Mortgage brokers are intermediaries that offer loans from a variety of lenders, saving you the hassle of shopping around. But getting the most out of using a mortgage broker means not just saving time and effort but also ensuring any broker is working in your best interests. That means giving you a truly independent appraisal of what's on offer in the loan market.
BankChoice and Mortgage Bureau have compiled the following checklist to help you find a broker:
- A broker should have a wide range of home loans from a wide variety of lenders eg. banks, mortgage originators and other financial institutions. The wider the choice, the better the chance of finding the loan that suits you best.
- Make sure your broker isn’t recommending a particular loan based on the commission it will receive from the lender. Brokers are generally paid a commission by the lenders they represent for every loan they sell. Some lenders pay higher commissions than others so it is wise to make sure this is not the motive behind your broker’s recommendation.
- Ask your broker how the loans they offer are researched and rated. A good broker should be able to clearly outline its criteria.
- Ensure your broker is not a lender in disguise? If your 'broker' is promoting loans of its own then it’s not really a mortgage broker but a lender. Mortgage brokers are intermediaries not lenders, this is how they differ from the banks and mortgage originators like Aussie Home Loans, Wizard or RAMS.
- Does the broker charge a fee? Some brokers will not charge borrowers for using their service, others will, so enquire about fees at the outset. Being charged a fee is not necessarily a bad thing; such brokers may be more independent.
- Make sure your broker will provide a proper comparison of any loans recommended to you. Any loan comparison figures should take into account the total cost of borrowing; upfront and ongoing fees and charges, not just the interest rate. If the broker uses AAPRs (average annual percentage rates) as a basis for comparison, make sure the AAPR is calculated specifically for the amount you want to borrow.
- Check the qualifications of your broker, even ask for references from previous borrowers.
- Always do some double checking yourself to satisfy yourself you've been given unbiased and correct information. Remember, BankChoice has comparative tables showing full rate, fee and condition details of home loans as well as tips and tricks to be aware of.
- Check what service is offered by the broker on an ongoing basis after the loan is negotiated. Will the broker be available for subsequent enquiries or bow out once the contarct is signed. What happens if there is a dispute between you and the lender? Remember, a loan can have a lifetime of 25 years or more.
- Brokers must comply with the Privacy Act to ensure the security of customer details.
- Your broker should have professional indemnity insurance. This will safeguard you in the event of legal action.
Our home loan brokers, Australia-wide are happy to answer any of the above for you.
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Last Updated: 26 Sep 2006
