Nov 30

The benefits of using a mortgage broker

Published in new car financemortgage brokerhome finance by Vicky Edema
There has been press recently concerning the benefits of using a mortgage broker when looking for home finance and car finance – yes, a mortgage broker will generally be able to assist you with your car finance as well as standard home finance and investment loans.

The mortgage broker business boomed during the 1990s when there was a plethora of home finance and car finance loan products launched into the market. With increased competition from the non-bank sector and mortgage managers, borrowers seeking home finance were overwhelmed with the options available to them. As a result the mortgage broker had a role to play in suggesting what may be the best home fiannce options for a borrower as well as keeping borrowers informed of any “specials” that may have been on offer from time to time. Most borrowers are working full time and simply do not have the resources to check out a myriad of home finance products. The mortgage broker offers a valuable service in this regard.

Over the past 15 years software packages have enabled the mortgage broker to tap into a wide range of lenders and the home finance products they offer. The software now is very sophisticated and allows the mortgage broker to select those features which are important to his client. In the interview process you might advise the mortgage broker that you have savings which you do not necessarily want to apply to the home purchase but rather would like to keep in an offset account. The mortgage broker can quickly identify those lenders which offer a 100% offset facility. Similarly you may want to purchase in a particular geographic location – a quick search of the software will let the mortgage broker know whether there are any lending restrictions applicable to that particular area. This can save the borrower considerable time and money.

Not only can the mortgage broker ensure that your needs are properly met in the home finance package you select but as a general rule the mortgage broker is aware of different offers that are being promoted by lenders. As an example, a mortgage broker with whom I dealt was able to recommend a loan which at the time had no upfront costs at all. There was no application fee, no valuation fee and non lender’s legal fees – my mortgage broker saved me just over $1230 in this exercise alone.

While the mortgage broker industry is not yet nationally regulated you can protect yourself by ensuring that you only use a mortgage broker who is a member of the Mortgage Finance Association of Australia. The benefit to you is that any mortgage broker who is a member must also be a member of Credit Ombudsman Services Limited and this provides you with a free external dispute resolution process if for any reason your mortgage broker fails to deliver or acts inappropriately.

The mortgage broker has been able to offer a valuable service to borrowers at no cost. How can this be? The mortgage broker has agreements in place with the banks and non-banks whereby they are paid a commission for placing the loan with a lender. No matter which lender he uses, the commission rates a mortgage broker receives are not significantly different. Because the lender is saving costs by not having to employ salesmen and women they agree that the rate that the mortgage broker negotiates with the borrower will be identical to the rate that the lender would have offered the borrower had he or she come directly to the bank. So…why would you not use a mortgage broker? By using a mortgage broker save money, time and ensure that you make an informed decision when on your home finance.
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