How to find a good broker
With the many changes taking place within the lending sphere over the past year or two, it is now more important than ever to choose the right broker in order to achieve your desired goal. The best way to know if you have found the right broker is to talk to them face to face and see if you believe they are working in your best interest. Do your research beforehand to see what their experience is, what qualifications they have, and if they come recommended by friends or family.
How much does a mortgage broker charge?
The cost to you to use a mortgage broker will largely depend on which mortgage broker you choose to do business with. In Australia, all mortgage brokers are paid a commission by the lenders to act as the intermediary between you and the lender and to facilitate the financial transaction through to settlement. The commissions paid by each lender varies, however these variations tend to me minor. If the loan does not settle, then there is no remuneration paid. There are also instances where a mortgage broker will not be paid anything at all – for instance, where the mortgage is of such a low amount that the lender does not consider it sufficient enough to pay for or where you are simply negotiating a lower interest rate or swapping to another type of loan. In most cases, mortgage brokers also have to pay back some or all of the commissions forwarded if the loan is subsequently paid out within a certain amount of time – usually 12 – 18 months, although the timeframe can be longer.
What questions should I ask my mortgage broker?
- How much experience do you have? Within the industry, brokers with less than 2 years experience are not considered fully qualified independent brokers.
- How many lenders do you have on your panel? You want to ensure that your broker has access to a large number of lenders – 25+ is a good figure.
- How do you get paid? Find out whether or not the broker charges a brokerage fee on top of the commission they will be paid by the lender.
- Are you available outside of normal business hours? At times, you will need to speak to your broker at evenings and weekends, especially if you are wanting to buy a house. It’s best to check how flexible your broker will be to speak to you at these times.
- Do you offer a mobile service? With such busy lives, it is not always possible to meet with a broker in their office. Find out if your broker can come to you rather than you going to them.
What does a mortgage broker do?
A mortgage broker acts as an advisor to you. Their job is to ascertain your lending requirements and source suitable options to meet your needs. The key word here is suitable. Mortgage brokers are governed by strict compliance rules and must not act to your detriment in order to make a financial gain. We have a pool of lenders that we are able to go to for your finance - once we have determined your needs and established which lenders will provide the best options for your unique circumstances, we act as a liaison between you and the bank until settlement of the loan.
What is an offset account?
An offset account is linked to your home loan account, and the balance is essentially offset against the principal amount, reducing the interest payable. For example, if your home loan is $500,000 and you have $50,000 in your offset account, you would only pay interest on $450,000.
How much deposit do I need?
The amount of deposit that you need to purchase a home varies between lenders. A deposit less than 20% of the property price means you will need to pay lenders mortgage insurance (LMI). Some lenders may allow you to borrow up to 95%.
What’s the difference between a fixed and variable home loan?
With a fixed home loan, your repayments remain the same month-to-month. With a variable home loan, repayments may change as they can increase or decrease in-line with changes to the RBA’s cash rate.
What’s the difference between a principal and interest vs interest only?
If you take out a principal and interest home loan, your repayments will include a payment to the original amount that you borrowed, plus the interest charged on that amount. With an interest only loan, your repayments only pay the interest, and nothing goes towards the principal amount.
What is the usual term of a loan?
In Australia, home loans are typically repaid over a 30-year term.
What will my home loan repayments be?
Your home loan repayments will vary depending on the amount you borrow and the interest rate you have secured. We have a range of calculators which can help show your possible repayments. It’s best to speak with a finance broker who can assist you when looking for a home loan.