How to Choose the Right Mortgage Broker for Your Home Loan

October 28, 2022  

A home loan is the most significant financial investment most people will ever make. But, unfortunately, it can also be the most difficult to navigate. This is primarily due to the vast number of loans, interest rate variables and conditions available.

This is where a mortgage broker comes in.

So, where should you start when searching for a mortgage broker? And what should you avoid? Read on to learn all you need to know about this important step.

What to expect from your mortgage broker

The job of a mortgage broker is to sift through the available home loans for your situation and budget needs, applying and researching on your behalf. With so many banks and lenders within the property market vying for your attention, a mortgage broker can help curb your overwhelm and clarify your decision.

After all, choosing the right loan with affordable fees and interest rates for your budget and circumstances is one of the most important parts of budgeting for your new home build.

How to choose a mortgage broker for your home loan

Once you’ve chosen between a mortgage broker or direct lender, selected your home builder, bought your land and filled your Pinterest board with new home inspiration, you might feel like you’re running out of decision-making energy. However, there are a few more decisions to make. A significant one is choosing the right mortgage broker. Unfortunately, they are not all made equal and are not all suitable for your situation. 

Our top tips for choosing your mortgage broker include:

  1. Do your homework
  2. Understand commission
  3. Look for experience & qualifications
  4. Ask about their lender pool
  5. Shop around & ask questions

Let’s take a look at each of these steps in more detail…

1. Do your homework

You will need to do a little bit of homework before signing on with your mortgage broker.

First, check out some of the loan features and loan products on offer so you have a good idea of the market, and contact several mortgage broking companies to see what they can provide. Be prepared to scrutinise their recommendations and look for one that will find the best option for you, not one that will simply get approved.

2. Understand commission

Most brokers get paid based on a commission basis. If your broker only accepts upfront commissions, this may influence them to recommend a larger loan than you’re comfortable with. A trail commission, on the other hand, provides payment to the broker over the life of the loan, which is more comfortable for many home buyers.

3. Look for experience & qualifications

At the very least, your mortgage broker should have the right licensing to provide you with a loan. This should be clearly displayed or easily accessible. In addition, they should have an Australian Credit License to act as a credit representative. Look for mortgage brokers with a Certificate IV in Finance and Mortgage Broking or higher-level education in finance, economics, or accounting. Additionally, your broker should have interests and experience in your situation.

4. Ask about their lender pool

Brokers are limited to their own lists of banks and connections, and some may even be owned by bigger banks. A good broker will have a range of options for you without bias.

5. Shop around & ask questions

Don’t make your decision too quickly, and don’t be afraid to ask questions. How clearly your broker explains things to you and how many options they’re willing to present can tell you a lot about what they will be like to work with.

What to avoid when choosing a mortgage broker

  • Poor communication skills 
  • No access to an example of their services or customer reviews 
  • A small number of lender options to purchase, (i.e. under 10) 
  • They aren’t pre-qualified, and have little experience 
  • They request upfront commission only 
  • Their options are consistently out of your budget 
  • They are connected to or owned by a major bank

 

How to compare mortgage brokers

Choosing the best, most suitable mortgage broker for your home loan comes with some homework. The best way to begin your research is by comparing a few top contenders.

When evaluating your options, ask your mortgage broker the following questions:

  • How many lenders are in their pool? 
  • Are they licensed? 
  • What fees and commission do they charge? 
  • What will the borrowing costs amount to? 
  • What interest rate is best for my situation? 
  • What is the home loan comparison rate?
  • What is the best home loan they can offer?
  • Can they help with pre-approval, or should I come pre-approved?
  • What loan features are on offer?
  • What information and identification will I need for my home loan application?
  • What happens after I apply? 
  • What will you do throughout the life of the loan? Will you help me find better rates?

 

The benefits of using a mortgage broker

Saves you money

Choosing a home loan is serious business, and it can have the power to make or break your financial situation. Your mortgage broker will select the deal that will save the most money in the long run, particularly for inexperienced home buyers prone to signing up for the first loan that says ‘approved’.

It saves you time

The home loan process can be very time-consuming. There are many phone calls, emails, meetings, and paperwork required before approval. Sorting out your mortgage can start to feel like a full-time job (on top of your actual full-time job!).

When using a broker, you will discuss requirements and submit paperwork only once, letting them do the legwork of researching and applying.

A greater pool of options

Unlike the step thousands of people take to apply through their local bank when using a broker, you will have a much wider pool of home loan options to choose from, including some you may not even know about. This can help you to secure a better option with features and products that suit you perfectly. 

Protected credit score

Applying for multiple loans can take its toll on your credit score, and brokers have all the latest tips, tricks and insights to assess your borrowing power and get you approved without sifting through denials first.

Quick comparisons

Sure, Google provides a lot of information on comparing different home loans. However, it can quickly become overwhelming and difficult to understand. If you’re time-poor or simply don’t want to spend your weekends researching repayments, fee structures and comparison rate calculators, a mortgage broker can provide the perfect solution.

Priceless experience

A mortgage choice comes down to more than fees and interest rates, and your broker will understand all the subtleties of what will eventually impact your bottom line. This can help you avoid mistakes and make the most of opportunities.

Fee management

Many different fees exist when signing onto a new loan product, from the application fees to the appraisal fees. Your broker can navigate these for you, sometimes even negotiating with the relevant bodies to eliminate the fees altogether.

 

Choosing the best mortgage broker, loan officer, or lender can make a real difference to the home buyer, whether the property is their first new home build, investment property or future source of passive income.

Our experience in the custom home building industry means we have seen it all when it comes to mortgages, and as a result, we can offer up-to-date advice on the best way to navigate your borrowing journey. Get in touch with our experienced and friendly team of today to discover how we can get you closer to making your dream home come to life.

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