There was a time, not so very long ago, when mortgage seekers would listen to every word that banks and lenders told them, following their advice without question. These days, thankfully, mortgage brokers are ensuring that such institutions are kept on their toes.
According to a survey commissioned by the Mortgage and Finance Association of Australia (MFAA), mortgage brokers have been central to the 2014 surge in mortgage lending in Australia. In fact, they accounted for $37.7 billion of the total mortgage lending increase of $56.2 billion, as reported by the Australian Bureau of Statistics (ABS). That represents 67% of the overall growth when the four-quarter period up to September 2014 was compared with the four-quarter period up to September 2013.
If nothing else, this reveals a high level of trust that the public has in mortgage brokers, preferring them to dealing directly with lending institutions. But what exactly is it that brokers do? And what should you look out for when deal with them? Here are some points to consider.
The Good
The principal good point is that, in turning to a mortgage broker, much of the headache involved in searching for the best mortgage loan deals is removed from your shoulders. But a broker also:
- Negotiates with mortgage lenders based on your circumstances
- Presents a shortlist of best available deals for you
- Translates the often mystifying financial jargon
- Advises on the best one for you
The Bad
But not everything that glitters is gold! Mortgage brokers do not have the key to your home loan dreams. There are limitations to what they can do, and there are potential pitfalls to using them that you should consider. Keep in mind that:
- Brokers rely on their inside contacts, so offer a limited range of products
- Brokers get commissions from lenders for bringing them business, so they may have their favourites
- Non-commission-paying lenders, even if they have the very the best deals, are likely to be ignored
The commission issue has caused some genuine concern in recent years. A 2012 report from News.com.au claimed that brokers were earning as much as 1% on the value of a mortgage sold (“$4,000 on a $400,000 loan”), while Choice, Australia’s independent consumer rights group, warned the public not to “confuse talking to a mortgage broker with receiving unbiased or comprehensive financial advice… You’re dealing with a salesperson.”
The Wise
So, how do you go about dealing with a mortgage broker to avoid the potential pitfalls, especially when you have never dealt with a broker before? Well, there are a few things you can do:
- Always shop around. Another broker could find a better deal, or talk directly to lenders.
- Check on the reputation of a mortgage broker before dealing with them. The Australian Securities and Investments Commission (ASIC) has excellent resources, including a database of properly licensed brokers. Check out what the ASIC has to say on using mortgage brokers.
- Get the terms of a mortgage deal in writing, signed by the broker sign it, before agreeing to anything.
The Flongle Mortgage Contest
Of course, you can also turn to the Flongle Mortgage Contest to find skip the mortgage broker and find the best deals directly. We have built our reputation on providing completely unbiased advice to consumers, and our contest system offers you much greater control over your mortgage options.
All you need to do is state your preferred terms and then watch genuine lenders bid for your signature. Our bidder community includes over 50 accredited banks, mortgage brokers and non-bank lenders all over Australia, so you can source the best possible deal.