Why use a mortgage broker?
If you are in the market for a home loan you will spot advertised interest rates everywhere. They will pop up on your phone, you’ll see them online and in newspapers, on billboards and TV. You can’t get away from them.
Let’s say it’s the weekend and you are out shopping, you see a good rate and you decide to talk to the bank. Then you see another, and another. They all look good and it gets confusing.
A mortgage broker’s job is to make finding a home loan simpler by shopping around for you. It is their business to know all the lending deals and find the best home loan to suit each situation.
And better still, they will also know whether there are better rates to be had that are not advertised.
Before we look further at brokers let’s consider why people go directly to a bank for a mortgage.
A home loan direct from the bank
Many people have been with their bank for a long time and for first home buyers most will still be with their first bank. So there’s loyalty, existing relationships, trust and a feeling of security.
In many cases it is also convenient to use your bank, simply because it doesn’t mean changing accounts, cards, direct debits and it’s easy to link existing accounts to the new mortgage.
Then there’s all the advertising. People know about the bank’s interest rates because they see them all the time and profile is important for many people when it comes to making such a big decision.
Now let’s look at using a mortgage broker
Let’s go back to the shopping story. You’ve returned home and start to talk with your partner about the range of home loan rates you saw. You start to consider phoning each of the banks and arranging a chat, but then you think maybe there’s someone who could do this for you?
This is where the broker comes in because he or she will provide advice and choice.
A broker is an arranger or negotiator of a deal between one party and another, and in this case it is between you who wants to buy a property and a lender. And guess what? In most cases, the main lenders brokers deal with are all the main banks.
And there’s more.
Unadvertised mortgage rates
As we’ve mentioned, a mortgage broker will also tell you about rates that aren’t advertised – sometimes called wholesale rates. These aren’t available all the time but it’s worth asking because they are lower. Think of these as a discount in a shop.
Home loan and mortgage incentives
A broker will also know about any incentives from different banks to move your mortgage. A lender will benefit from your mortgage business, so they will hang carrots to entice you to move, such as a cash incentive to cover legal costs or even special gifts.
What if I don’t fit the bank’s criteria?
One very big reason for using a broker is if you don’t fit the criteria for a home loan direct from a bank. For very good reasons, banks focus on people who fit their definition of an ideal customer. It doesn’t make sense for them to move too far off track.
But we are not all ideal customers. We may be struggling with a deposit, need to consider a family situation, or have a credit history that needs working through. A broker will look at the whole picture and advise on the best solution to suit you and your family’s needs. A broker will always be able to help you find an answer and will consider all lenders, not just the banks.
More reasons for using a home loans or mortgage broker?
Using a broker means you are a bigger fish in a smaller pool. You will always receive personal service from a bank but with a broker you won’t get the corporate structure and formality. Brokers are smaller businesses so you will always be more important to them.
Finally, using a mortgage broker is free, because their commissions come from the lender. This is also the case when going direct to the bank but it’s important to mention.
Many people are just happier using their bank for home lending but if you have an eye for a deal, like choice and want to shop around, you should consider a broker.
Of all these benefits, choice is the key. Brokers will have all the important relationships with the major lenders, so the banks will still get most of the business, but it may just save you some money along the way – and we think this is very important.
Posted 14 Dec 2016