Part of the job as a mortgage broker is to get asked questions. You’re their guide to buying the most expensive thing that they’ll likely ever own, so asking a lot of questions is certainly something that should be encouraged.
Furthermore, there are no stupid questions to ask a mortgage broker: for one, if they already knew the answers, we’d be out of a job, and secondly, what we do everyday can seem easy to us because we’re ensconced in it, but it can be extremely confusing to people who don’t deal with home loans every day of their lives.
With that in mind, we’ve covered everything from application fees to clawbacks, settlements to preapprovals and everything in between.
If this isn’t the first question that a mortgage broker gets asked by a new client, then it should be. Credentials are everything. Brokers have to be accredited by their aggregator and should be part of their peak body, whether the MFAA or the FBAA.
Our credibility as an industry took a serious hit from the Hayne Royal Commission, but remains largely high compared to other sectors, and experience, believe it or not, isn’t everything. The broker channel grew by 3% last year, so that’s a fair amount of new blood, and with tech moving at the speed that it is, new brokers might have been untouched by bad habits and the old ways that, pre-Covid, could have been seen to hold us back.
OK, down to brass tacks: how much is this going to cost me? Clients getting a home loan are buying the most expensive thing that they’ll ever own, so the answer is usually ‘a lot’. That’s alright though, because the loan is covering it.
Things like lenders mortgage insurance, application fees and interest rates need to be explained to the client so that they know what they are getting themselves into, while more widely understood subjects like house prices – the big top in today’s market – and stamp duty also need to be covered in depth.
We exist in the middle between a borrower and a lender, so it’s not surprising that one of the most frequent questions that mortgage brokers get asked surrounds the sort of loan that people should be getting.
We’re bound by Best Interests Duty, and have to factor in interest rates and the term of the loan, of course, but also the clients borrowing power, the lender’s offer, our panel and how quickly the application process can happen so that they can get their dream home.
Before people even get to the broker, they’re going to need a deposit. The purchase price of the house is a good starting point for saving, but as that is rising so rapidly at the moment, it is perhaps better to set a solid target and aim for it before you start skipping all that avocado toast.
Mortgage brokers have to know more about the housing market in Australia than their clients and be able to advise on local trends, price growth potential and the rates available from a range of lenders so that they can be best placed to help clients when they come knocking at the door.
So you’ve managed to get yourself a deposit and want to buy a home. Great! The second question to ask your mortgage broker – after how much it’s going to cost – is where we go from here. The job of the broker is to explain the whole thing, from soup to nuts, in a way that a client can understand and use to make informed decisions.
That means the application process, pre-approvals, settlements, conveyancing, solicitors fees and the like, as well as the plethoria of different lending options that a client will have available to them. Oh, and just how long this whole thing might well take, which is a huge problem in today’s marketplace.
The interest rates are a kicker. While it is undeniably a good thing for the mortgage broker market segment that rates are as low as they have ever been, or indeed, are ever likely to be, the hard part is that everyone else in the market knows that and has suddenly taken a massive interest in interest.
Our job is to parse through the cashback offers, honeymoon rates and fixed v variable debate and explain them to clients in a way that fits into the more commonly understood financial concepts like credit cards and expenses.
Interest rates are a hot topic, but few know about the annual percentage rate that underpins them. The mortgage that they pay isn’t just an amount over a 25 year period that they pay back like a rent to the bank: it’s the APR, the total cost of the loan over the life of the loan.
That means all the fees that goes beyond the interest rate on the agreed amount that is borrowed: it’s interest generated over time, plus servicing fees, lender’s mortgage insurance and all the other things that go into making a home loan possible. It should be greater than or equal to the interest rate, and is really the important question that any mortgage broker should be asked by their client before making any decision.
