How to work with a mortgage broker to get a better home loan deal
With many lenders to choose from, you may decide to get help from a mortgage broker and asking the right questions will help you get a home loan that meets your needs and is value for money.
What mortgage brokers do
A mortgage broker is a go-between who deals with banks or other lenders to arrange a home loan for you. A good broker works with you to:
Understand your needs and goals.
Work out what you can afford to borrow.
Find options to suit your situation.
Explain how each loan works and what it costs (for example, interest rate, features and fees).
Apply for a loan and manage the process through to settlement.
How mortgage brokers get paid
Usually, lenders pay the broker a fee (or commission) for arranging the loan so; you don't pay the broker anything.
Some brokers get paid a standard fee regardless of what loan they recommend and other brokers get a higher fee for offering certain loans and this could influence the loans a broker recommends to you.
Sometimes, a broker will charge you a fee directly instead of, or as well as, the lender's commission so, if you're not sure whether you're getting a good deal, ask around or look online.
Before you meet with a mortgage broker
Check if the broker is licensed
Before meeting with a broker, make sure they have a license to give you credit (loan) advice.
Search the following three lists on ASIC Connect's Professional Registers:
Credit Registered Person
To search, choose the list name in the 'Select Register' drop-down menu.
If the broker isn't on one of these lists, they are operating illegally.
Consider your must-haves and nice-to-haves
Before you see a broker, think about what matters most to you in a home loan.
Do you simply want the lowest cost loan? Do you want specific features, such as being able to make extra repayments? Thinking about this beforehand will make the conversation with your broker easier.
Make a list of your:
'must-haves' (can't do without)
'nice-to-haves' (could do without)
Meeting with a mortgage broker
Bring your list of must-haves and nice-to-haves and ask questions…lots of them!
Get the broker to explain how each loan option works, what it costs and why it's recommended to you and if you are not happy with any option, ask the broker to find an alternative.
Remember, you don't have to take the first loan you're offered.
You may have a preference for a particular lender, such as your current bank but, ask to see loans from other lenders as well, so you can compare.
A home loan is a long-term debt, so even a small difference in interest adds up over time. If you can get a lower interest rate from another lender, you could save thousands of dollars.
Questions to ask your mortgage broker
Do you offer loans from a range of different lenders?
How do you get paid for the advice you're giving me? Does this differ between lenders?
Why did you recommend this loan to me?
What fees will I have to pay when taking out this loan?
What features (options) come with this loan? Can you show me how they work?
Can you show me a couple more options, including one with the lowest cost?
What is the threshold for lender's mortgage insurance (LMI) and how can I avoid it?
What information do I need to provide for the loan application?
Get a written quote from the broker
A written quote tells you the:
type of loan
loan term (duration)
current interest rate
fees you have to pay (for example, broker's fee, loan application fee, ongoing fees, etc)
Make sure you're comfortable with what you're agreeing to and ask more questions if there's anything you're not sure about and if you feel you're being pressured into signing, ask for more time to think about the loan…or go to another broker.
Problems with a mortgage broker
If you're unhappy with the loan advice you've received or fees you've paid, there are steps you can take:
Talk to your broker...The first step is to talk to your broker. Explain the problem and how you'd like it fixed.
Make a complaint. ..If the problem isn't fixed, make a complaint to your broker's business in writing. If the problem is still not resolved, contact the Australian Financial Complaints Authority to make a complaint and get free, independent dispute resolution.