Mortgage brokers are finance professionals who help borrowers organise home loans with mortgage lenders.
A good mortgage broker can help you to:
- Work out your financial needs and property goals;
- Calculate how much you can afford to borrow and comfortably repay;
- Find a range of home loan options that could suit your needs, which may include broker-exclusive home loans that aren’t typically advertised;
- Compare the interest rates, fees, features and benefits of different home loans;
- Negotiate with a lender to help you get a better deal, and;
- Manage the application process, including keeping track of the paperwork.
Brokers are licensed and registered with ASIC and are typically members of industry bodies such as the Finance Brokers Association of Australia Limited (FBAA), the Mortgage & Finance Association of Australia (MFAA), or the Mortgage Industry Association of Australia (MIAA).
Mortgage brokers are obliged to act in your best interest, so you can be confident about the advice they offer.
What are the benefits of using a mortgage broker?
- Save time and effort: Comparing home loans can be an intimidating and time-consuming experience, especially if you’re unfamiliar with the mortgage market. Getting a broker to do a lot of the hard work for you could help you quickly find a shortlist of mortgage options that could suit your financial situation and personal goals. Brokers can also negotiate with lenders on your behalf, which could help you get the deals you want.
- Expert advice: If you aren’t sure which home loan may best suit your needs, a mortgage broker can offer specific advice around which loans could help you reach your goals.
- Borrow more: Between a broker’s familiarity with lender eligibility criteria, and their access to special broker-only deals that aren’t usually advertised, you may be able to maximise your borrowing amount, which could expand your home buying options.
- Improve your chance of approval: A broker can help you to fill out your home loan application the first time, so there’s less risk of time-consuming back-and-forth with the lender due to missed signatures or clarifying questions. These applications can often be processed faster, which could give you access to pre-approval sooner.
- Help for specialist borrowers: Self-employed freelancers, contractors, small business owners, and others who can’t provide payslips as proof of income could struggle to successfully apply for standard home loans. A broker may be able to put you in touch with lenders that are more likely to accept your financial circumstances and help you get your application together.
- It’s usually free: Most mortgage brokers in Australia won’t charge you a fee for their services. Instead, they’ll be paid a commission by the bank or mortgage lender when you sign up with them as a new mortgage customer.
What are the risks of using a mortgage broker?
- You don’t compare the whole market: Brokers need to be accredited with a particular lender to be able to work with that lender. A typical broker will be accredited with anywhere from 10 to 30 lenders, such as the big four banks, smaller banks, credit unions and non-bank lenders. By doing your own research, you could potentially find an alternative lender that the broker doesn’t work with, which is offering a deal that also suits your circumstances.
- Risk of bias: While brokers are obliged to act in your best interest, there is still a risk that your broker could still be biased towards a particular lender, which may not offer the best option for you.
- Fees for commission-free service: One way to avoid some of the potential bias risk of using a broker is to choose a broker that doesn’t take commissions from banks. However, these brokers may be hard to find in Australia, and you’ll need to budget for their fee alongside your other upfront home loan costs.
- Relying on a third party: Not every broker can meet your expected level of customer service. For example, if you get stuck waiting on a broker to get back to you on an urgent matter (brokers are often looking after a large number of clients simultaneously), in a worst-case scenario you may not receive your pre-approval in time to buy your dream property.
