You’ve narrowed down the search to find your new home and now you are on the hunt for the best home loan so that you can get your new home’s keys in your hand with confidence. One way to do it is to work with a mortgage broker who can help guide you through the lending process from start to finish.
You’ve probably heard the term “mortgage broker” from your real estate agent, friends or family who’ve bought a home. But what exactly is a mortgage broker and what does one do that’s different from ‘say’ a loan officer at a bank?
Here are answers to five of the most common questions about mortgage brokers;
1. What Is A Mortgage Broker?
Think of a mortgage broker as a middleman between you and potential lenders – the banks.
The broker’s job is to work on your behalf with the banks to find the best mortgage options which might include a bank that will offer you a loan, offer the best loan structure, at the most competitive rates so overall it is a home loan that best fit your needs.
People often use “mortgage broker” and “loan officer” interchangeably but they aren’t the same.
In general, mortgage brokers are regulated financial professionals who have a range of banks and other lenders they work with. They do all the legwork — from gathering documents, getting your credit history and verifying your income and employment. A broker will then use the information to apply for loans on your behalf.
A good mortgage broker can help guide you through the whole process and answer your questions, but also they will keep everyone informed so the process tick’s along smoothly for you.
2. How Do Mortgage Brokers Get Paid?
Like most sales professionals, mortgage brokers need to be paid for the work they do; however unlike most professionals the payment is typically made by the bank – not you.
A broker is paid for providing business (loans) to the various banks and non-bank lenders. The more business that a broker can do, the more they will get paid and conversely at times when they are not doing much business they are not getting paid much. The accountants at the banks generally like the concept of sourcing business via mortgage brokers as they are paid directly on performance.
Banks will also generally pay the brokers for helping with the ongoing management of the loans. This means that the mortgage broker can be your ‘go to person’ whenever you have questions or when you want to make changes to your home loans, refix a fixed rate loan or do a top-up. A broker will also advise what’s best to do with all of your debts whether that means refinancing your home loan or consolidating other debts.
So what makes loan officers at the banks different from mortgage brokers?
Loan officers are employees of the bank and are paid a set salary (plus bonuses) by the bank and are generally paid regardless of the amount of loans settled.
3. What Are The Benefits Of Using A Mortgage Broker?
For starters, a mortgage broker acts for you (not the bank) and then does most of the work for you.
The broker applies for loans with different banks and other lenders on your behalf and negotiates the terms for your loan approval.
Mortgage brokers, who work within a mortgage brokerage firm like The Mortgage Supply Company are able to deal with many lenders which means more choice and therefore will often result in better options for you. This compares to someone at the bank who can only offer you the loan options of that one bank and who is unlikely to tell you to go down the road to an opposition bank which may be a better option for you at that time.
You’ll also save time by using a mortgage broker. It can be difficult arranging a home loan if you have never done it before and even if you have experience it can take hours to apply for different loans with the back-and-forth communication involved in getting the loan approved the way you want.
A mortgage broker can save you the hassle of managing the process and ensuring your home loan is ready on time for you.
4. What Are The Drawbacks?
Some bank staff will tell you that it is better to go directly to the bank for your mortgage and we have even heard of bank staff who have suggested that you will get a better deal by going direct to the bank as this avoids the bank the cost of paying a mortgage broker.
This is not true – the banks pay someone and paying a mortgage broker is really no different to paying their own staff.
The only real drawback in using a mortgage broker is that there will be some banks and lenders that a specific mortgage broker may not be able to use. Some banks like Kiwibank and HSBC don’t really work with mortgage brokers. Also there are a number of mortgage brokers that may not have access to some of the banks and other lenders. Recently we have seen Westpac ceasing to deal with some of the brokers that have not been supplying them with enough quality business.
There are also some people in the business of providing home loans who are aligned with a bank and therefore are not really brokers in the true sense.
If you deal with a reputable mortgage broker they will explain what they can offer and point out any drawbacks.
How Do I Choose The Right Mortgage Broker?
The best way is to ask family, friends or your real estate agent for referrals, but make sure that person has actually used the broker and isn’t just providing the name of a friend. Learn all you can about the broker’s service, communication style, level of experience and knowledge and most of all make sure that you trust them and are comfortable working with them.
The best mortgage brokers will generally be in professional offices and be the busy mortgage brokers, but they will also have staff to support them.
Of course there are still some mortgage brokers that work from home, out of their cars or have most of their meetings in cafe’s. They might do an okay job but you would need to question how serious they are about business and therefore how professional they will be dealing with your loan application.
Your Next Steps
If you don’t have the time, patience or know-how to navigate the lending process on your own, talk to a mortgage broker who’s experienced and one that comes highly recommended.
Don’t be afraid to ask questions and learn about each step in the loan process as it is important to have a good understanding yourself too.
Of course you could just contact us at The Mortgage Supply Company – Hobsonville.