Getting a broker for home loans can make all the difference if you decide on buying a house. Nevertheless, there are many things to consider before opting for a mortgage broker, including their personal skills, fees, and registrations.
Read on as we answer questions like “What does a mortgage broker do in Australia?” and find out the advantages and disadvantages of working with one.
What Is a Mortgage Broker?
Mortgage brokers are financial professionals who act as intermediaries between people interested in getting a home loan and lenders or banks. Also known as “mortgage loan officers”, they are advisors for home purchases and help clients find a home loan with the best interest rates.
Did you know: 37% of households owned their residence under a mortgage.
What Does a Mortgage Broker Do in Australia?
As mortgage brokers in Australia are the connecting bridge between the borrowers and the lenders, they have a myriad of responsibilities until the final settlement.
Here is what you should expect when using services provided by a mortgage broker.
Evaluation of Borrower’s Financial Situation
Whether you are looking for your first loan or new ways of refinancing, the mortgage broker must be aware of your finances and credit files. Thus, they assemble all the paperwork to verify your financial statement and credit history in order to get your home loan application approved.
Some of the documents your mortgage broker needs are bank statements, proof of income, and documentation from past loans. They will then use these documents to determine your borrowing capacity and creditworthiness.
Brokering mortgage services are essential when your financial circumstances generally don’t fulfil the requirements for a home loan, like in a case of having bad credit or unusual employment. Using their expertise and wide knowledge of loaning offers, mortgage brokers can find a way to settle potentially hard-approvable applications.
Finding the Best Interest Rate and Home Loan Terms
With all the information collected from the client, the broker for a mortgage does research on the lending market, going through the lender’s terms and interest rates. In this process, the mortgage broker compares loan offers, negotiates with lenders, and matches your financial status and interest-rate needs with the home loan requirements.
Once they have found the most suitable options according to the client’s circumstances, the mortgage broker informs the borrower about the various alternatives and lenders.
Applies for a Home Loan
The mortgage broker services range from collecting the needed documents and communicating with the lender to finalising the home loan settlement. In other words, the mortgage broker in Australia handles the entire home loan application process and applies on behalf of the borrower.
Advantages and Disadvantages of Using a Mortgage Broker
Getting a mortgage broker to do the home loan search for you and match your needs and opportunities with a lender has its advantages and drawbacks.
| Pros | Cons |
| Credit policy expertise | The broker’s experience may be the thin line between getting approved or declined |
| Saving you time, and you will get personalised service | Mortgage brokers may work with a limited number of lenders, not with all lenders on the market |
| Have the best interest rates | Mortgage brokers can insist on an option that brings them a higher commission fee |
| Negotiating some fees applicable to your home loan is possible | |
| Dealing with the application process and knowing how to get you approved | |
| Providing multiple home loan options |
How to Choose a Mortgage Broker?
Australia has over 7,000 mortgage broker businesses making it a daunting task to find one that fits your standards and needs. For that reason, we have compiled the must-haves for your broker for home loans.
- Licence and expertise
Starting with the accreditations, ensure your Australian mortgage broker of choice has the required licences and works according to the regulations. They must meet the following terms:
- Be registered with ASIC
- Have an Australian Credit Licence (ACL) or be authorised under a licence from an aggregator
- Work according to the National Consumer Credit Protection Act
- Have a Certificate IV in Financial Services (Mortgage and Finance)
- Be a member of MFAA, FBAA or MIAA
Also pay attention to the expertise and experience of the broker. Some mortgage brokers in Australia only have competencies for commercial loans or business loans and probably won’t be suitable for your home loan.
2. Personal skills
Aside from professional experience and licenses, a mortgage broker must have the personal skills that are required for high-quality results. For example, they need excellent communication and negotiation skills to effectively do their job with both sides, the borrowers and the lenders.
Furthermore, having to keep up with a lot of documents brings the need for exceptional organisational skills and attention to detail. The brokering mortgage job is stressful, and patience and skills to work under pressure are necessary.
3. Fees
Although you might not need to pay brokerage fees, you should consider the expenses like application fees, lenders’ mortgage insurance and property valuation fees, which will be applied to your loan. Your broker needs to give you a heads up about every fee that comes with the options they offer.
4. The array of lenders
Review how many lenders the mortgage broker in question works with. Overall, the more lenders on his list, the better financial products you will get.
Where Can You Find a Mortgage Broker in Australia?
If you don’t know where to start your search for an Australian mortgage broker, you should look into:
- Brokerage companies or professional mortgage broker associations
- Lender or another financial institution
- Recommendations based on consultations with people who have used mortgage brokers
To choose the most suitable one, pay attention whether the broker asks you for the relevant information necessary to link you with the best lender for you. A mortgage broker should know about your:
- Employment history
- Personal and household income
- Dependents
- Household expenses
- Main home loan preferences like fixed/variable loan, offset account, credit card etc.
Questions to Ask Your Mortgage Broker
You should be prepared to meet the potential or chosen mortgage broker and ask the right questions. Here are some examples.
- What are the types of lenders you work with?
- Are there any lenders that you don’t have access to?
- How does this loan suit my needs and interests?
- What fees apply to this loan?
- Can you elaborate on the features of the loan?
- Can you tell me what are my other options and which one has the lowest cost?
- Is there a way to avoid the lender’s mortgage insurance, and what is the threshold?
Worth noting: Honest communication between the borrower and the mortgage broker is key to a successful home loan application and satisfied customers.
Tips For Getting a Home Loan with a Mortgage Broker
The process of getting a home loan can be strenuous and stressful for many people. Our final advice would be:
- Only borrow the amount you need even if your mortgage broker tries to convince you to get the option with more money
- Get a written deal with your broker with information on how the loan works, features, interest rates, terms, and fees
- Do research by yourself and check what loan offers you can find
- Take your time, consider all the pros and cons and make the right decision.
Bottom Line
Having a mortgage broker will make your journey of becoming a new homeowner easier by providing you with the best interest rates for home loans. Nevertheless, make sure to do individual research as well, and beware of brokers that may work against your best interests in order to get a higher commission fee. Finally, consider our tips for finding the right broker, and consult with people you trust.
How to save on a home loan? Check out some tips here!
FAQs:
1.Is it cheaper to get a mortgage through a broker?
Generally, getting a deal for your mortgage is more affordable if you use a broker. Using a mortgage broker might result in a better mortgage deal.
2.Can you have two mortgage brokers?
Yes, you can hire two or more mortgage brokers in Australia. Theoretically, you will have more home loan options to decide between, but having different brokers submit home loan applications in your name won’t benefit you.
3.How do mortgage brokers get paid in Australia?
Australian mortgage brokers don’t get paid by their clients. Instead, they get an upfront fee or commission from the bank or lender for bringing in clients – ranging between 0.65% (+GST) to 0.7% (+GST), and a trail commission – from 0.165% (+GST) to 0.275% (+GST), according to the loan’s lifespan.
4.Why are mortgage brokers better than banks?
What does a mortgage broker do in Australia? There are a number of responsibilities each broker needs to fulfil in order to ensure the best deal for you. Thus, they are more useful than banks since they have an array of home loan mortgages with the best interest rates from various lenders.
