Mortgage Broker Selection Tips
Selecting from the multitude of mortgage brokers and real estate agents who provide finance broking services can be risky as mistakes can be made!!!
I highlight here some common mistakes that can be avoided by being informed as you tread carefully into one of the largest investments you are likely to ever make.
Selecting a Mortgage Broker.
INDUSTRY KNOWLEDGE
The Australian home loan market has moved strongly towards mortgage broker originated loans. This has resulted in large numbers of new players in the home loan market. However a mortgage broker should have experience and training in a range of lending products from various lenders, including broad knowledge of the finance industry. The broker who works for the subsidiary of a major lender may be more likely to promote their products. However, a mortgage broker from an independently owned business working for themselves will show you a range of products before justifying and recommending a product for your requirements.
The difference in commissions earned by an independent mortgage broker from the various lenders is minimal. PROMISES....PROMISES... well I have heard a few, there are brokers promising borrowers no application fees, no loan mortgage insurance etc only to find out when they go to sign the contract that all these items appear as costs to be deducted on settlement. Ensure that you get confirmation of the fees and charges that apply. Mortgage brokers are required to disclose commissions they receive from the lender and any application fees or valuation fees you may have to pay.
COMMERCIAL EXPERIENCE
A mortgage broker should have experience in finance and property related sectors over a period of years. After all they are working at the intersection of these sectors. Long term experience is a definite plus...
ABILITY TO PROVIDE PERSONAL SERVICE
You should not be passed over to an inexperienced employee but should be able to deal with the same person over the long term. Most mortgage brokers are employed by large companies that spend big bucks advertising and the public responds indiscriminately, ending in wasting time all around. However the firms have to employ many people with a minimum of training and commercial knowledge to pursue these enquiries. Generally these employees have to meet sales targets to survive. So when you arrange to meet with a mortgage broker establish their background and how long they have been with the firm and in the industry.
Choosing a lender referred to you by the estate agent.
The agent is not familiar with your financial situation;
the agent is interested in getting the property loan arranged quickly and the transaction
completed so he can get his commission. Now, most agents are professional
enough to take care of your best interest.
However the loan may not have the best interest rates and conditions that you could have obtained if you had checked around or contacted Sydney Mortgage Plus. This is also true when looking for property insurance. Shop around before settlement or use a mortgage broker like myself to do the hard work.
Refinancing your home with your present lender.
Loans have to be submitted to mortgage insurers by the lender
even though you may not be required to pay any insurance premium. So in most situations
you will be required by your present lender to put in a new application, with all
supporting documents for the property loan. So the effort on your part to shop around and
obtain the loan through a new lender may prove to be worthwhile. Always have all
the documents ready when you go to make an application because any delay or hold ups associated could be costly if settlement dates are not met.
Check the break costs with your present lender or the loan documents
before arranging mortgage refinancing.
Most lenders have mortgage discharge fees and charges .
In addition, for fixed interest loans they have break costs based on the period of
the loan that has not expired and the rate of reinvesting the funds.
Some lenders will have break costs, which can be based on a % of the loan.
Is the lowest interest rate the most important factor?
While interest rates are important, bear in mind other costs
and fees like monthly administration fees, switch fees and application costs.
Discounted home loans are good if the discounts are for the life of the loan,
say below the standard variable rate of the lender. Short terms discount,
say for a year, may end up being more expensive after the period of discount expires.
Signing mortgage documents without reading.
Make sure you obtain mortgage documents you are required to sign in
advance so you can read through them or get professional assistance.
Some things to bear in mind as you search for your new property purchase.
Getting a pre-approval from a lender to establish your borrowing
capacity.
The process to pre-approval is similar to applying for a loan after a purchase (i.e. the lender will investigate your ability to repay the loan you require and check your credit history. This is an important first step as it narrows down the search to the properties you can afford and also allows you to negotiate from a position of strength.
Using a buyer's agent.
The agent most often used by purchasers is the seller's agent.
The seller's agent's loyalty should be with the seller, to get the best deal for him as
the seller is paying the agent's commission. Therefore a buyer's agent is someone
you can trust to negotiate on your behalf, and more importantly they are familiar with market
conditions for the type of property which saves you the time looking at numerous
properties to meet your requirements. They should have the market savvy to put
a convincing proposal to the seller and his agent or bid on your behalf at an
auction.
The buyer's agent can also obtain a property for you, which is not on
the open market as they have more contacts with estate agents
Make sure it is in writing
Do not take the seller's word or his agent's for any repairs to be done and have the building inspection report completed before settlement (i.e. make a satisfactory building report a condition of settlement). Make sure every item included with the property is written into the contract. Verbal agreements are not worth caring for; it does not matter how trust worthy they sound, the contract always overrides any verbal agreements.
Getting a rate and locking it in.
This is particularly important for fixed interest rates, when rates are moving up, some lenders allow the
rates can be fixed on the day of approval by paying a premium of say 0.15% of the loan. Otherwise the rate is fixed on the day of settlement.
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