By Mortgage Rebate - Australia
Mortgage broker.... two words that create different feelings for different people. There are definitely some bad stories out there, but is it really fair to tar all brokers with the same brush? After all, their are bad people in every industry including the lenders who are increasingly pressuring ordinary staff into sales based performance measures.
There is not doubt that obtaining your home loan through a mortgage broker is more convenient and will save you time. However dealing with a good mortgage broker will also save you ongoing stress and possibly thousands of dollars by helping you find the right loan, the right lender and staying with you in good times and bad.
Let's start with some basics. Although there is some debate as to who a mortgage broker works for and how they operate, it is generally agreed that a mortgage broker is an intermediary between lenders and borrowers. The question of who the broker is working for becomes grey because they are paid by the lender, yet much of the benefit of a good mortgage broker is given to the borrower.
Benefits of a good mortgage broker.
The first benefit is mortgage brokers deal with and understand a number of lenders and hundreds of different loan types. A good broker has the ability to listen to what you need, assess how you use your money and develop a loan structure that has the necessary features to help you manage it and pay it off as quickly as possible. Good brokers then take these features to the market to source out the best value home loan that offers these features.
A good mortgage broker will also understand the differences between the different lenders wordings and will be able to help you steer around marketing traps carefully placed by the lender to win your business. So by talking with a good mortgage broker, you have a single conversation that gets tested across hundreds of home loans.
Another benefit is a good mortgage broker stays with you as your needs change. Lenders simply can't. Home loans take years to completely pay off and during that time, lenders will slip from being competitive to not so competitive, being helpful, to not being so helpful. When it comes time to change, your mortgage broker can change with you, so you're not left to start again every time your loan gets stale.
The problem with mortgage brokers.
There are two problems with mortgage brokers. The first is that many, although not all, work on commission only. This creates a financial pressure for them that may lead them to make improper recommendations due to either greed, desperation or a combination of both. Contrary to popular belief, many lenders also set sales performance targets and incentives for their staff, whether they are tellers or 'home loan specialists'. Worse still, there are now quite a few small business franchise operations amongst the non bank and bank lenders, that appear bigger than they really are, which lulls the unwitting borrower into a false sense of security.
The second significant problem with mortgage brokers can be a lack of experience and capability. Whilst it is true that the longer you do something, the better at it you should be, time is not the only measure and even some brokers who have been in the industry for several years inadvertently make mistakes.
The challenge for borrowers.
The Australian home loan market is bewildering. Common terms like Offset have different meanings depending on which loan and which lender you are dealing with. Even basic terms like Fixed Rate have been hijacked by unscrupulous lenders to have a different meaning. Consequently, borrowers need to place their trust in someone. It is impossible for anyone outside the mortgage industry to accurately compare home loans from more than about two lenders. Borrowers simply don't have the time, the tools or the experience to pit themselves against lenders out to win their business.
Instead of attempting to evaluate home loans, smart borrowers are now developing the knowledge to identify a good mortgage broker as that is a lot easier to do than spotting a good home loan. However if you are thinking of using a mortgage broker to assess or arrange your mortgage, do more than ask a friend for a recommendation.
Spotting a good broker.
Spotting a good mortgage broker isn't that hard. Just asking a short set of questions and paying close attention to the answers is all you need to do. A good mortgage broker:
1.Won't charge you any extra, unless they refund 100% of all commissions they receive.
2.Has a minimum of three years mortgage brokering experience or they are required to test each recommendation with a broker who has three years or more experience before they make any recommendations to you.
3.Will not make recommendations off the top of their head.
4.Does not use a single software package to identify solutions on the spot.
5.Will put their recommendations in writing and explain the reasons for the recommendations to you.
6.Does not rely on commissions to survive.
7.Is paid regardless of whether you take up their services or not.
8.Has the appropriate professional memberships (COSL and either FBAA or MFAA).
9.Is fully insured for Professional Indemnity.
10.Make sure your mortgage broker can tick all of these boxes. If they give you a mortgage rebate, that's a bonus.
©2008 Mortgage Rebate
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