Can a mortgage broker help you onto the property ladder sooner? They can certainly help the process along and let you know where you stand.
Which perhaps isn’t that surprising when you consider their primary function is to match clients to loans that best suit their needs.
That said, not all brokers are created are equal, and so you should interrogate their reputation and methods before giving them your business. Doing so will simultaneously allow you to provide your prospective broker with an accurate picture of your current finances and future goals, which is absolutely crucial to a successful engagement.
Be clear about your financial position and highlight any outstanding debt or ongoing monetary commitments you may have. And weave the following ten questions into your discussion.
1. How will you decide which loan is best suited to my personal situation?
This question serves two purposes. First, it will help you weed out brokers who prioritise their commission above your interests. They won’t admit as much, but you should be able to discern their motivations from the way they answer this question.
Second, you’ll gain an insight into their way of thinking. An open reply that starts by explaining how their recommendations would depend on a number of factors suggests they are prudent and diligent. A rushed reply that provides one or two specific options without stating the need for further information suggests otherwise.
2. Are you a licensed home loan broker? Are you a member of the Mortgage Finance Association of Australia or the Finance Brokers Association of Australia?
There are plenty of accredited brokers out there, so don’t roll the dice with an unaccredited one.
Only work with brokers who are registered with the Australian Securities and Investments Commission (ASIC), and preferably those who are also members of renowned professional associations.
3. How much experience do you have?
Qualifications are one thing; real-life experience, something altogether.
Politely ask your prospective broker how many years they have been working and how many loans they have successfully written during that time. This will give you a good insight into how easily they can navigate the system.
4. How will the lenders pay you?
If the broker is a member of the Mortgage and Finance Association of Australia (MFAA), they are required to disclose this information under the MFAA Code of Practice.
Finding out what type and how much commission each lender will pay your broker will provide a valuable insight into the service they may provide you.
5. How many lenders do you have on your panel?
This is a simple one. The more lenders a broker works with, the more options they have to choose from when searching for the loan that best suits your needs.
If there are certain lenders they don’t work with, ask them why.
6. How much should I borrow?
Choosing to buy a home that’s well within your budget is the best way to avoid mortgage stress. And so you should always ask your broker to differentiate between what you can borrow and what you should borrow.
It’s important to note here, too, that you should let your broker know about any credit card limits, outstanding debt, and ongoing monetary commitments, as this will also have an impact on your borrowing capacity.
7. What fees will I incur when taking out a home loan?
Most brokers are paid by the lender, not the borrower. But you should still ask them whether they charge their customers fees before giving them your business, just to be clear. If they do, ask them why.
In addition to their own fees, quiz the broker on the lender’s charges. Ask for a detailed breakdown of all the potential costs – from application fees to lenders mortgage insurance – and request an explanation free from jargon. That way, you’ll know exactly what you need to pay.
8. What information do I need to give you to obtain my finance?
It’s worth asking this question so that you can prepare well in advance for future loan applications.
Ask your broker for a printed checklist of documents so that you can keep track of what work you need to do. And while you’re on the subject of finance, ask them to explain the steps you will need to go through to secure a loan.
9. What features are included in my new loan? And why are they right for me?
Once your broker has presented you with a list of potential loans, it’s time to drill into the specifics of each option, beyond the fees and interest rates.
Firstly, find out whether the loan is a fixed-rate or variable-rate loan. Then ask whether it comes with offset account and redraw facilities, and whether it allows you to make additional repayments.
Every time you discuss a new feature, ask your broker to break down why these features are right for you.
10. Can I choose to fix my interest rate at a later stage?
Chances are, your financial situation will change over the duration of your home loan. So having the flexibility to change from one loan type to another could be helpful.
Ask your broker whether your lender will allow you to do this, and if they will charge you for the privilege.
For more information on mortgages and to get an insight into securing your mortgage visit mortgagechoice.com.au.
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