6 key questions to ask your broker
More Australians than ever are using a mortgage broker to help them navigate the wide variety of home loans on the market today.
If you're buying for the first time or refinancing and have never used a broker, you're probably asking yourself whether you need any help.
It's simple enough to apply for a loan. You can step into any bank and do that. The challenge is finding the deal that best suits your circumstances.
Mortgage brokers offer a variety of loans from multiple lenders with a wider choice than any single lender will give you. You don't pay brokers anything for their service as lenders pay commissions to them.
While using a broker minimises your risk, there are six questions you should ask any broker (including me!) before giving them your business. They are:
What's the lowest rate for me?
The only relevant rates are those you qualify for. A broker's answer will depend on your income, credit rating and whether you're looking to buy a house or apartment. They'll explain the lowest rate can often come with the highest fees. So, stay open to all the possibilities they present.
Should I go for a fixed rate?
With speculation that rates will rise before the end of the year, this is a relevant question. Your broker will explain the pros and cons of going with fixed and variable rates. They'll also talk to you about a split loan and other options, like an offset account or setting a rate lock that your interest doesn't change before you purchase.
What's my minimum deposit?
The answer can depend on each lender's approach to risk. If you can't raise a 20% deposit, you may be asked to pay Lenders Mortgage Insurance. It's an expensive policy that protects the lender if you default on the loan.
What are the fees?
Your broker will explain the fees being applied to any loan they recommend. These may include penalties for switching loans mid-term or even paying off the debt ahead of schedule.
What's the deal with your commission?
Don't be afraid to ask your broker how they earn their commissions and who's responsible for paying them.
Do you have insurance?
Every broker must have professional indemnity insurance. If they make a mistake or give faulty advice, the insurance ensures you can be financially compensated if you make a successful civil claim.
This article is provided for general information only and does not take into account the specific needs, objectives or circumstances of the reader. Before acting on any information, you should consider whether it is appropriate for your personal circumstances, carry out your own research and seek professional advice.