Should You Use A Mortgage Broker When Looking For A Mortgage Loan?
There are many mortgage brokers and mortgage managers in the market who can assist you with this process. The role of the mortgage broker is to assist you in identifying a suitable mortgage that suits your needs. Many mortgage managers also offer a mortgage broker service – this can provide you with the best of both worlds – you can consider the mortgage manager product as well as other loans offered by other lenders in the market.
Many mortgage brokers will recommend bank loans mainly because it is a much easier “sell” to the borrower. Banks obviously spend a considerable amount of money on advertising and have a high profile in the market. It is easier for a mortgage broker to sell a bank product as opposed to a loan product from a lesser known mortgage manager, even though that mortgage manager may offer better interest rates and better featured products.
When you use a mortgage broker you are not generally charged a fee by the mortgage broker for his / her services. The mortgage broker instead receives a commission and sometimes an on-going trail income from the lender for placing the business with that lender. As a rule the commission structures are all the same or very similar – this gives some protection against a mortgage broker channelling business to the lender who pays the highest commission as opposed to the one that may offer the best mortgage loan for you. The interest rate that you pay on your mortgage should be the same as you would be paying if you went directly to the bank or lender.
Mortgage managers also generally receive an upfront fee from the wholesaler who funds the mortgage. This is to assist with the loan processing costs involved with a mortgage application. Unlike a mortgage broker who collates the application and supporting information then hands it to the lender for processing and settlement, a mortgage manager processes the loan through to settlement on behalf of the lender who then pays those costs by way of an upfront fee. While a mortgage broker has no further involvement with the loan once it has settled with the lender, the mortgage manager fulfils an on-going management role for which it receives a management fee from the wholesaler. The mortgage manager in effect fulfils “branch -like” role on behalf of the funder.
While mortgage brokers are generally reputable and working in your best interests there are some mortgage brokers out there that consumer groups consider predatory in their mortgage broker practices. To protect against the less honest mortgage brokers you should check that the mortgage manager or mortgage broker with whom you are doing business is a member of the Mortgage Finance Association of Australia (MFAA). The MFAA has a code of practice and any borrower who has a dispute with a member mortgage broker or manager, can access the Credit Ombudsman Services Limited, a free ASIC- approved dispute resolution process.
Take some precautionary steps when dealing with a mortgage broker – once you have established that they are members of the MFAA you will be better protected should any issues arise in relation to the mortgage broker or the loan product he arranges for you.
Vicky Edema has been the Managing Director of Austral Mortgage Corporation since 1992, the company offers a
mortgage broker service which provides borrowers with
access to an expanded offering of loan and lease products.
Austral URL: www.australmortgage.com.au
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