There can be a number of potential pitfalls in relaying on a mortgage broker to find and present the best home loan options for you.
Engaging a broker to research and arrange your home loan for you can save you time, but it is important to do your homework to ensure you are delivered the service you are expecting.
Obtaining genuinely objective recommendations from brokers, confusion over just who’s a lender and who’s a broker and lender delays in processing applications mean that using a broker is not always the quick and easy solution to home borrowing it may at first appear.
Establishing that any broker you intend to use has experience and qualifications as well as being committed to the industry code of practice is vital to ensure you’re getting the best loan for your needs, within a reasonable timeframe.
A number of lenders are also now acting as brokers and some borrowers may be confused over whether they’re dealing with an independent broker offering a range of loans, an agent for one lender only, or someone who wears both hats. Borrowers must establish with any loan representative just what their role is and how they’re being paid so they can judge the integrity of loan recommendations being provided.
Questions to ask before engaging a mortgage broker.
How many lenders and loans are you able to compare for me?
A broker should have access to a wide range of loans from a wide range of lenders. From major banks, credit unions and non-bank lenders.
What are your qualifications and experience?
Check the qualifications and experience of the broker. Ask for references, which professional bodies are they a member of and what accreditations and/or qualifications do they hold?
Are you an independent broker?
Ensure your broker is not an agent for one lender. Some lenders now have brokers representing them directly; establish exactly whom your broker works for.
How much do you get paid?
Brokers are legally required to disclose their commissions, this includes the upfront and ongoing monthly payment they receive. Make sure you are advised of what commission they will receive so you can judge if a loan recommendation is being influenced by how much the broker will be paid.
Will you charge me a fee for using your service?
Most brokers do not charge for their services, some brokers charge only if they do research and you later decide not to avail of their services, whilst others charge a full fee from the moment you engage them.
How will you rate and rank my loan options?
A good broker will be able to outline the criteria, features and benefits to each loan he presents to you as an option.
Will you provide me a formal comparison?
Ask the broker to provide you a formal comparison of any loans he recommends, including upfront, ongoing or exit fees. Also ensure the comparison is customised specifically to the amount you want to borrow.
What service do you provide after my loan is negotiated?
Will the broker be available if you have questions after you take the loan? What if you disagree with the lender or want to change the product selected, will the broker be available to assist?
Can I have a copy of your appropriate insurances and guides?
A broker should professional indemnity insurance, a privacy statement, credit guide and dispute resolution guide. They should all be available at your request.
If you have a dispute or concern you are unable to resolve directly with your broker, you can contact the independent Mortgage Industry Ombudsman Scheme on 1800 138 422.