refinance or consolidate your debts? He should be able to explain everything to you without hesitation!
Find the right broker today
Communicate with your broker before you settle for one. Choosing a mortgage broker is a long term association and a wrong choice can result in a loss for you, be it money, time or both.
If you are having trouble finding a mortgage broker for your home loan, do give us a call on 1300 889 743 or send us an online enquiry.