Choosing the right broker, for you, is almost as important as choosing the right bank for your home loan. They’ve got to suit your needs, wants and understand what your priorities are. If you’ve got an ‘out of the box’ scenario, you’ll want someone who has relationships and experience with these situations. If you’re a First Home Owner, you’ll want someone who speaks in terms you’re more likely to understand (because it’s REALLY important to understand what you’re getting into).
I’ve compiled a few questions that i think (and others within the industry) think are the questions you need to ask your mortgage broker.
How will you be paid? Do you earn more if I borrow more or choose a particular lender? Most brokers receive a percentage-based commission for their work. They’re paid by the bank, not by you [although some do charge an extra fee]. This introduces two risks – that you’ll be encouraged to borrow more, and that you’ll be encouraged to go with a particular lender. Some brokers have a self-imposed rule to receive the same commission for every loan, which reduces these risks to you – but doesn’t remove them. Some other [the genuine] brokers just don’t let the difference in commission cloud their judgement.
Is your business owned by or associated with a lender, like a big bank? Research shows that broker companies owned by big banks send more loans back to their parent company. Steer clear of these broking companies unless you want a loan with the big four.
What’s your experience with the lending market and what training have you done to understand home lending? Look for brokers who’ve been members of the MFAA for more than two years – members need to meet a high education standard to belong, and will have a bit of experience after 12 months.
How many lenders are on your panel? This will let you know how many loans a broker can look at for you – some have lots of options but others offer a surprisingly limited selection. Ensure they have a minimum of 10 lenders, if they don’t, don’t be scared to question why.
How many lenders did you send loans to in the last year? What are the top 10 banks you send loans to? What percentage of the loans you secure do you send to each of these? Just because they have 10…20 lenders on their panel, doesn’t mean they actually use them or have a relationship with them. Some brokers send most loans to just four lenders. Look for a broker who has used a lot of different lenders, again at least 6-7, in the past year. These brokers will be more likely to genuinely scan the market and find a loan that fits your unique circumstance.
Are you a member of any broker clubs or tiered service arrangements? Broking clubs have a very controversial history – they were previously used to reward the best salespeople with high-end perks like cruises to the Caribbean, sports tickets, corporate events and boxes. Industry has promised they’ve stopped this practice, but it’s worth asking what benefits your broker may receive from a club, just incase.
Please feel free to ask me any of these questions and more!