13 Questions to ask your Mortgage Broker
If you’ve ever applied for a home loan then chances are you used a Mortgage Broker to help you do it. According to the Mortgage and Finance Association of Australia, Mortgage Brokers are facilitating two out of every three home loans written in Australia these days. Put simply, a mortgage broker is the go-between who deals with the bank or lender when you apply for a home loan.
They are typically a loan expert who helps you to find, apply and get approved for a home loan. The view is that they can use their expertise and experience to negotiate the best rates and help you get approved as quickly as possible. Further to this, they will often act like a bit of a coach as you navigate the property buying process which can be pretty overwhelming the first time you do it. The way it works is they will assess your financial situation and then present a range of loan options to you from their panel of lenders. Brokers can be especially helpful if you have complicated or unusual financial circumstances that might make it difficult to get approved for a loan by going directly to a bank.To find a broker it often helps to ask friends, family or a trusted advisor like your accountant or financial planner for a recommendation. Alternatively, a quick google of ‘mortgage brokers near me’ will bring up a range of contacts in your area.
To help you feel confident and get the most out of your meeting with your broker, here’s some questions you can ask them:
Can you share with me your qualifications and experience as a mortgage broker?
You’re looking for your mortgage broker to have at least a Certificate IV in Finance and Mortgage Broking. If they’ve been operating for a while then they should have a Diploma of Finance and Mortgage Broking management. Whilst it’s not necessary for a Broker to have been doing the job for decades in order to be a talented and capable broker, it does help if they have a few years of experience as their knowledge and ability to navigate complicated loans will be higher.
Who is on your panel of lenders?
First, let's define the term ‘panel of lenders’. A panel of lenders is the collection of finance companies such as banks and lenders who they work with. The bigger the panel, the more choice you have available to you. A great follow up question is to ask you broker if there are any lenders that they tend to do most of their business with. A high concentration of loans with a single lender often indicates either a lazy broker who doesn’t shop your loan around or it might indicate that this is the lender where they receive the highest rate of commission.How do you determine what is the most suitable loan for me?
With this question you are looking for your broker to tell you about their process to get to know you and understand your current situation and future needs. Then you’re looking to hear how they use this information to find the best loan for you.How do you get paid as a mortgage broker?
Typically, mortgage brokers are paid an upfront and trailing commission based on the value of your loan. This payment is made once your loan has settled. The commission they receive may vary from lender to lender.What information do I need to have ready to apply for a mortgage?
A good broker will give you a comprehensive list of the documents and information that you’ll need to supply. Your loan application will be approved much faster if you gather this information quickly and completely for your broker.How long does it typically take for a loan to be approved?
This is an important question to ask especially if you’ve purchased a home and have a set settlement date. I won’t name names but some lenders are notorious for taking an excessive amount of time to approve a loan due to inefficient processes. An experienced broker will know which lender will be best placed to get your loan approved in time for settlement.What fees can I expect to pay?
By asking this question your broker will help you to understand what fees your lender might charge such as application fees, valuation fees, title search fees, settlement fees as well as any government fees such as stamp duty. These fees will vary depending on the type of transaction you are making.What steps do I need to take in order to get my mortgage approved and purchase a property?
When purchasing a property there is a typical order of events to the process. First you need to save up the deposit, get an approval in principal to borrow sufficient funds to purchase a property at a certain value, find and successfully bid on a property, get your finance unconditionally approved during the lead up to settlement, and then settle on the purchase (aka the day you officially become the owner). A good broker will explain this process in detail and help you be prepared for each step.
Why did you recommend this loan for me? Why is it in my best interests?
You want to be assured that your broker has selected a loan that’s going to work for you today and in the years to come. By asking this question your broker will need to explain why this loan achieves that. For example, if you’re someone who wants to pay down their loan as quickly as possible by making large repayments when you receive a bonus at work then your broker may recommend something like a variable rate loan which allows you to pay off the loan as quickly as you please. Alternatively if you’re nervous about interest rises and want certainty on what your loan repayment will be each month then your broker may recommend a fixed rate loan or a partially fixed rate loan.What features come with this loan and how do they work?
You want to make sure you understand your loan and how it works. I can’t tell you how many clients I spoke to when I was a lending specialist who had an offset account and didn’t understand how it actually worked. Your broker has a duty of care to ensure that they explain all the features of your loan, how they work and why that’s beneficial to you.Can you show me a couple more options, including one with the lowest cost?
This is a great question to ask if your broker has only suggested one particular loan solution to you. If you’ve only seen one option, how can you be sure it’s right for you as you have nothing to compare it to. By asking this question you’re able to compare and contrast a few options and make an informed decision about the loan you want.Is there anyone else in your team I can expect to work with?
It’s helpful to know who you will be working with such as an administrative assistant or who to contact if you can’t reach your broker.Once the loan is settled, how often should I expect to hear from you?
Technically once the loan is settled then your broker’s job is done. A good broker, however, will want to check in with you in the future to make sure the loan is still right for you and the rate remains competitive. Most will do this every two years or so because if you need to change your loan then and they arrange that for you then they are likely to get paid again by the lender. You may, however, want to review your loan more or less often. This is your opportunity to set some expectations with your broker.
Finally, here’s a list of information that you should expect to take with you when you meet a mortgage broker for the first time:
Proof of identity
Recent transactions and bank account statements.
Proof of deposit in the form of savings (if you are relocating/refinancing you’ll provide proof of equity by way of current home loan statements and a value estimate for the property to be sold/refinanced).
Proof of income with payslips or tax returns if you are self-employed.
Statements for any liabilities like credit cards or other loans.
Details of the property you intend to purchase or wish to refinance
Let me know if you find this list helpful or if there’s anything you would add to it by commenting below!