Should You Use A Mortgage Broker?

A mortgage broker can help you compare home loans, work out which lenders are likely to suit your circumstances and manage the application for you.

Where a broker can become particularly useful is in understanding how lenders assess borrowers differently.

Your income, deposit, debts or property might fit one lender’s policy but not another’s. A broker can help narrow down the lenders worth considering before you apply, then compare their rates, fees and features.

You do not need a mortgage broker to get a home loan, and using one does not guarantee approval or a cheaper rate. Whether it is worth using one depends on your situation and how comfortable you are researching and applying yourself.

Why Do People Use Mortgage Brokers?

Most people use a mortgage broker because they want more choice, help understanding their options or someone to manage the loan process for them.

If you approach a bank directly, that bank can assess you for the home loans it offers.

A mortgage broker can look across the lenders on their panel.

That matters because lenders do not all assess borrowers the same way. They can have different approaches to:

• Overtime, bonuses and commissions
• Casual or contract income
• Self-employed income
• Rental income
• Existing debts and credit limits
• Deposit sources
• Credit history
• Loan-to-value ratio (LVR)
• Employment history
• Different types of property

A borrower can therefore look perfectly suitable to one lender and fall outside another lender’s policy.

This is why an experienced broker will usually look at your circumstances before focusing on individual products. Once the suitable lenders are clearer, you can compare the actual loans available from them.

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What Does A Mortgage Broker Actually Do?

A mortgage broker acts as an intermediary between you and potential lenders. They can help you work out what you may be able to borrow, identify suitable loan options and manage much of the application process.

Before You Apply

A broker will usually look at things such as:

• Your income
• Living expenses
• Existing loans and credit cards
• Your deposit and where it came from
• Your credit history
• Your borrowing capacity
• The property you want to buy
• Your preferred loan features
• Relevant lender policies

From there, they can narrow down the lenders that are worth considering and explain the options available to you.

This pre-assessment is one of the more useful parts of the process.

A broker should check for potential problems before an application is submitted. That might mean spotting an income issue, a deposit problem, a property restriction or a lender policy that does not fit your circumstances.

During The Home Loan Application

Once you decide to proceed, your broker can typically:

• Tell you which documents are required
• Check your supporting documents
• Prepare the loan application
• Submit it to the lender
• Arrange or co-ordinate a valuation where required
• Respond to lender questions
• Provide additional information requested by the lender
• Explain approval conditions
• Keep you updated on progress

For many borrowers, this is where a broker saves the most time. You have one person helping manage the finance side, rather than working through the lender process yourself.

After Approval / Post-Settlement

The service does not always stop at formal approval.

Depending on the broker, they may continue helping through settlement and afterwards.

That could include answering questions about the loan, helping with settlement-related issues or reviewing the loan later if your circumstances or the market change.

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What Are The Benefits Of Using A Mortgage Broker?

You Can Compare How Different Lenders Will Assess You

Rate comparison websites can be useful for seeing interest rates and product features.

What they cannot always tell you is how a lender will assess your actual circumstances.

Take two borrowers earning $120,000 a year. One earns a fixed salary. The other earns a $90,000 base salary plus overtime and bonuses. Even though their total income is similar, lenders may not use the second borrower’s additional income in the same way when calculating borrowing capacity.

The same issue can come up with self-employed income, rental income, commissions and other less straightforward income sources.

Two borrowers can earn the same amount and still end up with different borrowing capacities depending on which lender is assessing them and what evidence that lender accepts.

That is why lender policy can matter just as much as the rate advertised on the website.

A Broker Can Spot Issues Before You Apply

Some lending problems are easier to deal with before an application reaches the lender.

A broker may check:

• How your income will be treated
• Whether your existing debts affect servicing
• Whether large credit-card limits are reducing your borrowing capacity
• How your deposit has been built
• Whether there are credit history issues
• Your LVR
• Whether the lender accepts the property
• Whether your employment history meets policy

For example, you might earn enough overall but find that one lender will only use part of your bonus income.

Or your finances could be strong while the property itself falls outside a lender’s usual security policy.

A broker cannot remove those restrictions, but identifying them early can help avoid applying to a lender that was unlikely to fit in the first place.

You Can Look Beyond The Headline Interest Rate

A lower rate can be attractive, but it is only one part of the loan. A broker can help compare:

• Interest rate
• Comparison rate
• Application and ongoing fees
• Offset accounts
• Redraw
• Fixed and variable options
• Lenders Mortgage Insurance (LMI), where relevant
• Lending policy
• Loan structure
• Refinancing costs
• Cashback or other offers
• How the loan fits with what you plan to do next

A slightly lower advertised rate can lose its appeal once higher fees or unsuitable features are taken into account.

This is particularly relevant when refinancing. A lower rate might save money on repayments, but switching lenders can also involve discharge fees, application costs, valuation costs or LMI.

In some cases, a review will show that staying with the existing lender makes more sense for the time being.

You Can Save Time On Research And Paperwork

Applying for a home loan yourself can involve researching lenders, checking eligibility, comparing products, preparing documents, following up with the lender and responding to questions from the credit assessor.

A broker can take on much of that work.

If your application is simple and you are comfortable dealing directly with a lender, this may not matter much.

If you are short on time or unsure how lenders will view your circumstances, having someone manage the process can be useful.

A Broker Can Be More Useful When Your Situation Is Complicated

The differences between lender policies tend to matter more when your circumstances fall outside a standard PAYG home loan application. That may include borrowers who are:

• Self-employed
• Earning variable income
• Working on contract
• Using a smaller deposit
• Building an investment portfolio
• Buying an unusual property
• Using foreign income
• Dealing with a previous credit issue
• Refinancing from a specialist lender
• Applying with several income sources

There will not always be an immediate lending solution.

Sometimes a broker may find that something needs to change first, such as another year of financial statements becoming available, an existing debt being repaid or the LVR falling.

Knowing what is holding the application back can be useful even when you are not ready to apply yet.

Mortgage Brokers Have A Best Interests Duty

Mortgage brokers providing regulated mortgage credit assistance in Australia are subject to a legal Best Interests Duty.

When providing credit assistance, a mortgage broker must act in the customer’s best interests. Where there is a relevant conflict between the broker’s and the customer’s interests, the customer’s interests must take priority.

You should still ask your broker to explain the recommendation.

A good broker should be able to tell you:

• Which lenders they considered
• Why a particular lender was recommended
• What other options were available
• What the loan will cost
• How the broker will be paid

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Can A Mortgage Broker Get You A Better Deal?

They may be able to, but it depends on what you mean by a better deal.

For some borrowers, it means a lower rate. For others, it might mean:

• Lower fees
• Better loan features
• More borrowing capacity
• A lender that accepts their income
• A lender that accepts the property
• A more suitable loan structure
• More flexibility
• Faster lender processing
• A loan that works better with future plans

A broker can compare options available through their lender panel and may also request pricing from a lender.

There is no guarantee that a broker will always find the cheapest loan available anywhere in the market.

What matters is whether the recommended loan is competitive and suits the borrower’s actual circumstances.

For a straightforward borrower, the lowest-cost product may also be the most suitable one.

For a borrower with a more complicated application, lender policy can narrow the options before rate becomes the deciding factor.

How Much Does A Mortgage Broker Cost?

Many Australian mortgage brokers do not charge the borrower a direct fee for a standard residential home loan because the lender pays the broker a commission when the loan settles.

Some brokers do charge fees in certain situations, so it is worth checking before you proceed.

At Home Loan Experts, customers rarely have to pay us a broker fee. A fee can apply in some cases, depending on factors such as the complexity, size or type of loan.

If a broker fee applies, it should be disclosed before you proceed. It is reasonable to ask:

• Will I need to pay you a fee?
• How does the lender pay you?
• Does the amount you receive differ between lenders?
• Are there any other costs I should know about?

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What Are The Disadvantages Of Using A Mortgage Broker?

Mortgage brokers can make the process easier, but there are a few limitations to understand.

A Broker Does Not Necessarily Compare Every Lender

Mortgage brokers generally compare products from lenders on their accredited panel.

A broker can have a large panel without covering every bank, lender or home loan product in Australia. Some products may only be available directly.

Ask which lenders your broker can access and whether any major options sit outside their panel.

The number of lenders is useful context, but what matters more is how the broker decides which ones are relevant to your application.

Some Brokers Charge Fees

Many residential borrowers do not pay their broker directly, but fees can apply.

Check the broker’s fee arrangement before you commit.

Broker Experience Varies

Access to a large lender panel does not automatically mean a broker has experience with your particular situation.

This can be important if you have:

• Self-employed income
• Foreign income
• Trust or company structures
• Credit issues
• Multiple investment properties
• A specialist property
• An unusual employment situation

A broker who regularly handles your type of application should be able to explain the lender policy issues that are likely to matter.

The Lender Makes The Final Decision

A mortgage broker can assess your situation, recommend a lender, prepare the application and help deal with lender questions.

They cannot approve the loan themselves.

The lender decides whether to approve the application and what conditions apply.

Be cautious if anyone guarantees approval before the lender has completed its assessment.

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Do I Need A Mortgage Broker?

No. You can apply for a home loan directly with a lender.

Whether using a broker makes sense depends on how much help you need with comparing lenders and managing the application process.

A broker may be more useful if:

• You want to compare several lenders
• You are unsure how much you can borrow
• Your income is complicated
• You are self-employed
• Your deposit is small
• You own investment properties
• You have a previous credit issue
• You are buying an unusual property
• You want someone to manage the application
• You are refinancing and want to know whether switching is worthwhile

Going directly to a lender can also make sense when your situation is straightforward, you already know which lender and product you want, and you are comfortable managing the application yourself.

For example, if you have independently compared your options and a direct lender has an offer that suits you, there is no requirement to use a broker instead.

Is It Better To Use A Mortgage Broker Or A Bank?

It depends on what you need.

A bank can tell you about the home loans it offers and assess your application against its own lending policy.

A mortgage broker can compare suitable options from several lenders on their panel.

If you already know which bank and product you want, applying directly can be straightforward.

A broker can be more useful when you want to compare several lenders or you are unsure how different lending policies will affect you.

For a more detailed comparison, read our Mortgage Broker Vs Bank guide.

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When Should You Speak To A Mortgage Broker?

You can speak to a broker before you find a property.

Doing it earlier can be useful if you are unsure about your budget or whether lenders will accept your circumstances.

Before you start making serious offers, a broker can help you understand:

• Your approximate borrowing capacity
• The deposit you may need
• Purchasing costs
• How lenders are likely to treat your income
• Debts affecting your borrowing capacity
• Credit issues
• Possible property restrictions
• Whether pre-approval is appropriate

For example, if part of your income will not be accepted by a lender, that could change how much you should be spending on a property.

It is better to find that out before making an offer than after signing a contract.

You may also want to speak to a broker when:

• Your income or employment changes
• You want to refinance
• You plan to buy another property
• You are considering using equity
• Your existing lender declines an application
• Your circumstances no longer fit standard lender criteria

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How Do You Choose A Good Mortgage Broker?

A useful broker should be able to explain their recommendation without burying you in mortgage jargon.

Ask questions such as:

• Which lenders can you access?
• Are there lenders you cannot access?
• Have you handled borrowers with circumstances like mine?
• Why are you recommending this lender?
• Which other lenders did you consider?
• What are the disadvantages of this loan?
• Will I pay a broker fee?
• How are you paid by the lender?
• What happens after the application is submitted?
• Will you review my loan after settlement?

Pay attention to the explanation, not just the recommendation.

You want to understand why some lenders were considered suitable, why others were ruled out and what trade-offs come with the option being recommended.

For a more detailed checklist, read our Questions To Ask Your Mortgage Broker guide.

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Are Mortgage Brokers Worth It?

For many borrowers, yes. The value usually comes from a combination of lender knowledge, pre-assessment and help managing the application.

That value is likely to be greater when your finances or property are less straightforward.

If your application is simple, you already know which lender you want and you are comfortable dealing directly with the bank, the benefit may be smaller.

A useful broker should be able to tell you which lenders they considered, why some were ruled out and why the recommended option suits your circumstances.

That tells you more about the quality of the advice than the size of the lender panel on its own.

Not Sure Whether A Mortgage Broker Would Add Value?

Before choosing a lender, it helps to know what your own home loan position looks like.

Our 360° Home Loan Assessor can help you check your borrowing position, deposit and purchasing costs in about two minutes.

There is no login and no credit enquiry.

Please call us on 1300 889 743 or enquire online and one of our commercial mortgage brokers will get back to you with some options.