It’s time to chat to a mortgage broker, you’ve arranged a time to catch up and want to make sure that they are the best fit for you in your situation – So what questions should you ask?
We’ve put together 8 questions which we believe will help you get to know your mortgage broker better and see if they are the right fit for you.
How much experience do you have as a mortgage broker?
In finance experience counts for everything, it can be the difference to knowing you qualify for a loan or not. It is worth asking your mortgage broker how long they have been in the industry for, have they had banking experience previously or are they completely fresh to the industry? This gives you a good sense on their background and if they are suitable to help you in your situation. You can even go one further and ask if they own property? Knowing they have sat on the other side of the fence can help give you some confidence they will be able to help you navigate the home loan process quickly and easily.
These questions will give you an understanding of their background, where they’ve come from, and what they have done.
Why should I use a mortgage broker rather than going straight to the bank?
Although you might expect the answer to be obvious, it is always worth asking your mortgage broker why you should go through them rather than going directly to your bank. In general using a broker will give you advantages like seeing options across multiple lenders, understanding what the mortgage market is doing and what different policies are available for you to take advantage of (for example 90% no LMI loans for pharmacists or medical professionals), but by asking the broker this question it gives you an understanding of the areas they specialise in.
We find competition between the banks is a good thing, and even though you might have been with a bank for years and years they generally don’t reward loyalty in the form of discounts as they just assume you’ll stay with your existing bank. So we have seen lots of situations where we have been able to negotiate really large discounts for customers who stay with their own bank because the bank understands the mortgage broker can easily take them somewhere else.
Ask the broker if they are members of the Mortgage Finance Association of Australia (MFAA) or Finance Brokers Association of Australia (FBAA)?
All brokers across Australia need to be a registered member of either the MFAA or the FBAA, these associations ensure professionalism of brokers across the country through required education requirements to make sure the brokers keep up to date on the latest policies and compliance procedures. If your broker isn’t a member of the MFAA or FBAA it should be considered a red flag as they could have been made to leave the industry due to issues in the past so its worth asking the question or doing a quick search online before you see them.
How do you decide which loan is best suited to my personal situation?
Ask your broker how they will decide which loan will best suit your needs, as well as find out their process and how they operate. Firstly if they are saying they will use the lowest rate to best suit your needs you need to ask more questions, a low interest rate loan could attract additional fees or have restrictions for example not having an offset account which could cost you much more in the long run.
In addition to this its good knowing their process and what goes on in the background to get your loan approved – do they have other team members or support staff? If they are a one person brokerage what happens if they get sick, or take holidays – will your loan still get processed? It’s always good to know they have a team working in the background to make sure you not only get the best deal, but you are also looked after in the process.
What commissions do you get paid for writing my loan?
It’s always good to find out how much commissions they get paid for doing your home loan. In general mortgage brokers get paid commissions from the bank that gives you your loan – this doesn’t add any costs to you as a customer but in some cases there are brokers who also charge fees for their services. These are typically on commercial loans or development finance, but its always best to know up front what you’re getting into so you don’t get down the process and unexpectedly find out you need to pay your broker extra fees.
At Hunter Galloway we do not charge any additional fees for our services.
Do you offer a range of different lenders?
The majority of accredited mortgage brokers have at least 20 different lenders and bankers they can utilise to help give you the best home loan – but – these days not all lenders are accepting loans from all brokers. There are different volume requirements, where a broker who doesn’t do much business is unable to write mortgages through a bank like the Commonwealth Bank (CBA) as they require brokers to submit a minimum amount of home loan applications per year to maintain their accreditations. Again its important to understand this up front, to know which banks are on the brokers panel and which aren’t – and importantly why?
What is a comparison rate?
A comparison rate is a brilliant tool that can help you work out the actual cost of a loan. It factors in all the interest rate expenses, loan fees and charges to boil down into a single percentage rate. Ultimately this can help you compare one lender to an other, factoring in all fees and charges.
For example, the broker might tell you about a loan that has a variable interest rate of 3.99% and comparison rate of 4.54% based on a loan of $150,000 over 25 years. If you are borrowing a loan of say $500,000 or another figure and your loan term is 30 years the 3.99% rate is not really true, and will be higher once you factor in fees and charges so don’t let a really cheap rate trick you up. Comparison rates can help you work out which lending option makes sense for you factoring in all fees.
What impact will my credit card limits have on my borrowing capacity?
Lastly, ask what impacts your credit card limits would have on your borrowing capacity. Even if you don’t owe anything on your credit cards, your credit card limits will have an impact on your borrowing capacity, and if you’re looking to purchase your dream home and need to lend a bit more money reducing your credit cards will have a positive impact.
For example a $10,000 credit card limit, which has nothing owing on it could reduce your borrowing capacity by up to $40,000 – this is 4 times the credit card limit, and could negatively impact your dream home purchase! Knowing what impact these cards will make can help you make better decisions before starting the entire home loan process.
What does this all mean in short?
In summary before choosing the best mortgage broker Brisbane you need to ensure you ask some of these questions, including finding out what their past experience has been and how long they’ve been in the industry.
Knowing how they will choose your home loan, what commissions they are paid and a few simple questions around comparison rate and your credit card limits can make the difference between choosing a good and a great mortgage broker Brisbane.
All of these questions will help you make a better informed decision and make sure you’re working in the right broker for your situation!
Help this is all confusing
If you are a wanting to buy a home speak with one of our experienced mortgage brokers to walk through the next steps with you.