Most people deal with a solitary bank without ‘shopping around’. A smaller percentage may visit two or three financial institutions to get the better financial deal and while this maybe a step in the right direction, it might have some risks.
The advent of mortgage brokers has meant greater choice and in recent times with tougher regulations more befitting and often less risky financial arrangements.
A Mortgage Broker offers the service of being the sole point of contact for arranging your finance requirements for a property purchase or refinance.
The process normally includes the following:
- Discussing your financial situation and assessing your requirement(s).
- Considering the appropriateness of lenders to meet your needs including the matching of a loan solution, including product mix and features to your requirements.
- Preparing an analysis of all the purchase costs and the loan repayments including alternatives eg. Variable vs. fixed, principal and interest vs. interest only.
- Preparing the Application and submission thereof with the relevant supporting documentation required by the lender.
- Arranging a pre-approval in a situation where a suitable property has not yet been sourced.
- For First Home Buyers preparing and submitting the First Home Owners Grant Application.
In this way at a ‘high level’ a better product can be sourced at a lower cost, often with less risk.
More specifically, the benefits of using a Mortgage Broker include the following:
- A Mortgage brokers experience and knowledge should save you time and money (lower repayments and lower establishment, ongoing and exit fees).
- Professional mortgage brokers use software which updates them with all the information on lenders products, including interest rates, loan establishment and ongoing costs and features. The software normally has all the lenders servicing calculators so it enables the broker to evaluate how much each lender will lend in the clients’ circumstances.
- A competent mortgage broker will normally offer you various options and products and compare them for you. Features include offset accounts, repayment holiday, internet access, credit cards etc.
- Most mortgage brokers should have access to hundreds of products including most major & 2nd tier lenders including Adelaide Bank, AMP, ANZ, Bank SA, BankWest, CBA, Home loans Limited, HomeSide Lending, ING, NAB, St George, Suncorp & Westpac.
- An honest broker with integrity will choose the loan package that best suits the client rather than the one that pays the highest commission. If the broker follows this mantra and has a long term business approach he will receive more referrals and should be more successful in the long term.
- The lender pays the mortgage broker on settlement of the loan and in most cases an ongoing trailing fee. In most circumstances the client is not charged a fee by the mortgage broker.
- As the Mortgage Broker is writing many loans and is aware of the current circumstances in the lending market, he/she is aware of which lenders are looking to increase their market share and will be prepared to negotiate better interest rates and terms to win the business.
- A mortgage broker should be aware of the banks criteria and therefore assist you in efficiently obtaining a loan whereas if you apply directly you may be declined because of your limited knowledge & experience.
- The mortgage broker understands the process and timing and knows what the lender requirements are and what the client is required to do throughout the process.
- An experienced mortgage broker understands the risks that the client is taking by their actions, eg paying a holding deposit, exchanging contracts, buying at auction, buying without cooling off etc.
- A broker should be able to assist with current Stamp Duty concessions, queries and exemptions, the legislation is always changing depending on government policy & the economic climate
- Many mortgage brokers will be happy to meet you after hours and at a place of your choice be it home, work, or other locations.
In summary, Mortgage Brokers bring choice and hopefully ‘a better deal’. Before you commit to a Broker make sure of the following:
- The mortgage broker and his business should be accredited with an Association such as the Mortgage Finance Association of Australia (MFAA) or Finance Brokers Association of Australia (FBAA).
- The Broker is a Member of a Dispute Resolution Body such as Credit Ombudsman Service Limited (COSL).
- The mortgage brokers have Professional Indemnity Insurance.
- The Broker is accredited with a lender.
- They have the necessary competence and experience.
Article Written by Paul Rabie of Rabie Finance
Paul is a Chartered Accountant by background and is a member of the Institute of Chartered Accountants in Australia. He has 14 years experience in lending and established his own Mortgage Broking business 6 years ago and has arranged both residential & commercial funding for numerous clients. Rabie Finance is a member of the MFAA and COSL.