Article by Manya Mehra. This article was originally published on ibuildnew.com.au and has been reposted here with permission.
When you’re in the market for a new mortgage, acquiring the mortgage you want can be a complicated and stressful process. As the market becomes more competitive, we no longer have to directly deal with banks and other financing institutions when getting a home loan. There’s a better option – a mortgage broker. They are highly experienced professionals and act as the intermediary between you and your lender. They can make the whole process much easier by recommending a financial solution that is right for your needs, help you fill out any necessary paperwork, answer any questions you may have about the process and most importantly, negotiate the best deals on the market for you. To help make sure you’re making an informed decision and choosing the right loan for you, we have compiled important questions you should ask your mortgage broker:
1. Are you a licensed member of the Mortgage Finance Association of Australia or the Finance Brokers Association of Australia?
Before the process begins and you ask any other questions, find out if the broker is licensed and belongs to any of the two associations mentioned above. Only work with brokers who are registered.
2. Why should I choose a mortgage broker instead of a lender?
Organising finance when purchasing a property is already as stressful as it can be, so you want to make sure that you’re in safe hands. Although this may be a straightforward question, you should challenge your broker with it. A good mortgage broker will have an intimate knowledge of a large number of lenders and should be able to guide you and offer you a loan and service that goes beyond what you would receive by just going to a lender.
3. How much experience do you have?
The Australian Securities and Investments Commission (ASIC) requires that brokers need to have a Certificate IV in Finance and Mortgage Broking in order to meet the minimum requirements to legally work in Australia. It’s always worth checking or respectfully asking your broker how many years they have been working and how many loans they have successfully written during that time.
4. How many lenders are on your panel?
A good mortgage broker will have access to loans from a range of lenders which will give them more scope to find the best loan package for you. The more lenders a broker works with, the more options there are for you to have access to a loan that will suit your personal circumstances.
5. How will you decide which home loan is best for me?
This question is important as it will help you scope out if your broker prioritises their commission above your interests. Your broker should be able to explain what each home loan option features and why they think it would be best suited for you and your personal circumstances. They should also be able to outline how they source these loan products from lenders and what the process is.
6. What is the fee structure?
It is important to ask your broker’s fee structure, which may not be the same for every broker. Most brokers earn commissions paid by the lender, not the borrower. However, some may charge borrowers a fee for their services. This could include an application fee, valuation fee and even LMI if your deposit is less than 20% of the purchase price.
7. What documents do I need to provide?
A good broker should provide you with a printed checklist of documents so that you can keep track of what you need to do. Generally, you’ll need to provide identification (driver’s license, passport), contact details, records of your credit history, proof of income and bank statements.
8. How much can I borrow?
The big question that plagues home buyers tends to be about how much they can actually borrow. However, before you get into it, make sure you know the difference between how much you CAN borrow and how much yous SHOULD borrow. Rather than encouraging you to borrow as much as you can, a good mortgage broker should be able to arrange a loan that will suit your current as well as your future financial circumstances. Let your broker know about any credit card limits and outstanding debts as that can impact your borrowing capacity.
9. What is the best rate available?
The interest rate you are charged on your loan is an important factor to consider when picking a broker. A good mortgage broker will give you a range of options, including several appropriate home loans with features to suit your circumstances at the lowest rate available.
10. What if my circumstances change?
Change is inevitable and your financial situation may change throughout the course of your home loan. A good broker should offer you advice is from the start of your loan till the end. It is important to ask your broker if your lender will allow you to have the flexibility to change from one loan to another and if they will charge you for it.
Need help getting started? If you are looking for apartments, townhouses or house and land packages and need help getting in touch with a reputable mortgage broker, speak to our one of our friendly team about how we can help you today.