A mortgage broker acts as a middleman, a liaison of sorts between a borrower and a bank to procure financing in the form of home loans. As a buyer, you can engage the services of a mortgage broker to negotiate for you and guide you, instead of contacting a lender or a bank directly.
Mortgage brokers can also help you refinance existing loan arrangements along with new home purchase loans. A reputable and competent mortgage broker will help you find the right mortgage by looking around for the best rates and terms. They can guide you through the whole loan process, whether it is with a lender or a bank. They can also advise you through the legalese and formalities that are associated with getting a mortgage. By negotiating on your behalf, mortgage brokers can help you save money on establishment fees and payments that are necessary in the process.
Here are some of the things that a mortgage broker may take care of for you.
Mortgage brokers usually have a vast network of contacts that include various lenders with different portfolios and rates/terms. They can assess the different rates that are available for the kind of mortgage that you need and evaluate which would be most suitable. By comparing the different rates and terms, a mortgage broker can help guide you in the right direction. Also, they can help guide you away from certain lenders whose payment terms would conflict with your requirements.
There are mortgage lenders who work almost exclusively with brokers to ensure that their clients are suitable and possess stable credit status. Such lenders, given the bulk of business they conduct with mortgage brokers, offer better rates and terms. It is possible that you will be able to secure a better mortgage if your broker negotiates the rates on your behalf.
There are a number of fees associated with a new mortgage. For example, you are liable to pay application fees, origination fees, and appraisal fees at various stages of the process. A competent mortgage broker can negotiate with the lenders and have them waive some of these fees, perhaps, all of them. It will help you save a considerable amount of money.
What should you look out for when employing a mortgage broker?
Misalignment of Interests
Your goal is to secure a mortgage with low fees and interest rates. A mortgage broker should help you attain that goal. You should ensure that your broker won’t steer you towards a mortgage that you won’t be able to afford over the years, simply to maximize their commission.
Mortgage brokers receive their remuneration either from the borrower or the lender. If you, as a borrower, are paying the fee, make sure to account for the amount when calculating the mortgage. That essentially is what you are paying for the mortgage. Assess the best deal for you after having calculated the entire sum.
While there are lenders who work exclusively with mortgage brokers, there are also those who work exclusively with individuals. Some of whom offer individuals better rates and terms than they might offer to mortgage brokers. Make sure that you aren’t missing out on a more affordable mortgage by employing a broker to negotiate on your behalf.
An estimate that doesn’t match with the terms and rates of the final offer is a red flag. You shouldn’t have to pay additional fees or higher rates than agreed upon. Make sure that the terms/rates are aligned with the estimate offered to you by the mortgage broker.
Mortgage Brokers Protection
A mortgage is a big financial commitment. More importantly, it is a commitment that depends on a number of factors. Stable credit status, job security, and socioeconomic climate are only a few of these factors.
A seemingly affordable mortgage can turn oppressive and impossible to pay if things go wrong. A mortgage broker can do the utmost to ensure that their client finds the best deal possible. But mistakes can happen. If you are that client and you find yourself out of pocket because of their mistake, your next course of action may be to seek legal advice.
The good news is that Mortgage Brokers are required by the Mortgage & Finance Association of Australia (MFAA) to hold Professional Indemnity insurance as part of their membership. Professional Indemnity insurance* is an important form of protection for businesses that provide specialist service or professional advice, like mortgage brokers. This type of insurance is designed to respond to claims against professionals for losses as a result of actual or alleged negligent act or omissions in the provision of the professional mortgage broking service. BizCover provides Professional Indemnity insurance that can help professionals safeguard their careers and reputations against lawsuits. Professionals can protect themselves and their livelihoods against the financial risks of an extensive and expensive lawsuit.
*As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this web page is general only and should not be relied upon as advice.
investopedia.com (n.d) What is a Mortgage Broker Available at: https://www.investopedia.com/terms/m/mortgagebroker.asp [Accessed 12th Nov. 2020]
moneygeek.com (n.d) How to Decide If You Need a Broker’s Help to Find a Home Loan Available at: https://www.moneygeek.com/mortgage/mortgage-broker/ [Accessed 12th Nov. 2020]
nerdwallet.com (n.d) 5 Facts About Working with a Mortgage Broker Available: https://www.nerdwallet.com/article/mortgages/working-with-mortgage-broker [Accessed 12th Nov. 2020]