Home Loan Refinancing

Mortgage brokers usually do not charge fees to their borrowers. They aren’t always paid by their employers either. They typically make money from the commissions they receive from banks or other lenders. This is also the case when you use a broker for the refinancing of your home loan. 

There are various ways mortgage brokers receive commissions. For one, they can be upfront and have the bank or lender pay them when you sign up for a home loan. They can also opt for “trail” commissions that will continue annually for the duration of the loan. 

Either way, the commissions that mortgage brokers get are usually calculated as a specific percentage of the full loan amount. For instance, a mortgage broker might get an upfront commission worth 0.5% of the total loan amount of the refinanced home loan and an additional trail commission of 0.2% per year.

Additionally, mortgage brokers may also get “soft dollar” benefits from lenders and banks which may be in the form of trips, exclusive perks, and others. What this means is that when you choose to refinance with a broker, they will get paid in one way or another. 

But the question is, should you use a mortgage broker to refinance your home loan? Read on and find out as one of the best mortgage brokers shares what you need to know about this:

Why Mortgage Brokers Want You to Refinance

Because mortgage brokers earn their bucks from commissions from banks and lenders, it is understandable that they’d want your business if you’re thinking about refinancing. If you are considering refinancing but unsure whether or not a broker will recommend loan products that are based on how much they’ll be getting instead of what’s best for you, you should know that brokers are legally bound to act in your best interests

This duty to act in your best interests started in 2021 and it requires brokers to always prioritise the needs and wants of their clients whenever they recommend home loan products, considering things like the cost, the benefits, and the potential drawbacks. This statutory duty was put in place as an effort to mitigate conflicts of interest that could occur between lenders, brokers, and borrowers. 

What Should You Ask Brokers When Refinancing?

If you are considering refinancing with a mortgage broker, some of the things you should ask include:

“Are You Licensed?”

You want to make sure that the broker is licensed to provide you with credit advice. You can check with such bodies as the Finance Brokers Association of Australia Limited or the Mortgage & Finance Association of Australia if you want to be sure. 

“How Many Lenders Do They Deal With?”

There’s no rule about how many lenders a broker should be working with before they can be considered credible, but of course, a broker who works with many lenders will be able to provide you with more options, too. 

“What Will the Costs Be?”

Though you may not have to pay for the broker's fee, there will still be costs that you need to take care of. For instance, if you change lenders before your current home loan term is up, you might have to pay a break fee. Make sure you ask your current lender about this and other potential costs. 

Conclusion

Though there are lots of things to consider when refinancing your home loan, using a mortgage broker might just help you get to a more desirable and affordable option than what you would have otherwise.

Wealthy You is one of the best mortgage brokers in Sydney who can provide you with various mortgage solutions. Contact us today to know how we can make refinancing simpler for you.

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