Is it worth working with a mortgage broker?
When property buyers are arranging their financing, they have an important decision to make: whether to work with a mortgage broker or not. Mortgage brokers currently write over half of all Australian home loans which suggests just under half of property buyers choose to apply directly to the banks for their mortgages. Whether to work with a broker is one of those decisions which can make a real difference to the outcome with your mortgage, so we delve into the pros and cons of working with a mortgage broker below.
Pros of working with a mortgage broker:
- Objective advice – Mortgage brokers generally work with most of the lenders and products in the market, and are therefore able to provide objective advice which best aligns with an applicant’s needs.
- Property buying guidance – Good mortgage brokers often take on a role of a coach, and can often help property buyers navigate each step of the buying process.
- Experts in dealing with more complicated financial situations - Brokers are able to help applicants who may not fit inside the box the way the banks are used to (eg. contractors and self-employed people), to put together a strong loan application. These brokers are often adept at creating a personal story which explains the applicant’s financial position.
- Network of professionals – Mortgage brokers generally operate within a network of professionals who can provide all the services a property buyer may require. For example, a good mortgage broker is likely to be able to refer you to a good tax account, a depreciation schedule expert and a pest inspector, which can save you time and effort.
Cons of working with a mortgage broker:
- No brokers work with every single lender – Mortgage brokers generally work with a portion of the lenders in the market, but not with every single lender. This means you may miss out on loan opportunities by working with a mortgage broker.
- Not always professional – The mortgage broking industry is a commission-driven sector, which means some players are more focused on the commissions they could earn rather than the quality of the advice they are providing. This is a risk in any commission-driven sector, and means property buyers are well-advised to do a lot of research before picking a mortgage broker.
- Lack of visibility on how their commissions work – Property buyers are generally not privy to the range of commissions brokers receive from the lenders. This is key information since there may be a bias for some brokers to recommend loan products which pay them the highest commission.
Jim Dionysatos, Landen’s Director, discusses the mortgage broker decision with these pros and cons in mind:
‘The decision whether to work with a mortgage broker or not is really up to the individual. Our observation is that buyers who do their research to find a good mortgage broker are generally the happiest with the process and the most likely to receive the funding they are after. A good mortgage broker will use their knowledge and experience to ensure the property buyer is heading down the right path for them, and that can save them a lot of money over the long term.’
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