Why should I use a Mortgage Broker?

The key issue when deciding how to obtain a home loan is one of trust.

Your home loan is very likely your biggest single expense and the difference between the cheapest loan and a more expensive one can be tens of thousands of dollars.

So why is it then that every year more people use Mortgage Brokers to help them get a loan, and less people go straight to their existing financial institution or research the market themselves?

Between 30 and 40% of people use a Mortgage Broker when obtaining a home loan and this number has been steadily rising since the inception of the Mortgage Broking industry some 20 years ago. In some states as many as half of all loans are organised by brokers.

When looking at the pros and cons of the three main options when organising a loan, this dramatic growth in the use of brokers becomes clearer:


1)    Do you trust your bank?

The first option is to go straight to the institution you have been banking with for a long time
This is the most common way people obtain a home loan, although the number of people doing this is steadily declining. They have had their accounts and credit cards with a bank or credit union for a long time, they possibly even know the bank manager personally and trust that this institution will look after them for being long-term customers.

Pros:
  • No time lost by shopping around.
Cons:
  • It is unlikely that this institution has the cheapest loan available in a market of many dozens of lenders and hundreds of loan options.
  • All lenders are in the business of making money, so it is not in their best interests to give you the cheapest loan they can. In our experience, lenders only negotiate on loans when the customer can demonstrate they can get a better loan elsewhere.
  • Lending policies vary dramatically between lenders, and if your loan is declined then you will have a Credit Query recorded on your credit report (lasting 5 years) which can make future loan applications more difficult.
  • It is not in the lender’s interests for you to pay the loan off quickly.

2)    Do you trust that you have the expertise, access to information and time to correctly compare hundreds of loan options?

Your second choice is to shop around and compare different lenders and their loans. This is definitely an improvement on simply speaking with one institution. Some people will contact a number of lenders and research the internet and mortgage magazines to find the cheapest option for them.

Pros:
  • Some lenders will negotiate their rates if you can show a competitor has a better loan.
  • The more lenders you research the better your chance of finding a cheaper loan.

Cons:
  • The complexity of the mortgage industry, lenders and numerous types of loans makes it very difficult to compare loan options correctly.
  • Very time consuming to cover a reasonable number of lenders.
  • You are often relying on lender advertising, which makes it difficult to get a clear picture of the exact product details.
  • Honeymoon and Introductory rates can confuse the true cost of the loan.
  • Lender’s don’t disclose their full fees and charges without substantial research.
  • Lending policies vary dramatically between lenders, and if your loan is declined then you will have a Credit Query recorded on your credit report (lasting 5 years) which can make future loan applications more difficult.
  • Many lender discount packages are not disclosed to the public.
  • Many wholesale and non-bank lenders only deal with brokers.
3)    Do you trust a third party?

As the Home Loan market becomes increasingly complex, more and more people are turning to Mortgage Brokers. Mortgage Brokers save you time and money, and they have the expertise to find you the correct loan from hundreds of options.

Pros:
  • Mortgage brokers save you time because they have already done all the research and know the best lender offers.
  • They know the lender’s policies and will only submit your loan to a lender they are confident will approve your loan, which protects your credit rating.
  • Mortgage Brokers have the expertise to correctly compare the best loan offers.
  • A Mortgage Broker can arrange a loan with your existing financial institution, but will ensure you get any discounts you may be eligible for.
  • A Mortgage Broker does not charge you a fee for their service.
  • They can help you avoid pitfalls and hidden fees and charges.
Cons:
  • Mortgage Brokers will only offer lenders on their lender panel.
For more information contact Mortgage Australia Today