Buying a home is one of the most significant milestones in your life! And although less exciting, a home loan is part and parcel to this.
So if you’re about to take on what is likely to be your largest debt, you’d better make sure you’re getting the right advice. And there is much more to consider than the interest rates on offer.
Many people are now turning to mortgage brokers, over going direct to their bank. This is because brokers generally have a panel of lenders and can help them find the right home loan to suit their goals and objectives. Brokers also hold their hand through the process.
To help you make sure you’re working with an experienced finance professional, who has your best interests at heart, we’ve put together this list of questions every client should ask their mortgage broker:
- What level of experience do you have?
Although there are many things which make a good broker, experience is an important one. Make sure you are comfortable that your broker has been around the block a few times and is well placed to find the right solution for you. If your broker is new to the industry, make sure you’re satisfied that they have a strong support network around them.
- Are you a member of the Mortgage Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA)?
Finance professionals who belong to the MFAA or FBAA must have minimum levels of education and also undertake ongoing professional development. Further, there are high ethical standards which their members must adhere to. If your broker is a member of one of these industry bodies, you can draw a significant amount of comfort from this.
- Do you offer a range of different lenders?
In contrast to going directly to a lender, brokers have a panel of lenders available to them. The broader the panel of lenders, the wider the range of products that they can compare. If there is a particular lender who you want to be included in your broker’s research, make sure that lender is on their panel.
- How do you determine which loans to recommend to me?
Just because a home loan is right for someone else does not necessarily make it right for you. Talk to your broker about the process they use to prepare their recommendations.
- What commissions do you get paid for writing my loan?
Brokers generally receive an upfront and a trailing commission from your chosen lender, for assisting you with your application. This commission must be disclosed to you before your broker lodges an application.
- Do you charge a brokerage fee for assisting me with my application?
In addition to the commission mentioned above, some brokers also charge an additional brokerage fee. This fee must be disclosed to you in advance of providing credit assistance and your agreement documented.
- Are you able to cater for my holistic needs?
As well as assisting with your immediate financial needs, a good broker will be able to connect you with other professionals who can cater for your holistic needs. These needs include, property consultants, legal advisers, accountants, financial planners, and insurance advisers.
Once you’ve found the right mortgage broker, you can kick off your discussions with these two fundamental questions:
- How much can I afford to borrow?
Every lender has different ways of assessing how much you can afford to borrow. A good broker will not only be able to help calculate how much you can currently borrow, but make recommendations on how to maximise your borrowing power.
- How much deposit do I really need to save?
The deposit that you need to save depends on a whole range of factors. Although 95% finance is available, closing costs, as well as Lender’s Mortgage Insurance (LMI), need to be considered. First Home Buyers can often benefit from various government grants, as well stamp duty exemptions and concessions. These can help reduce the deposit required. In fact, Michael was able to get the keys to his first home with a low deposit of only $7,800.
Want to discuss your situation with a mortgage broker who has solid answers to all of these questions?