What is a mortgage broker?

A mortgage broker is someone who acts on your behalf to discuss, choose, negotiate, apply for a loan for the purpose of buying a house, refinancing a home loan, building a new house and more!

Whilst they are the middle man, the value that a mortgage broker can add to you or your business is in their expertise in assessing your financial situation, helping you decide and structuring your loans that best suit your circumstances and goals.

There is a lot of regulation around mortgage brokers. Mortgage Brokers are regulated by the Australian Securities and Investment Commission (ASIC) and they are also required to be a member of an industry body including the Finance Brokers Association of Australia (FBAA) and Mortgage and Finance Association of Australia (MFAA), AND a member of the external dispute resolution provider Australian Financial Complaints Authority (AFCA).

How many Australians use mortgage brokers?

According to the Hayne Royal Commission, approximately 59% of home loans were written through mortgage brokers. (1) This is due to the many benefits that mortgage brokers can offer to everyday Australians. However, not all mortgage brokers are the same and each will have their pros and cons.

How do I choose a good mortgage broker?

A good mortgage broker will perform the following functions:
  • Understand your personal financial situation (including your needs and goals);
  • Compare loan products;
  • Simplify and guide you through the home loan application process;

    Have a read through our in-depth guide below to help you make an informed choice.
  • Understanding your personal situation

    A good mortgage broker needs to take your personal financial situation and goals into account. This will include understanding your family situation (such as whether you are married and how many kids do you have), your living situation (such as whether you are renting or living with parents), job situation (such as whether your are self-employed or working part time), your line of work (such as if you are a doctor), your personal finances (how much money you are making, and what are your monthly expenses), your credit history (have you been on time with paying your debts), your future goals and dreams as well as how you intend to use the loan.

    Being honest and upfront with the mortgage broker you are working with is extremely important as any missing information will not only make it more difficult for them to assist you in finding the right loan product, but it can also impact whether you can be approved for a loan.

    This is why it is important to choose a broker that is value-based as you are sharing very personal information with an expert, you want to make sure that they are working in your best interest.

    Compare Loan Products

    Did you know there are over 100 lenders in Australia? (2) Most brokers will only choose to work with a small subset of 10 (or even less!). This presents a problem to consumers as you might be missing out on deals offered by smaller lenders (bank or non-bank). Finding the right loan is critical as it needs to match your personal circumstances, your future goals and the reason why you are getting a loan. If it doesn’t, you’ll be finding yourself being rejected and impacting your credit score for no reason. What we find is that the smaller lenders (bank or non-bank) tend to offer great deals every so often in order to attract customers. For example, in the past we have seen a lender offer a fixed 4% interest rate (Principal and Interest) Home Loan for the entire life of the loan (30 years). For someone that wants consistent repayments over 30 years, and not worry about future interest rate rises, this is a possible consideration for them. Most brokers would not even know the details of this lender or even put it on the table for their customers to consider! Periodically, lenders (big and small) will also run promotions to attract customers. Recently, some of the Big 4 banks have been offering “rebates” and “cashbacks” for people choosing to refinance with them. We’ve seen cashbacks in excess of $4000 (this is not including the interest saved over the life of the loan too with lower rates). Lastly, did you know that brokers have different tiers within lenders which gives them access to different levels of interest rates and customer service? The interest rates you see advertised online with many of the lenders are not as low as what some brokers may be able to get you.

    Simplify and guiding you through the home loan process

    Depending on the bank, the home loan application process can be cumbersome and confusing. Imagine that you have to wait hours on end with a bank’s call centre customer service waiting line, only to be told that they do not have any further updates on your loan application? By going through a broker, they generally have access to a different team which can provide quicker responses and approvals for loan applications.

    Loan forms can also be a pain to fill out. A good broker will guide you through filling them out and also ensure that you have provided all documentation before they submit the loan. There’s nothing worse than a broker with no attention to detail who gets you to submit an application, only to have the lender come back and ask for more information because they forgot to ask you to attach a document. Good mortgage brokers are on top of what is required from each bank.

    Lastly, some brokers have such good relationships with lenders they can even negotiate interest rates for you too. Imagine getting a home loan package or rate that is lower than what most other customers are getting?

    Are you keen to check us out?

    At Reservoir Finance, we are a 100% independent mortgage broker based in Sydney CBD (but we service all of Australia!). Our values based approach not only ensures it carries the mark of a good mortgage broker but goes above and beyond by educating our clients on navigating the Australian financial system to help you achieve your goals and dreams. Reach out with the form below or call us for an obligation free chat and assessment and we would love to help you out!

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