If you like nothing more on a weekend than to pore over interest rate updates, decipher mortgage jargon and scroll through bank T&Cs, then you won’t need to call on a broker to find a home loan. But if you’d rather spend that time sipping a latte with your feet up, you’d better outsource the hard yards.
In theory, the vast array of home loans available should benefit homebuyers, but the amount of choice can be overwhelming. So it’s no surprise that brokers now provide more than 50 per cent of mortgages in Australia. Here are some of the reasons why.
It’s technically free
Mortgage brokers are free in that you don’t pay them directly. Their pay comes from the commission they receive from the lender they ultimately pair you with. The Domain Home Loans online comparison tool can help put you in touch with potential brokers.
It pays them to help you
So how do you know they’re not favouring the lenders who pay the best commissions?
“I’ve found in the last two or three years that all the conventional banks have been paying virtually the same commission,” independent broker Brian Wood says. “The non-traditional lenders might not but in the main it’s the same.”
Brokers are actually compelled by law to reveal the details of their commissions with the introduction of a disclosure document under the Mortgage and Finance Association of Australia’s National Consumer Credit Protection Act.
“We’re randomly audited all the time to make sure we’re doing the disclosure,” Wood says, adding that it’s always a good idea to ask your broker to provide such information upfront.
Niche or mainstream
There are two options of brokers homebuyers can choose to go with, niche or mainstream. Photo: Jessica Shapiro
It’s up to you whether or not you go with a broker affiliated with a larger network of lenders such as Aussie Home Loans, which has access to 21 lenders and around 2700 loan products.
“Aussie lenders cover 95 per cent of all residential settlements in the marketplace today,” chief executive James Symond says.
While mortgage brokers usually have a good network of lenders, they can only, according to Wood, market and sell loans they’re licensed to talk about, so your broker might not be accredited to talk about every lender and bank out there. Many brokers choose to take a niche route, preferring to stick with two or three lenders that meet their specific customers’ needs.
Just to succeed in an increasingly competitive industry, brokers have to keep their ears to the ground, so you can rely on most having a good depth of knowledge.
Wood says some “young loan managers” show limited knowledge.
“They follow the script exactly because that’s what they have to do. They suggest you diversify your investments, they sell you life insurance, health insurance – everything else they’ve got,” he says. “It’s very difficult to go into a branch of any bank and get someone who really knows what they’re talking about. And they’re getting paid whether they get you that loan or not. Most brokers, you’ll find, have been around for a long time.”
Symond agrees: “It’s harder to be a broker today than ever before. With Aussie there is a significant upfront training course and year-long mentor program plus a diploma. The bar is very high.”
Aussie Home Loans CEO James Symond says a professional mortgage broker will recommend the best loan for the customer. Photo: O’Neill Photographics
Symond says the nature of the broker industry is that most are small businesses and as such rely on reputation and word of mouth. Bank loan officers promote their own products and only process mortgage loans originated by their employer. Of course it’s similarly important to ask whether a non-independent mortgage broker is favouring their own products. “There is no benefit for our brokers to sell a home brand product over another on the panel,” Symond says. “A professional mortgage broker will just recommend the best loan for the customer.”
If you have an outstanding bill or two that have blackened your credit rating then banks are likely to knock you back without question. There are lenders, however, that specialise in bad credit loans and brokers can put you in touch with these.
A good mortgage broker will tailor their home loan offering to meet their client’s needs. Photo: Rob Homer
Mortgage brokers are able to work one-on-one with each client, evaluate their specific needs and find a lender that suits them. The customer can then come back to that same broker for future loans, with the benefit of that background knowledge and previous research.
Life’s too short
Don’t forget that the forms you need to fill and the paperwork you need to locate once you’ve finally chosen your loan make for a whole new headache, but your broker can help you with that too. For many, tackling the jargon and maths of home loan research is so far removed from their personal skill-set tit can be difficult to just understand the basics.
Wood says that in his experience those who do their own research and manage to find a cheaper loan are usually derailed by the pedantics of fine print later on.
Symond agrees: “It’s so competitive and confusing today you need an expert to help you navigate through it all. It’s not good enough to go to one lender. Broking has grown out of, really, helping all borrowers navigate through what is one of the most complicated mortgage markets on the planet.”