A mortgage broker can be seen as a loan expert. In most cases, lending is all they do and can give you professional advice to match your needs with a suitable lending solution. Given that a loan/mortgage is probably the biggest expense you will ever have, it pays to get professional assistance and advice.
Mortgage brokers earn a commission from the various lenders for the loans they write. They have access to a broad range of products and are accredited with the lender to offer their product. Some mortgage brokers do not charge a fee for advice while others do.
Regardless of their business model, a great mortgage broker can save you time, effort and most likely money in selecting a suitable home or commercial loan. They can help you to avoid taking out a loan you might later regret and plan for a better mortgage.
What does a mortgage broker do?
- Assess your financial circumstances
- Find a suitable loan for your situation
- Manage the application process
- Provide advice at every step
The industry of mortgage broking is changing. In early 2010, the National Consumer Credit Protection Act, was established to protect borrowers and ensure ethical and professional standards in the finance industry
A key protection for consumers under the NCCP, are the responsible lending obligations on mortgage brokers. The objective of these obligations is to ensure that the credit contract or lease is ‘not unsuitable’ for you, the consumer.
The responsible lending obligations require a mortgage broker to:
- make reasonable inquiries of the consumer about their financial situation, their requirements and objectives in relation to the credit contract;
- based upon these inquiries, assess whether the credit product is unsuitable for the consumer and only proceed if the credit product is not unsuitable; and
- give the consumer a copy of the assessment if requested.
Assess your financial circumstances
Your mortgage broker will take the time to discuss your needs and circumstances with you. This gives them the opportunity to determine which type of loan is most suitable.
To make it easier for you, you will need to provide documents to support your identity and financial situation. These documents will include a 100 point check list for identification, personal bank statements to demonstrate savings (if applicable), tax returns, payslips, outstanding loans, statements, etc. Your mortgage broker will advise you of what you need for your particular situation.
Once your mortgage broker has an understanding of your objectives and financial position, they will discuss the various loan products available. A mortgage broker should also provide you with product comparisons and inform you of proposed mortgage repayments and any upfront and ongoing fees.
Find a suitable loan for your situation
After assessing your objectives and financial needs, your mortgage broker will search their database containing hundreds of loan products from many different lenders, including major banks, smaller banks, credit unions and other lenders.
This database is constantly updated and has details of the latest deals from the lenders. Sometimes, your mortgage broker can have access to some exclusive loan products which are not available elsewhere.
Sophisticated software can assist with this otherwise labour intensive task and usually a comparison table and/or graph is presented for your consideration.
Your mortgage broker will then recommend a product or products which will suit your needs.
You may also be provided with a copy of the lenders comparison rate. Comparison rates include both the interest rate and fees and charges relating to a loan. It is a tool to help you identify the true cost of a loan. A sort of an “apples with apples” yardstick to help you compare loan packages easier.
Manage the process
If you wish to proceed, then your mortgage broker will help you to complete the necessary paperwork and liaise with the lender on your behalf. This will include the completion and submission of your home loan application and the on-going communication between all parties until your home loan is approved and settled.
Your mortgage broker is also required to inform you of their complaints process. This is called an Internal Dispute Resolution procedure.
Provide advice at every step
There are many steps in the loan process and a professional mortgage broker will help you from your initial steps, such as getting pre-approval (where your loan is “approved” based on certain conditions such as loan value) right through to settlement. A great mortgage broker can also provide a home loan health check further down the track. After the ‘health check’ a mortgage broker may be able to help you reduce your repayments, unlock the equity in your home, or consolidate debt. They can also assist with your refinancing needs should your objectives or financial circumstances change.
The earlier you contact your broker the better it is for you!