How do you choose the right mortgage broker?
It’s essential to do your due diligence on any professional that you use when it comes to buying a property. After all, buying a home is likely to be the biggest purchase you’ll ever make, so cutting corners when it comes to researching the people who you’ll be doing business with can cost you thousands.
A mortgage broker is an invaluable member of your team when it comes to financing your purchase. But what exactly does a broker do and how can they help? He or she acts as a liaison between lenders and borrowers. Brokers have access to many products through the network of lenders they are accredited with. Their main goal should always be to find the best deal for you using the information that you provide.
Brokers have a legal ‘responsible lending’ obligation to ensure that you are not placed into a loan that is unsuitable for you, and must give you a Credit Guide (with information including their licence number, fees and details of your right to complain) before they provide you with any assistance.
How to size up your broker
There is a lot of competition to win your business. This means that you should take the time to research and compare different options. Ask your colleagues and friends if they know anyone who had a positive experience with their broker. You can meet the broker face-to-face to decide if you are a good fit for the long-term.
To get a better understanding of the broker market, you could also contact a few brokers. Find out how long they’ve been in the industry, which lenders are on their panel and the types of loans they’re offering.
It can be expensive to choose the wrong mortgage broker, but it will save you money and ensure that you are getting the right product. To help you make this decision, your broker should have several years’ experience in the mortgage industry and be properly qualified. You can ask for testimonials from past clients and speak directly with them to get a better understanding of their relationships with borrowers.
Your broker should be accredited under the National Consumer Credit Protection Act, have a Certificate IV and preferably a Diploma in Financial Services Mortgage Broking, be a member of the Mortgage & Finance Association of Australia (MFAA) and/or the Finance Brokers Association of Australia (FBAA), and be a member of the Credit Ombudsman Service Ltd (COSL), which is an avenue for borrowers to source independent dispute resolution help.
The broker you choose should find the loan that best suits your needs – not the other way around.
Make sure you find a broker who has the latest industry knowledge. Also, make sure they are able to adhere to deadlines. Test the waters with the broker, ensuring they’re punctual and well organised, and that they give you confidence in their decision-making and problem-solving capabilities.
A great mortgage broker is able to communicate with clients and discuss products and lenders without having to rely on software. If your broker doesn’t appear 100% confident in the information he or she provides, then that’s a pretty clear indication they lack experience.
Follow the example of others
Don’t let the broker do all the talking. Make sure you ask plenty of questions about what’s on offer. Ask your broker for advice on the best product to suit your needs.
Don’t hesitate to ask your broker to explain everything in simple terms, particularly if it’s your first time taking out a loan. A broker who is knowledgeable about financial issues and terms should be able and willing to help you understand.
A broker should be able to access a variety of lenders. These lenders include traditional (banks building societies, credit unions, and credit unions) as well non-conforming (wholesale, or non-conforming). Some brokers don’t always compare a wide range of suitable loan products, so it’s best to ask your broker which products they’ll be comparing and from which lenders.
Who’s on their lending panel?
The lending panel of a broker can tell you a lot. You should verify that they have relationships with reputable institutions. You could miss out on better mortgage deals if they don’t.
Your broker should be able to tell you how many lenders they have and which lenders they use. You should ensure that a broker only uses the right lenders. Ask why they use only a few lenders for the majority of their clients.
Make sure the product that your broker offers you matches your needs as borrower. Know why they’re offering a lender from their panel and know exactly what they’re offering. Bigger lending panels don’t necessarily mean better service. All in all, it comes down to the borrower’s needs and wants.
Ask for a detailed explanation of the documents that are associated with your loan application and contract. Many borrowers aren’t clearly informed as to which lender their broker has used, let alone the interest rate or features of the loan product. You can also request a loan product factsheet: This will allow you to verify that the broker did not offer any nasty surprises.
Ensure that you’re given a hard copy of the comparison rate table of the home loans you’re considering. A comparison rate factors in the interest rate plus all of the other costs – other than any exit fees – that you will incur with that loan. This comparison rate can help you to determine the best home loan for you.
The industry has been self-regulated in most states, but a new – and rigorous – regulatory regime has recently been put in place to govern brokers.
This regime is similar to that for financial planners. All brokers must currently be registered with the Australian Securities and Exchange Commission (ASIC) and ,as of 1 July 2011, must either hold an Australian Credit Licence (ACL) or be a ‘credit representative’ of an organisation that holds an ACL. You can check if a broker is currently registered at www.asic.gov.auBefore providing any assistance, a broker must give you information about his or Her license number, fees, as well as details of your rights to complain.
Over and above ASIC accreditation, make sure your broker is also a member of at least one of the industry bodies as well as with ASIC: these are the Mortgage & Finance Association of Australia (MFAA) and/or the Finance Brokers Association of Australia (FBAA). Ask if the broker holds a Certificate IV (Financial Services). This is the key qualification to watch for, as a broker usually can’t become accredited by ASIC without it, unless they can satisfy experience criteria.
Brokers must also be members the Credit Ombudsman Service Limited, (COSL), or any other external dispute scheme approved and approved by ASIC. In the event of dispute, you have recourse to an ASIC complaints body. ASIC can also be reached online at 1300 300 663.
Charges and fees
The credit providers pay a commission to the brokers, who are usually free to provide their services. These fees may be paid upfront or after the service is completed.
Ask your broker to disclose the benefits and commissions they receive. Ask your broker if they charge a fee for their services. Is it fair and reasonable? The new legislation requires brokers to disclose the commissions they are paid by lenders.
Always remember that if a broker secures you a loan that adheres to all of the requirements set out in the agreement that you have with the broker and you decide not to accept it, you’ll probably have to pay the broker’s fee regardless.
It is important to consider the criteria of independence and reliability when selecting a mortgage broker. If a person you’re dealing with fulfils these criteria, then follow your instincts. A broker’s reputation and past performance are also strong indicators of their worth.
20 questions to ask your broker
1. What length of time have you been in this industry?
2. What number of lenders are you accredited with?
3. Who do you write most of your loans with, and why?
4. Is there a charge for your service?
5. Are you licensed with ASIC or are you accredited?
6. Are you a member or a representative of an industry group? Do you belong to an industry body?
7. Have you developed a strategy to address the current interest rate outlook?
8. What fees might I have to pay for establishment, legal, valuation, and ongoing fees? Are there other fees?
9. Do you own a mortgage? Do you have a mortgage? If so, with whom and why? Is it fixed, or is it variable?
10. What is the state of business?
11. Could I speak to any of your clients?
12. What can you offer other brokers and lenders that they cannot?
13. What is the process of your service?
14. Are you an expert in one type of client?
15. How can I be sure you will look out for my best interests?
16. What will you do to help me get a loan?
17. What happens when the loan is paid off?
18. What happens if my bank or lender makes an error with my loan?
19. Have you received any testimonials?
20. Which industry training or qualifications are you certified in?