Using a mortgage broker to help you choose a home loan can save you considerable time and could result in huge savings. However, before you decide on a broker, you need to make sure they’re going to meet your needs.
Here are 10 questions to ask and how our Finance & Mortgage Broker, Mick Doyle, answered them.
- How long have you been a mortgage broker?
It may help you feel more comfortable with your decision if you know the person you intend to choose as your broker is experienced and has a solid track record. This question will let you know how long they’ve been a broker and what sort of lending they’re involved in. Also ask them to provide client testimonials, if possible.
Mick: I have been in finance broking for eight months, however, this follows over 30 years in the banking industry. The last 20 of these in Business Banking management roles.
- Are you a licensed broker and a member of a professional mortgage industry body?
It’s important to check a broker’s qualifications and credentials. Major lenders require that brokers complete at least a Certificate IV in Financial Services and either hold an Australian credit licence or be authorised under a licensed home loans aggregator or lender. They should also be a member of the Mortgage and Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA).
- Do you have access to a range of different mortgage lenders?
The mortgage broker you choose should be able to offer you loans from a large number of Australian lenders. Ask how many they have access to and if they can provide you with a full list. That way you can have confidence in their contacts and know that they have a wide selection to choose from.
Mick: I presently have access to a panel of 15 lenders:
- Arch Finance
– Capital Finance
– Liberty Finance
– ME Bank
– St George
- How do you determine the best lender?
Your broker’s primary job is to source the best home loan for your specific needs. Securing a low interest rate is key, but a broker should also assess your requirements and then present a number of product options. They should be able to demonstrate how they research and rate their selections, and which loan best fits your circumstances.
Mick: Not all lenders service every segment of the market – some are quite specialised. Furthermore, different lenders have varying risk appetites – eg: some currently have low appetite for residential investment. After undergoing a fact finding exercise with the borrower I try to narrow down to a panel of 3-5 lenders that best suit the client’s needs.
- The criteria used in this process can include (but not limited to):
- how does the lenders’ risk appetite and policies match the needs of the borrower?
- does the borrower require full branch network access post settlement?
- does the lender have expertise in the borrower’s industry?
- will the lender be able to complete the transaction in the time frame available?
- and of course, the pricing of the offers tabled
- What fees and commissions are you entitled to?
This question may seem blunt, but keep in mind that brokers generate income from every transaction they complete. It’s good to understand how they are paid, and how that may affect you.
The broker must disclose all payments and commissions they receive.
Mick: For most transactions, we are paid exclusively by the lender themselves (ie: no cost to the borrower). An upfront payment (or commission) is the most common and is based on a percentage of the amount borrowed. Sometimes we are also paid a monthly “trail” payment based on a percentage of the remaining loan balance.
In some cases where the transaction is very complex or takes a lot of work to complete, we will charge the borrower a “Credit Assistance Fee” which will be outlined upfront.
- How much can I borrow?
As part of the process, a broker should provide an idea of how much you can borrow based on your deposit, income, assets and liabilities. This will help you understand what type of property you can afford to buy.
Mick: I work with you one on one to full understand and access your specific situation and what is possible and a best fit for you. What lenders look for in a borrower also holds some weight here.
- Do you help with first home owners grants?
First-time home buyers may be entitled to government grants and other incentives. Your broker should know what’s available in your state or territory and assist with any paperwork.
Mick: Yes, we can help you with this as the process can differ slightly from lender to lender.
8.What’s the best loan structure for me?
A good broker should advise you on which loan structure makes the most sense for you. Ask whether a variable interest rate loan is best, or whether you should have a loan with split portions providing both variable and fixed rates.
Does it include an interest offset account, a redraw facility, and should you pay principal and interest, or interest only?
Mick: This advice is provided only after the full fact find is undertaken. Each applicant’s needs and circumstances are different – hence loan recommendations will differ accordingly. Some of the things we consider when making structural recommendations are:
- timing, frequency and amount of incomes used to repay the loan
- maximising tax benefits if appropriate
- taking into account short-term changes in income (like taking time off to have a baby)
- the shelf life of the asset funded (eg: you would not fund a car purchase over 30yrs)
- interest rate risk management
- What are the next steps?
Ask about the process of getting your loan application underway, including any information and documentation you need to provide them as the intermediary between you and the lender. Your broker should be able to give you a checklist.
Mick: We provide you with one-on-one support, along with documents to assist including a checklist that covers the following:
- step by step guide of the proposed process
- information required by the lenders
- likely conditions of approval
- other specialists that you may need to engage (eg: lawyer, accountant and insurers)
- How long will it take?
This will determine how quickly you can start shopping around. Ask the broker to estimate when you should get pre-approval from the lender and also how long the full approval and settlement process should take from start to finish.
To get the ball rolling on your home loan, talk to a mortgage broker today.
Mick: The time frame will differ depending on a number of factors involved in the transaction. We will usually be able to give you an indication upon receipt of the information from you.
If you’d like to speak to Mick about how he can help you get the finance you need, you can contact him on 07 3883 8999.
Accountplan Finance Solutions Pty Ltd (ACN614700775) and Mick Doyle are credit representatives 495434 & 495495 of BLSSA Pty Ltd, ACN117651760 (Australian Credit Licence 391237)