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Using a mortgage broker is a great way to expedite your property purchase journey. With the Australian market offering hundreds of home loan products, navigating the complex mortgage landscape can be challenging. This is where a mortgage broker could be of great help. Not only does a broker scope the market on your behalf to find the right home loan fit, but they also handle your loan paperwork. Finally, mortgage brokers receive a commission from the lender for each loan they settle, and their services are free for borrowers. However, getting the most of your mortgage broker requires a healthy involvement from your side as well. Here’s our take on the list of questions you should consider asking your broker to get the most of their services.
#1 How much should I borrow?
Use your broker’s help to arrive at a comfortable loan repayment size based on your current living expenses and income. While your existing assets play an important role in determining the amount you can borrow, lenders assign greater importance to your current income and living expenses.
#2 What loan features should I consider?
Loan features like an offset account, redraw facility and the flexibility to make bigger and more frequent repayments can quicken homeownership and save you thousands in interest if you pay off your mortgage faster. Work with your broker to identify what features would work best for your circumstances.
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#3 What strategy should I use to improve eligibility?
Despite having the right income level, there may be hurdles in securing a home loan. Your broker can work with you on identifying a solution for any challenge you may be facing. Some common limitations include:
- Low credit score: if you have several missed payments, late bills and debt, you are likely to have a low credit score. Your broker can guide you on other avenues for securing a loan, like a ‘Near Prime Loan’ or finding a loan guarantor.
- Inadequate income proof: If you don’t have salary slips or two years of tax returns, your broker could help you find the right ‘Alternate documentation’ home loan provider that could finance your property purchase as per your circumstances.
- Insufficient home loan deposit: If you have less than a 20% home loan deposit, you can secure a home loan by buying LMI (Lender mortgage insurance), usually 1-2% of the property cost. However, even if you purchase property with an LMI, you still need a 5% home loan deposit. Other approaches to buying property without LMI include finding a guarantor, applying for the ‘First Home Loan Deposit scheme’ or using equity from an existing property you own. Your broker can help access the best approach for you.
#4 Please walk me through your credentials as a mortgage broker
Understand if your mortgage broker is fully equipped to support you with these questions
- Do they have a valid license as a standalone credit professional, or are they the authorised credit representative of a more prominent mortgage firm?
- How long have they been a mortgage broker?
- How many lenders do they have access to?
- Does any lender influence them, or are they independent?
- How are they paid their commission?
# 5 What are the reasons for your loan recommendations?
Once your broker scopes the market on your behalf, you will receive loan recommendations. Understand the rationale behind these recommendations in terms of
- Loan Features
- Loan processing time
- Fixed-rate vs variable rate
#6 What is the actual cost of my home loan?
Remember that there is generally a difference between the advertised rate of a loan and its comparison rate. The loan’s comparison rate needs to be legally displayed by a lender and is the true cost as it includes all fees. Understand all components of your home loan and any exit fees should you choose to switch lenders.
Do remember that mortgage brokers are legally required to provide you with home loan recommendations that are not unsuitable for you under the recently announced “Best Interest Duty” obligation. This extra layer of protection does not exist with the lender. To know more, click HERE.
Reach us for the best way forward as per your circumstances.