There are many benefits to you by using a professional mortgage broker.
While legislation and regulation imposes a “best interest’ responsibility on all brokers, as in all professions some brokers are simply better than others.
We became mortgage brokers long before the the regulators stepped in and we have always made our client’s best interest our first priority.
Today mortgage brokers generate over half (55% Feb 2020) of all home loans in Australia.
Why? When you go to your bank and ask about a home loan, they will “hopefully” give you the best product/rate that is available from that bank.
At Illawarra Mortgage Brokers we have access to a broad panel of lenders including all of the major banks, regional banks and mutual lenders.
We can often negotiate additional discounts in many cases. With a wide range of lenders, some of the suggestions you may receive, could be lenders you don’t know much about or indeed haven’t heard of. Often the smaller lenders have a lower interest rates. less fees and/or better features than a major lender. It’s our job to stay informed on who is offering what and who is not.
Mortgage Broker Fees
This is a big topic in Mortgage Broker circles. At present the lenders pay a commission on the introduction of new home loan business. They also pay a retainer to the brokers to be there to answer questions during the life of the loan. Very few brokers charge an additional fee to the client for arranging a home loan. In the past some brokers charged customers fees in addition to the commission received. (There aren’t many of these fee structures left in the industry). This is however a good question to ask a broker you may be thinking of using. ” Do you charge the client a fee to arrange a loan” If they do, check with another broker or two to see if the advice you are getting is consistent.
Mortgage Broker Independence
Because a Mortgage broker can’t possibly represent all financial institutions ( there are over 450 different institutions in Australia) we are prohibited from calling ourselves “Independent”. Some brokers however, are less independent than others. Did you know that the major banks own a large portion of the main mortgage broking aggregation groups in Australia.
So a good questions to ask your prospective broker is “are any of the loans you are suggesting issued by a lender that owns or controls your organisation?”.
A broker that is in a bank owned group can still offer you a wide variety of loan options. You may get the same selection suggested to you by a broker not in such a group. As long as you know if there is any link, you can make an informed decision.
Mortgage brokers are required to be licenced and you can check if the broker you are talking to is licenced with ASIC and must be a member of the industry associations either the MFAA here, or the FBAA here.
In summary, If you want an experienced professional to navigate the available options and to do the “heavy lifting” for you in terms of negotiating the policy and interest rates of a lender, then a mortgage broker who will advocate on your behalf will make the whole transaction easier. The service shouldn’t cost you anything and you will almost certainly a home loan that is suited to your needs.
This varies widely depending on the type of loan eg: home loan as opposed to a commercial or rural loan. Some loans pay upfront while others pay a trailing commission, while many home loan lenders pay both.
Typically on home loans, these range from 0.50% to 0.80% upfront and 0.15% to 0.30% trailing. These amounts are inclusive of GST and most brokers have to pay a percentage of their commission plus other costs to their aggregation group.
By law your broker must disclose, in writing any commission they will earn before they can proceed with an application.
The important thing to remember is that the home loan we arrange for you will have an interest rate the same or lower than the interest rate you can get by going direct to the bank.
That will depend on the broker’s policy which must be fully disclosed to you before proceeding with your application. The application process for your broker is very time consuming. Due to regulation over the last 10 years a loan application now takes at least twice as much work as they did 20 years ago.
As a result many brokers will charge a fee, if the application submitted is approved but does not go through to settlement. Discuss this with your broker before proceeding.