What is a mortgage broker?

When it comes to choosing a home loan, the options are endless.

With a myriad of lenders and loans to choose from, finding the most affordable loan for your financial situation is not always straightforward. And, when the difference between choosing one loan or another could mean saving thousands of dollars, it’s not a decision to take lightly. A mortgage broker can help wade through the complexities so you land on the best choice for you.

First, what is a mortgage broker? 

A mortgage broker is a type of financial adviser who acts as a go-between for you (the borrower), and the lender (bank or financial institution), in the purchasing of a property. One of the most important tasks of a mortgage broker is to haggle with lenders in order to find you the most affordable loan. 

What else does a mortgage broker do? 

In addition to negotiating on your behalf, a mortgage broker will also assess your credit history and your financial situation and help you understand the process of paying back a loan. They can simplify the paperwork required by the lender and save you time and energy by researching the different financial products on your behalf. 

Why might you need a mortgage broker? 

Securing a loan requires specialist knowledge. There are a number of market conditions, rates, fees and loan terms to understand. For example, should you get a fixed or a variable loan, an interest only loan or a principal plus interest loan, an offset account or just a standard account? Lender advertisements often tout loans with the lowest interest rates, but a lower interest rate doesn’t necessarily mean you’ll get a cheaper deal. A good mortgage broker will assess your financial means, take stock of your financial goals and help you navigate these options to secure the best deal for you.  

What are the pros of using a mortgage broker versus a lender?

The biggest benefit is that you have more choice than going directly to a lender. A mortgage broker will have access to more than 10 lenders with approximately 50 financial products, as opposed to an individual lender that will only a handful of financial products available. More choice means you have a greater chance of finding a cheaper loan.

In addition, brokers can assist you with applying for government assistance or government grants and provide ongoing assistance over the course of your home loan by notifying you about changes in interest rates and advising you when it may be time to refinance your loan. 

How can mortgage brokers save you money?

Mortgage brokers often have strong bargaining power with lenders that want their business. As such, they can bargain to your advantage which can result in lower interest rates or lower or discounted fees. They can also help you avoid common loan traps and pitfalls hidden in the fine print of home loans products. 
What are the cons of using a mortgage broker?
The strength of the financial advice you receive is very much dependent on the experience of the broker and industry experience can differ widely between brokers.  Some mortgage brokers only represent lenders that will pay them commissions, which can reduce the products available to you. Be sure to ask as many questions as you can before deciding on a particular broker.

What fees do they charge?

In most cases mortgage brokers receive upfront commissions for securing loans as well as a trail fee for the life of the loan once your home loan settles. The bank pays out these fees so you shouldn’t have to pay the broker directly. Always check up-front with the broker about how they’re paid. Although not common, there are some situations where a broker may charge their client, so it’s worth checking before you sign any contracts.

The verdict

Whether or not you choose to use a mortgage broker is a personal decision, but if you want expert financial advice and more choice without having to do extensive research yourself, using a mortgage broker may be a prudent choice.