Broker Vs Bank
Mortgage Broker Vs Bank – What’s The Difference
Some people just go to their existing bank/lender for a home loan. Alternatively, others may use a mortgage broker referred by their real estate agent, accountant, financial planner etc. without doing any independent research in the way of looking for their own options.Nonetheless, it should be realised that the end result with this kind of approach won’t necessarily deliver the best deal.
Dealing Direct – Because they’ve been with them for years, traditionally many people go down the route of organising their house mortgage with the bank or building society. Although it may seem to be the most convenient option, besides saving money there could be other reasons to do some research before making a final decision
Mortgage Broker – A mortgage broker is a go-between who can assist you to both source and negotiate the right deal on your home mortgage. Experienced mortgage brokers are able to deal with multiple lenders whose interest rates rate may be much better than what your immediate bank is offering. Many people don’t feel at all comfortable trying to haggle with banks, or they might not feel that they’re in the position to ask for a better interest rate.
However, if you’re able to get a ½ percent cut in your rate over a 20-30 year home mortgage this can be potentially huge money in the way of tens of thousands of dollars saved. So, whether you’re looking for a cheap home loan, the best home loan, refinancing home loan rates comparison, home loan repayment quote, a home loan pre approval, consolidation loans or where to find low home loan deposit lenders they can all be sourced fast by mortgage brokers. Many delight in the fact that it’s the most efficient method of getting the best-priced and efficiently structured mortgage.
What Does a Mortgage Broker Do?
It’s a much more personal experience when it comes to, what do mortgage brokers do? Because, the mortgage broker is introducing you to the multitude of offers available in the market. Something your bank isn’t going to do. They will hold your hand and guide you through the process. You avoid having to wear your shoe leather out shopping at various lenders and haggling with each of them to try and get the best deal you can.
One phone call and the mortgage broker will quickly sort it out for you. Home mortgage brokers can help you with many more aspects of a mortgage than just showing you the available interest rates. They can calculate how much would be truly affordable for you. Match you to the most appropriate home mortgage product for your circumstances. Not to mention showing you strategies to save money and even how to pay off your mortgage faster.
Additionally, expert mortgage brokers follow up to review your house mortgage periodically to see if there are ways to pay it off faster. Also, whether or not it’s still the right loan product for you, and importantly that it’s still competitive. You won’t get that kind of service from a bank. When was the last time a bank called you to see how you were going with your house mortgage? For people who aren’t used to negotiating, who aren’t certain what the right house mortgage product is for their situation, or for those who have a less than perfect credit rating, using a mortgage broker will save time, money and frustration.
Is Your Mortgage Broker Really Independent?
One would easily assume that when dealing with a mortgage broker you’re going to get independent mortgage advice. However, in recent times a number of the larger franchised mortgage broker groups have been steadily taken over by the major banks in Australia. We would suggest if you’re looking to get independent mortgage broker advice, then ask a couple of straight forward questions when you’re seeking a broker you’re going to be comfortable with.
Questions Worth Asking;
- Who owns your company?
- Is a major bank involved as a share holder in your company?
- How long have you personally been a mortgage broker?
How qualified are Mortgage Brokers
The Mortgage and Finance Association of Australia (MFAA) was established in order to monitor the activities of the many thousands of mortgage brokers now operating in Australia. In addition to ensuring that brokers are operating their businesses ethically it sets the educational requirements for its members at challenging levels. The market demands for ethical and qualified mortgage professionals are growing strongly.
More than ever home owners are turning to mortgage brokers for trustworthy advice on their housing and/or business finance needs. Credit advisers (or brokers) engage with their clients to determine their specific borrowing needs, borrowing capacity and borrowing affordability. They assist in selecting a mortgage that fits the borrower’s goals and objectives. Then manage the entire process skilfully through to settlement. Professional level mortgage brokers will have strong finance literacy skills, excellent people and customer service skills and the innate ability to closely listen to customer’s needs.
Loan brokers can also specialise in different areas such as:
• Residential Home Loans
• Investment Property Loans
• SMSF Loans
• Business Loans
• Reverse Mortgages/Equity Release
• Equipment Leasing
• Chattel Finance
• Car and Personal Loans
• Debtor Finance
• Commercial Property Finance
These days many mortgage advisers are now adding additional skills and qualifications to their portfolios and have expanded their client product services into the areas of general insurance and financial planning. A mortgage adviser or brokerage house is required to obtain what is known as an accreditation with a lender in order to represent and sell their product/s.
Most mortgage brokers/ advisers become accredited with a wide range of mortgage lenders. This is then called ‘the panel of lenders’. Mortgage brokers can only offer the loan products from the lenders that are on their panel. The requirements for accreditation vary from lender to lender, as too does the size of each mortgage adviser’s panel. Therefore, it’s well worth checking to ensure you have a good representation of lenders to choose from. Some lenders used to have minimum volume dollar loan requirements for the purposes of achieving and maintaining accreditation with them. However, this has mainly died a natural death.
Just like many similar businesses, home loan brokers are required to carry and maintain professional indemnity insurance. The MFAA requires all its members to maintain membership in the Credit Ombudsman Service Limited (COSL), or similar Australian Securities Investment Commission (ASIC) sanctioned External Dispute Resolution scheme (EDR) or be covered by a COSL membership. This is also a requirement for all brokers under the ASIC regime.
Will Your Mortgage Broker Charge a Fee
Pay Levels: Mortgage advisers get their remuneration from the chosen lender by the way of receiving first of all an upfront commission and then on a monthly basis a small trailing commission on each of the loans they have settled. It’s not normal industry practice for mortgage brokers to charge customers a fee for their services. However, due to the changes brought in by the new Credit Legislation it can mean some loan brokers can charge a fee as well as receive a commission. Consumers can ask and are encouraged to ensure that a mortgage broker discloses this information before they retain his or her services.
How Should You Choose a Mortgage Broker
You will find that the best mortgage brokers explain all aspects of the home loan application process to you clearly and easily in a way that you can readily understand. Be alert to brokers who may get defensive or condescending about when you ask direct questions, you may want to consider having second thoughts about working with them. It may mean that there are aspects of the mortgage industry they don’t understand and they’re trying to hide it.
You’re looking for your broker to return your messages promptly – ideally the same day — and always be up front and not try and “hide under the desk” per chance your loan runs into trouble for some reason. It’s also important that a loan broker stays calm when under pressure because without a doubt there can be a lot of pressure at times in the mortgage business.
Not all loans do settle quickly. It’s essential for maintaining a professional relationship that the loan broker gives their clients regular updates of what’s happening during the loan application process. For example for one reason or another unforeseen problems crop up with loan applications and these situations can cause loan applications to take longer than normal to process.
You are entitled to ask your potential mortgage broker how they would handle any of these unexpected situations if they arose. It’s important to take the time to find the right home loan broker. As you well know, once committed to a specific broker, it’s usually awkward to try and change mid-process without causing inconvenient delays. It’s much more productive to select the right one right from the very beginning.
- Has your broker answered all questions clearly to your satisfaction along the way?
- How prompt was your broker in returning your phone calls or emails?
- How long did your loan application process take?
Signs of a broker to avoid
A. You quickly get an interest rate quote without detailed questions being asked about what you’re really looking for.
B. You get pressured into submitting a loan application without due consideration to all of your needs.
C. You are asked for upfront money of any kind without genuine justification.
D. The mortgage broker readily tells you everything you want to hear.
Signs of a Reputable Mortgage Brokers
A. Are they members of professional associations like the Chamber of Commerce? Compulsorily they need to be members of the Mortgage and Finance Association of Australia (MFAA) or alternatively the Finance Brokers Association of Australia (FBAA)
B. What if anything could others be saying about them?
C. Check their mortgage broker license or Authorised Credit Representative status. They should be in good standing with ASIC.
D. Most importantly when they sit down with you, do they take the time to endeavour to understand your individual needs and goals? Do they really work at matching you with the best possible mortgage loan for your personal needs as well as reviewing with you the potential options?
Also see the Guide To Mortgage Brokers