What does a Mortgage Broker do?
Whether it’s your first home or your next home, enlisting the help of a mortgage broker can help you get into the property market – and your new home – faster.
Many of us will look straight to our current banking provider when looking for a home loan as we feel it’s more convenient to have our money in one place.
However, having assistance from a mortgage broker not only ensures you’re getting the best deal but also makes the home-buying process a lot quicker and easier.
Still unsure whether a mortgage broker is the best choice?
Let us convince you.
They are experts in the industry
The role of a mortgage broker is to help you understand and navigate your financial situation to achieve your goals.
A good broker will:
- Work out what you can afford to borrow
- Find options that suit your situation
- Explain how the process works
- Apply for the loan and manage it through to the settlement
Every day, they work with people from all sorts of backgrounds which means they have experience in a range of financial circumstances.
Their main goal is to find a home loan that is right for you through the range of lenders they work with.
They’re on your side
Mortgage brokers are neutral parties within the home-buying process.
Their primary goal is to assist the buyer and help them find the best deal, whereas a lender’s goal is to get the buyer to use their services.
As of January 1, 2021, the National Consumer Credit Protection Act states the following:
“Mortgage brokers must act in the best interests of consumers when providing credit assistance in relation to credit contracts.
Where there is a conflict of interest, mortgage brokers must give priority to consumers in providing credit assistance in relation to credit contracts.”
This legislation is called ‘Best Interest Duty’ or BID, which essentially means by law, mortgage brokers must act in the best interest of the consumers.
In contrast, the banks act in their own best interest as the product provider. Failure to do so can result in significant penalties.
They get to know your financial situation
Your financial situation extends far beyond the amount that’s sitting in your bank account.
When preparing to purchase a home – whether it’s by yourself or with someone else – some things you can expect a mortgage broker to ask about include:
Your employment history
Regardless of how much money you have saved, if you require a loan, you will need to prove you’ll be able to service that loan.
Different types of employment (full-time, part-time, self-employed, etc.), as well as how long you’ve been in your current role, are all important to a lender.
If you’ve been moving from job to job recently, or have a long period of unexplained unemployment, your ability to service a loan may come into question.
Be prepared to bring in recent payslips to confirm your employment.
Your credit score
Without speaking to a financial adviser or broker, your credit score will give you the best indication of your financial position.
Websites like Equifax and ClearScore will show you your credit score for free – you just need to input some information first.
Equifax’s definition of an average credit score is between 622-725 and a very good score as 726-823.
This considers your debt, loan history and whether you make repayments on time.
Your debt position
How much debt you have is a factor in figuring out how much money you can borrow.
If you have other loans such as personal loans, car loans, another mortgage, or credit card debt, your borrowing capacity may be reduced.
A mortgage broker will help you navigate how your debt can affect your application, the steps you can take to reduce this debt, and how to increase your borrowing power.
Your savings
Your deposit is an important part of the homebuying journey and the biggest upfront expense.
However, there are other expenses to consider, such as lender’s mortgage insurance (if you don’t have a 20 per cent deposit), stamp duty and conveyancer fees.
Having enough money in your savings account for a deposit is great, but a mortgage broker will look at whether this will cover the other fees associated with buying a home.
Your identification
A mortgage broker is there to guide you through the application process.
While they do the leg work, you will still need to provide them with proof of identification – it’s a good idea to have these documents ready to go before seeking their help.
You may be required to submit the following documents:
- Driver’s license
- Passport
- Birth certificate
- Medicare card
- Most recent payslips
- Loan statements
- HECS debt information
- Most recent Notice of Assessment
Head to our blog to learn more about how a lender will assess your application.
They do the work for you
Enlisting the help of a mortgage broker is like having a personal sidekick.
Once you’ve provided your personal and financial information, your broker will scour the market to find the best deal.
While there used to be only a few banks that granted home loans, there is now a wide range of lenders all competing for your business – that’s a lot of choices to navigate!
A mortgage broker will also consider whether you’re eligible for any government grants or schemes, as well as any stamp duty concessions.
Upon speaking to lenders, they can give you an idea as to how much they’re willing to lend you.
Mortgage brokers can also help you through the preapproval process, should this be something you’re willing to apply for.
Having preapproval from a lender puts you in a strong position when making offers.
They have access to things you don’t
Mortgage brokers work alongside banks and lenders, and often have access to deals and rates that wouldn’t be available to you.
Many of these lenders work exclusively with mortgage brokers who bring them clients.
Brokers may be able to get these special rates from lenders due to the volume of business generated, which might be lower than you can get on your own.
It’s also comforting to know that a mortgage broker is a neutral party.
While a bank or other lender will try to talk you into their business, a broker remains impartial, as they’re not trying to sell you on a product.
Because of this, you know you’re getting the best deal for yourself.
They can guide you through the process
Although they do the work for you, they’re there as a source of information.
They can answer any questions you have relating to your finances and the loan application process.
A good mortgage broker will guide you through the application while simultaneously ensuring you understand any document you sign and exactly what your options are.
A mortgage broker is a great opportunity for new and experienced home buyers alike to get the best deal in the market. If you’re looking at buying into the property market,
