It’s natural that people will want to have as low a debt as possible. That’s why many are increasingly choosing to work with a mortgage broker instead of approaching banks directly. This is a sponsored post.

Buying a home is one of the biggest financial commitments most Australians will ever make. And make no mistake, it is a big undertaking.

According to the most up-to-date findings by the Australian Bureau of Statistics (ABS), the average sale price for a residential home in Australia is $1,111,100. Along with it, the current average home loan size is $735,000.

It’s natural that people will want to have as low a debt as possible. That’s why many are increasingly choosing to work with a mortgage broker instead of approaching banks directly themselves. This shouldn’t really come as a surprise, given that the Mortgage & Finance Association of Australia (MFAA) recently stated that 81% of all new residential home loans were facilitated by mortgage brokers.

It’s true that a good mortgage broker can save you time, explain your options and help you find a loan that best suits your circumstances. But with over 22,000 of them operating across the country, it can be difficult to know which one to put your faith into. That is why it pays to know what to look for before doing so.

With that being the case, let’s examine what you should look for when choosing a mortgage broker.

What does a mortgage broker do?

Essentially, a mortgage broker acts as a professional intermediary between you and various financial institutions and lenders

Rather than you approaching banks one by one, a mortgage broker does a lot of the heavy lifting for you. To help you find the best home loan for your needs, they manage the entire process. This includes everything from evaluating your finances and comparing loan products to packaging your application and guiding it through to settlement. All of which is usually completed at no direct cost to you.

Aside from new home loan applications, experienced brokers such as AFMS Group can also help existing homeowners to find better deals.

How do mortgage brokers get paid?

As mentioned, most mortgage brokers do not charge their clients for their service. Instead, they are usually paid a commission by the lender once a home loan settles.

Sometimes, mortgage brokers may also receive an ongoing commission, often called a trail commission, while the loan remains active. You should be aware that these payments are built into the lender’s business costs and do not usually change the interest rate offered to the borrower.

There are some circumstances in which brokers may charge their clients a fee, particularly if the application is complex or involves specialist lending. If this is the case, it should be included in your upfront homebuying costs. This transparency is important to them because it allows borrowers to understand the relationship between the broker and the lenders they recommend.

How can you tell if a mortgage broker is right for you?

When it comes to finding the right mortgage broker, there is a lot more to the process than simply choosing someone who has plenty of good reviews or a professional-looking website. (Although this is still a useful guide). Indeed, the broker you choose will play an integral role in organising one of the biggest financial decisions you’ll ever make. So it’s worth taking the time to find someone who is a good fit for your needs.

One of the first things to look for in a broker is whether they take the time to understand your personal situation. Without doubt, a quality mortgage broker should ask detailed questions about your income, expenses, future plans and financial goals before recommending any loan products. If they seem eager to suggest a loan before learning much about you, see that as a red flag. It may be a sign that they are focused on the transaction rather than finding the right solution for your needs.

It’s also important to consider how many lenders the broker works with. Generally speaking, the more lenders in your mortgage broker’s professional network, the more it will increase your chances of finding a home loan that suits your circumstances. This can be especially valuable for first-home buyers, investors, self-employed borrowers or those with a low credit score.

You’ll also naturally want to work with someone who keeps good communication lines open. Mortgage products can be incredibly confusing to applicants. So, a good broker should be able to explain your options in simple language and provide you with straight answers to any questions you may have.

Ultimately, the right mortgage broker is someone who listens, communicates openly and takes the time to find a loan that aligns with your goals. Rather than treating you as just another application. While you might make your choice based on gut feeling, here is some additional information to help you decide.

Use a mortgage broker or go directly to a bank?

There is no right or wrong answer about whether you should use a mortgage broker or go directly to a bank. It is effectively a personal decision. You can successfully argue either way. However, what you should be focusing on is which is the quickest, least stressful, and most successful way to secure a home loan.

This, by and large, will depend on your financial circumstances. For instance, if you have a 20% deposit, no debt and a steady income, you’ll find that most banks will grant you approval pretty quickly. However, they will only show you their own lending options.

By contrast, if you need to secure the best loan possible to minimise your debt, then it is worth working with a mortgage broker. They can compare loans from multiple lenders, which will increase your chances of identifying alternatives you wouldn’t have found on your own, and could potentially save you thousands of dollars in interest and repayments.

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