A primer on mortgage broking
Upon announcing to friends and family that you're looking to buy a home, there's every chance they'll chime in with their own suggestions for a quality mortgage broker. But, you might ask, what's the point of using a mortgage broker's services? Will it actually help you buy a house?
Don't worry – you're not unusual. Many inexperienced buyers don't know what a mortgage broker does and how it can benefit them. Consider this a short explanation.
What is a mortgage broker?
A mortgage broker is a mortgage industry expert who essentially provides advice and assistance to customers applying for home loan products. If you want to buy a house, they'll assist with the selection of and application for the mortgage.
Can't I just find a home loan by myself?
In theory, you can. In practice, trying to find a home loan on your own may not work out very well. Brokers are experienced experts who not only know the industry inside out, but have connections with a variety of lenders. This means they have access to loan products that you wouldn't otherwise. It also means they simplify what can be a time-consuming and laborious process. With one meeting you can get the benefits of visiting a dozen separate banks, along with a professional recommendation on which bank and loan package suits your individual needs!
How do brokers find suitable home loans?
All brokers are accredited with a panel of lenders – or, in other words, a list of credit providers with whom they work. There is no standard size for one of these panels, and the lenders will often range from the big banks to smaller providers.
How do brokers get paid?
A broker typically receives a commission from the particular credit provider from whom they've sourced the loan. There is no difference in the loan package or interest rate you pay compared to sourcing the loan direct from the bank. Different brokers have different fees, as do some different lenders, and some brokers will charge you this fee directly – though this is uncommon.
What should I do before signing on with a lender?
Whenever you use a broker, it can't hurt to check their credentials. Have a look on the Australian Securities and Investments Commission's professional registers online to see if they're licensed – unlicensed brokers are illegal in Australia. You might also want to make sure they're part of the Mortgage Finance Association of Australia or the Finance Brokers Association of Australia – these bodies set an industry Code of Practice for their members.