A good mortgage broker can help you to find a home loan that meets your needs. Conversely, bad ones may focus more on the commission they can earn, rather than finding the best deal for you.
You need to be able to separate the wheat from the chaff, which means you should enter any meeting with a mortgage broker with the right questions.
We’re going to look at 20 great questions as well as the answers you should expect to receive to each one.
At Customers First Mortgages & Insurance we are licensed as a mortgage broker, but we use technology to give our customers greater transparency and make it easy. You can find out more about what makes us different here.
Question #1 – How Much Experience do You Have?
This question will allow you to establish what the broker can do to help you. Don’t completely discount brokers with little experience, especially if they work for an organization that has a good reputation or have access to quality mentors.
Still, an experienced broker will possess more experience, which they can apply to your situation.
Question #2 – Do You Have a Credit Licence?
Some mortgage brokers have credit licenses, as their activities fall under those listed in the National Credit Code.
The rest should be credit representatives or employees of a licence holder. This means that they represent somebody who has a credit licence. It is illegal for a mortgage broker to operate without appropriate licensing so be very wary of any mortgage brokers who don’t have their own credit licences or aren’t representing somebody who does.
Question #3 – Why Should I Use a Broker?
This question can lead into a sales pitch, however there are a number of benefits that most brokers operating across a good panel of Lenders will be able to advise you on. Your aim is to sort through the salesy talk and get down to brass tacks of what suits your needs..
Your mortgage broker should explain the direct benefits of working with them. These benefits may include access to more home loan products and contacts within the industry, among others such as greater industry experience than offered by most Bank personnel as well as being prepared to meet you at your availability and location and also being available after hours when needed.
Question #4 – Are You a Member of a Professional Organisation?
Mortgage brokers (unless being a direct employee of an Australian Financial License holder) must maintain professional memberships as part of their licensing and professional indemnity insurance requirements. Those who do not, operate outside of the law and will not be able to provide you with the quality advice you are deserving of.
Look for membership of either the Mortgage & Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA). Both indicate that your broker meets some exacting professional standards.
Question #5 – How do You Choose the Right Loan for Me?
This question allows you to work out the broker’s process. Ideally, the broker will want to find out what you’re looking for so they can match a home loan to your needs and situation.
Be wary of any brokers who try to push products you don’t want. These brokers may be looking at the commission they’ll earn, rather than try to find the best product for you.
Do not be afraid to ask your broker the reasons behind any product recommendations they may be offering.
Question #6 – How Much is the Brokerage Fee?
Some brokers charge a fee for their services. It’s important to know what this fee may be before signing on the dotted line. Some will charge a flat fee, whereas others may ask for a percentage of the loan value. If this is the case, ask for a Credit Quote to get an indication of the fees that might be applicable.
Some may work solely for the commissions they receive from lenders.
At Customers First Mortgages & Insurance, we don’t impose any fees or charges for providing credit assistance to our customers.
Question #7 – How Many Lenders Do You Work With?
This is an important question because brokers who work with few lenders have limited scope for finding a home loan that best suits your needs.
Ideally, your broker will work with several prominent lenders and some speciality lenders. This will provide you with a greater choice. At Customers First Mortgages & Insurance we have over 25 lenders on our panel, so you can be confident in finding the right home loan for you.
Question #8 – What Commissions Do You Receive?
Clearly your mortgage broker is entitled to be paid a suitable amount for the professional advice and service that they provide. You need to be satisfied that such payment is not conflicting with the brokers recommendation or not being passed onto yourself in the cost of the product, so be direct in asking about the available commissions they receive from different lenders.
This will help you determine if the broker has any bias. After all, if they receive higher commissions from one lender than they do from the rest, they may try to push you towards that lender.
At Customers First Mortgages & Insurance we believe it is a better outcome to place you in the most suitable loan regardless of any small variation on commission levels available. Our aim is to match your needs with a suitable lender that best help achieve your goals and objectives. In doing so, we hope that you will be prepared to recommend us to family and friends, an opportunity that is far more valuable than what commission is paid by any particular lender.
Question #9 – What Deposit Do I Need?
This question will show how much thought the broker has put into your situation. There may be options that allow you to purchase a property with minimal deposit after taking advantage of available government grants and exemptions for first home buyers etc. This all depends on personal circumstances, of course.
The broker should take those circumstances into account and tell you about any products / offers that don’t need the same deposit as a standard home loan.
Question #10 – Will My Credit Card Limit Impact My Borrowing Power?
Did you know your credit card limit can have an effect on your ability to borrow? Your mortgage broker should be able to advise you if a reduction / cancellation of a credit card can increase your borrowing capacity.
Many lenders are wary of borrowers with high credit card limits. This may result in you receiving less money than you’d hoped for. Your broker should understand the impact your credit card limit may have on your ability to get a home loan.
Do not ever try to keep credit cards you hold a secret from your broker. Lenders will often be aware that you hold credit cards when they complete their mandatory credit checks. Keeping this information secret from your broker will not assist in achieving your home ownership goals.
Question #11 – What’s the Comparison Rate For?
All lenders must offer a comparison rate when advertising their home loan products. This rate combines several things, including the loan’s interest rate and any fees the lender attaches to the loan. It doesn’t include stamp duty and some external fees, such as those you’d pay to a solicitor.
Be wary of any broker who can’t explain what a comparison rate is and how it’s used.
Question #12 – What Fees Will I Pay?
Most loans incur additional costs and fees. Lenders may charge you for arranging the loan, in addition to various other fees. You may also need to pay stamp duty, government registration fees and solicitors fees.
Your mortgage broker should be able to offer a full rundown on every fee you’ll face when arranging a home loan.
Question #13 – What is Lenders Mortgage Insurance?
Lenders usually take out Lenders Mortgage Insurance (LMI) on home loans that exceed 80% of the property’s value. LMI protects the lender if the borrower defaults on the loan.
Your broker should explain what LMI is if it will affect you, and why lenders may apply it to a home loan product.
Question #14 – Can I Get the First Home Owner’s Grant?
The Australian government created the First Home Owner’s Grant (FHOG) to help first home buyers get onto the property ladder. It’s a one-off payment, with the amount you receive varying depending on different circumstances.
There are limits on the value of the home that can impact your eligibility, your broker should be able to explain your FHOG eligibility and how this might affect the home loan products you have access to.
Question #15 – Will a Default on My Credit Report Affect the Loan?
Lenders are naturally wary of defaults on a credit report, as they show the borrower has failed to pay a loan back in the past or has a history of late payments.
However, defaults don’t always prevent you from getting a loan. Advise your broker about any defaults you may have and what products they can provide access to.
A good broker should be able to provide you access to your credit file for a small fee. If in any doubt, ask your broker to obtain a copy of your credit report prior to proceeding with an application to a lender.
Question #16 – What Features Should My Home Loan Have?
Many loans offer more than the basic features because lenders want to attract as many customers as possible. These features may include things like a redraw facility, offset arrangements, or the option of making additional payments.
You should know which of these features apply to your circumstances. Your broker should make every effort to find a product that contains the features you want.
Question #17 – Can I Fix the Interest Rate Later?
You need to ask this question if you take out a variable rate loan and are concerned about any future rate increases in the short to medium term.
The ability to fix your rate for a period of time at a favourable level may prove useful in such circumstances.
Question #18 – What Information Do You Need From Me?
Ask your broker about the documentation needed to secure your home loan. This will usually include a couple of forms of ID, details about your income, and some other documents such as existing loan commitments, level of savings etc..
A good broker will provide a detailed list, as failure to produce the right documents will delay the process.
Question #19 – What Procedures Do I Need to Follow?
Every lender has different procedures that they want you to follow in order to secure your financing.
Your broker should know these procedures in detail, including anything specific to the lenders they work with. Again, this knowledge speeds up the process so you can secure your loan quicker.
Question #20 – How Long Will it All Take?
Ask your broker about the length of the home loan process, from initial application through to settlement. Also, ask about anything that may hold the process up.
The time frame can vary depending on weather you are a purchaser or looking to refinance with the same or a different lender. Your broker should be able to give you a good indication once all your supporting documents are available and you have selected your preferred lender of choice.
What to do next
Now you know the questions you need to ask, it’s time to start looking for a qualified mortgage broker. Here are a few steps to get you started:
● Find out what makes Customers First Mortgages & Insurance different
● Use our calculator to find out how much you need to borrow.
● Contact us by providing your name, phone and email details or simply phone 1300 275 532
● Visit our web site for more great information and tips that will assist your home ownership journey
This information is general in nature, and you should always seek professional advice when making financial decisions.