Choosing a mortgage broker who will suit your particular needs is not always an easy task.
Currently there are over 12,000 brokers registered with The Mortgage & Finance Association of Australia (MFAA) and many more brokers who are registered with the Finance Brokers Association of Australia (FBAA).
So apart from recommendations from friends or relatives, how do you decide which broker is right for you? Before you decide on who to trust with the biggest investment you're likely to make, here are 12 questions you should ask any potential broker you might want to use.
1. Does Your Broker Have Any Credentials?
You want to make sure that the mortgage broker you choose has the necessary qualifications and experience to adequately assist you with your finance choices.
Ask your broker how long they've been providing mortgage services and what type of qualifications they have.
Also ensure that your broker is registered with ASIC (Australian Securities and Investment Commission).
2. Is Your Broker A Member Of An Industry Association?
It is a requirement in Australia that mortgage brokers join an industry association such as the Mortgage and Finance Association Australia (MFAA) or the Finance Brokers Association of Australia (FBAA).
These organisations ensure that brokers are suitably qualified and conduct Credit, Police and Bankruptcy checks before a broker can join the association.
They also ensure that all their members are kept up to date with industry regulations and offer further training and education.
3. Does Your Broker Charge A Fee?
You'll find that most brokers won't charge you a fee for their services, however some will.
It's a good idea to know upfront any costs that you may be liable for.
Those who don't charge a fee will be compensated by whichever lender you decide to go with.
4. How Many Lenders Does Your Broker Have In Their Network?
You want to ensure that your broker has access to a diverse range of lenders to ensure a better success of securing the right sort of loan for your needs.
Most brokers should have access to around 20-30 lenders ranging from big banks to other non-bank lenders.
This is especially important if your situation is a little out of the norm and you need to access a specialist lender who deals with your type of borrowing needs.
5. How Much Commission Does Your Broker Make?
While you might think this is an unusual question to ask, it will help you to determine whether your broker is working with your best interests at heart or whether he's just interested in making the most commission possible.
A good broker will be transparent about their commission structure so you can be confident that he or she will find the best loan for your needs rather than the one that pays the highest commission.
6. What Documents Do You Need To Provide To Your Broker?
Knowing upfront what documents and information you'll need will save you and your broker lots of time. You may need things like payslips, bank statements and some form of identification.
If you have all of these documents with you when you go for your first meeting with your broker it will be much easier to get started on your application.
7. How Many Credit Checks Will Need To Be Done And Will This Affect My Credit File?
Every time a bank or other financial institution does a credit check on you, it will be recorded on your credit file. While this is not necessarily a bad thing, too many checks on your file could have an adverse affect when you try to borrow more money.
Ideally you want to ensure that the absolute minimum number of credit checks are done for any particular loan.
8. Will Your Broker Show You A Full List Of Your Borrowing Options?
In most cases, your broker will give you the top three options and then recommend the best loan for you. It's a good idea however, for you to be able to see a full list of your options so that you're completely satisfied that you're getting the absolute best deal.
9. How Much Deposit Will You Realistically Need?
Your mortgage broker will know their lenders' requirements and will be able to advise you of a realistic deposit amount. This will give you a good idea of where you stand financially and which lenders would be better suited to your particular situation.
You also want to find out whether the size of the deposit will affect the interest rate of the loan. You will sometimes be able to secure a cheaper interest rate if you have a larger deposit.
10. Why Has Your Broker Selected A Particular Loan For You Over Others?
You want to understand why your broker thinks that the loan he or she has chosen, is the best fit for you. Make sure that your broker has taken into account all of your personal circumstances to ensure that the loan is indeed the best fit.
11. Are There Any Additional Charges?
In most cases you'll find that there are some additional charges to set up your loan such as valuation fees, legal fees and application fees. These are usually added to your loan, however you may be able to pay these upfront and save on some interest charges.
Sometimes lenders will also run promotions such as offering free valuations or legal fees. You want to be able to take advantage of these if they're available.
12. How Long Will It Take To Process Your Loan?
Your broker will usually be able to advise you on how long the application process is likely to take. This is really important when you're out looking at possible properties to purchase or you need to finalise the sale of your current property.
Usually it's a good idea to get a loan pre-approval before you decide on the property that you want to purchase.
Finding your perfect mortgage broker needn't be too difficult as long as you know the right questions to ask.