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Everything You Need To Know About Using A Mortgage Broker

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Everything You Need To Know About Using A Mortgage Broker

Mortgage broking is an industry that has a lot to gain from the property market. Australia has a very large home loan market with over $31 billion dollars of residential loans granted in April of 2021 alone.

Mortgage brokers are responsible for more than half of all home loans in Australia, and are most influential among demographics that are looking to buy their first home.

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What does a mortgage broker do?

Mortgage brokers are third parties that work between the buyer and the loan providers to negotiate the best deal for their clients and determine what home loan is right for them.

They will first assess the buyers’ financial affairs to gain an accurate picture of their creditworthiness and borrowing capacity. They will communicate with their client which loan is optimal on the basis of their current finances, whether they be fixed or variable loans, along with what they will cost and what features they have.

A good broker will understand the property goals of their clients and communicate their options clearly, finding the right course of action according to their circumstance.

They are legally required to work in the client’s best interest or risk incurring a fine of up to $1 million.

What are the pros and cons of using a mortgage broker?

Advantages

  • The main advantage of using a property broker is that a good broker will save you a lot of legwork, time, and stress associated with finding a lender yourself.
  • They should already have connections with a variety of lenders who have a range of products that may be suited to your needs.
  • They may be able to steer you away from any unattractive terms buried in loan contracts.
  • A broker will also be able to explain the financial aspects of buying a home in depth to people who may not be comfortable with navigating that process for themselves.
  • Some (not all) mortgage brokers may also be free for the borrowers, and instead make their money from the lender.

Disadvantages

Mortgage brokers have interest in getting you to take a loan from someone who they may have a pre-existing commercial arrangement with. This means that the broker may not be able to give you a wide enough scope of lenders- or may have interest in encouraging you to take loans from lenders whose commission to them is higher.

It's best that you do your own research by using a mortgage calculator and scoping out what common lenders have to offer.

  • Using a broker will save you work, but it might be just as time consuming, if not more, than doing your own research online, or dealing directly with a lender. In this age of interconnectivity all the information you need can be divulged through a few google searches, so long as you’re thorough.
  • Using a broker may incur a fee.

You can find licensed mortgage brokers through a professional mortgage broker association, your lender or financial institution or through word of mouth.