If you're in the market for your first property, it can all seem a little overwhelming. But as with all things in life, knowledge is power. That’s where mortgage brokers come in handy.
Figuring out what LVR is and how it differs from LMI, calculating how much you can afford to borrow and understanding the fine print can really suck the life out of what should be an exciting experience. This is where a mortgage broker can help.
There are many myths about brokers that need to be busted, if you are to take advantage of the knowledge they can provide when you're looking to get a home loan.
Myth #1 Mortgage brokers are expensive
It's a common misconception that mortgage brokers have hidden costs and fees for helping you with your home loan, but that's just not true.
Most brokers do not charge any fees, and instead are paid by a commission by the banks to represent their best home loan products. However, if a mortgage broker charges a fee, they will be upfront in communicating this with you.
Some customers think that going direct to the lender will get them a cheaper interest rate, convinced that the broker's commission will be passed on to them. This is not true, as the commission is a 'silent commission' and no extra cost is passed on via higher interest rates.
Which leads onto the next myth.
Myth #2 Mortgage brokers look out for the banks
It's often thought that because mortgage brokers get paid by the banks, they have deals with certain banks behind closed doors. This then leads to the idea that mortgage brokers will only recommend the banks that give them the biggest commission.
Whilst some mortgage brokers may lean toward certain lenders, most will look out for their customers first. Any conflict of interest would only be of detriment to their business, as they rely entirely upon their reputation to be able to grow their client base.
If you think your mortgage broker is not looking out for your best interests, consider the following:
- Do they offer you multiple options for loans from different lenders?
- Do they supply evidence for why the loans they have chosen are best for you?
If not, it may be worth shopping around for a different broker.
Myth #3 Mortgage brokers only focus on the lowest rates
When you're looking for a home loan, you may think that the interest rate is the most important part. Whilst this is true to some extent, a mortgage broker will look at more than just the interest rate.
Mortgage brokers are there to help you get your application approved, which can be time consuming, and requires quite a lot of documentation. This can be especially useful for first home buyers that are new to the home loan process or are looking to refinance.
If, for instance, you decide to go it alone and apply for a loan with the lowest interest rate, you could end up having your application declined due to other factors like your expenses, income and genuine savings.
Sourcing new documents when your application is declined could add weeks or even months onto the application process, as lenders require that applications have up to date documents.
A mortgage broker also has insight into how likely it is that your application will be approved, so they may not always go for the loan with the lowest rate, but one you will most likely be approved for.
Further, they understand home loan structuring, and can provide advice on what type of investment or owner occupier loan is best. They can also let you know if you could save thousands by switching lenders, and how to increase the tax effectiveness of your home loan to protect your assets.
Myth #4 Lenders will get you a better deal than a broker
You may have heard on the grapevine that going directly to a lender will get you a better deal on your home loan. This could be the case, if you know the ins and outs of the industry, keep up to date with the latest rates, understand home loan structuring and have a good idea of the lender’s application process.
However for most buyers, especially first home buyers, this is not the case.
Going directly to a lender only gives you access to loan options from that one lender. This means you may miss out on loan information from a range of lenders, including the variety of loan products that both big banks and smaller lenders have on offer.
Brokers can also gain access to special offers that may not necessarily be available if you approach that lender directly, which could save you thousands.
Engaging a mortgage broker to help you with your home loan can lead to better rates, products and overall mortgage solutions to help you best meet your financial goals.