Even for an experienced homebuyer, choosing a mortgage can be difficult. You could complete all the home loan processes on your own, but that would probably mean many phone calls and in-person meetings, plus lots of paperwork. Instead, you might think about working with a mortgage broker. A mortgage broker can help a borrower save money over the life of the loan, and considerable time and work during the application process.
As with anything, there are pros and cons to look out for when using a mortgage broker. Read on to find out more.
Pros of using a mortgage broker
The Best-interests Duty
Brokers are required by statutory obligation to act in the best interest of their clients – not the lenders and not themselves. This best-interests duty sets them apart from anyone at a bank or another lender. Brokers are the only option for professional help with the entire home loan process if you want to work with someone who is required to keep your interests paramount in their efforts.
Save Time And Effort
Brokers deal with paperwork, co-ordinate with relevant parties and keep the home loan process on track, which could help you get your loan approved faster. They will save you the stress of doing all the work yourself. Depending on what works best for you, they’ll typically require one meeting with you at the start, which you can have in-person or over the phone. Any necessary papers you can typically supply via email. If you don’t have the time to research home loan options yourself, a mortgage broker can assist with this as well.
Better Access To Lenders
If you apply directly with a bank, you can use only the products they provide. But if you use a mortgage broker, you can access hundreds of loan products and multiple lenders, including some you can access only through the broker. Brokers can find home loan packages to work through any complex scenario, such as bad credit, unusual employment, unusual properties, no-doc, low-doc and so on. They can quickly assess the type of home loan suitable for your situation and often know when lenders are offering new home loan products and discounts. They will fill out applications for you, negotiate with lenders and speed up the turnaround process. Brokers have ongoing relationships with lenders and direct conversations with those making the decisions.
Negotiations And Best Rates
Applying for a new mortgage or negotiating with a new lender may involve many different fees, such as application fees, appraisal fees, and more. By convincing the lender to lower or waive them, a broker can help you minimise the cost of your home loan, saving you hundreds or even thousands of dollars. You’ll have access to lower mortgage rates than you would if you tried to negotiate with lenders yourself because most mortgage brokers receive volume discounts from their top lenders.
Since they receive a commission from the lender, mortgage brokers can offer you free service. They won’t be paid if they can’t find a suitable loan. This provides a strong incentive for your broker to locate the ideal loan that satisfies your needs and preferences and offers the best rates and conditions. Experienced brokers frequently have expert-level negotiating skills regarding terms and closing charges; they are not inclined to accept no as an answer. If a lender rejects your application, the broker will make every effort to assist you in overcoming the challenges that are keeping you from receiving loan approval.
They Can Give You Expert Advice
Brokers with years of experience working in the industry have efficient processes. They are professionals at dealing with borrowers who have unique needs, such as independent contractors or people with bad credit. They will decide whether you can afford a mortgage and what types of rates and terms are available for you after looking at your income records, credit reports, employment history, lists of assets, etc. This is beneficial for you because it eliminates the need to contact various lenders on your own, which risks lowering your credit score.
Cons of using a mortgage broker
Not All Lenders Work With All Mortgage Brokers
Many brokers are employed directly by one bank or lender; if you work with them, you won’t have access to banks with whom that broker doesn’t do business. Also, not all lenders use brokers for mortgages; if you work with a broker, you will not have access to such lenders. Some of those lenders might even be able to provide you with mortgage terms that are better than what a broker could find. So, if you have a particular financial institution you want to get a loan from, double-check that your mortgage broker can work with them before proceeding.
Too Many Clients
Brokers usually have a long list of clients searching for home loans simultaneously. That might keep them from prioritising you and slow down your process. A smart broker will know how many clients they can handle realistically. It’s essential to research your broker before agreeing to use their services. You don’t want to find yourself working with one who views success as just a numbers game. Search online for testimonials telling you more about the broker’s ethics and history before working with them.
Interests May Not Align With Your Own
Using a mortgage broker doesn’t guarantee that you are receiving the best possible offer. Traditional banks may provide better loans than mortgage brokers can access for some borrowers. Because of their connections to lenders, brokers sometimes have biases. Perhaps a broker will favour a lender that pays a larger commission above the lender that offers the most outstanding deal for you.
May Not Get the Best Deal for You
Brokers can often get the best deals available but not always. To determine whether your broker is genuinely giving you a great deal, it never hurts to do some research. Some dishonest brokers are more concerned with their paycheck than your interest rate, so be cautious and make sure you choose one with a solid reputation.
Not The Final Decision-makers
Despite their best efforts and connections, brokers are still the go-between in your home loan journey. Lenders can waive costs, provide favourable terms and lower interest rates, whereas brokers aren’t the final deciders. Brokers lack the direct authority to take exceptional action or deviate from accepted lending practices. You could be in a position to negotiate a better bargain than a mortgage broker if you already have a good relationship with a particular bank or loan officer.
Who Should Use a Mortgage Broker?
You might consider using a mortgage broker if:
- You are in a hurry to secure a home loan.
- You have a bad credit score.
- You want access to a broker’s network of lenders.
- You have a unique borrowing situation like owning your own business.
- You need a mortgage broker to help you negotiate a lower interest rate.
- You want the convenience of having someone handle most of the research and paperwork of finding and buying a home for you.
When you work with a broker, you are not obligated to move forward with your mortgage application until you have learned what interest rates you can secure and from which lenders.
In the best-case scenario, you’ll save thousands of dollars in mortgage interest. And after speaking with a broker, you still leave with the information they gave you tailored to your financial circumstances, even if you decide not to proceed with them.
Do You Need A Good Mortgage Broker?
We have brokers who specialise in all kinds of deals and have the right blend of personality, professionalism and responsive communication. Our brokers get many referrals from customers and much repeat business.
If you’re searching for quality service and a smooth approval mortgage process, call us on 1300 889 743 or complete our online enquiry form today.