What does a mortgage broker do, and should you use one?

Mortgage brokers play a valuable role in helping you navigate the mortgage market, find suitable loan options, and streamline the application process. Here, we will explore what a mortgage broker does, the advantages and disadvantages of using one, and considerations to help you decide whether or not to use one.

Buying a property, whether it's your dream home or an investment, is a significant financial decision that typically requires a mortgage to finance the purchase.

Securing a mortgage can be a complex and overwhelming process for many individuals, especially for first-time homebuyers. This is where a mortgage broker can help. 

Mortgage brokers play a valuable role in helping you navigate the mortgage market, find suitable loan options, and reduce the stress for you through the application process.

Here, we will explore what a mortgage broker does, the advantages and disadvantages of using one, and considerations to help you decide whether or not to use one.

What does a mortgage broker do?

A mortgage broker acts as an intermediary between borrowers and lenders, helping borrowers find the most suitable mortgage products based on their individual financial situation and needs. Here's a breakdown of the key responsibilities of a mortgage broker:

• Financial assessment - A mortgage broker will assess your financial situation, including income, expenses, credit history, and savings. This helps them understand your borrowing capacity and what type of loans you may or may not qualify for. Some may use technology to make gathering all this data easier for you.
• Loan comparison and recommendations - With access to a wide range of lenders and loan products, mortgage brokers can compare different loan options and structures, interest rates, terms, and features to find the most suitable one for you.
• Application process - Assisting with the completion of the mortgage application accurately and efficiently and liaising with lenders on your behalf to expedite the application and approval process whilst managing your expectations and reducing the stress of a loan application.
• Negotiation - Brokers will research and negotiate with lenders to secure competitive interest rates and favourable loan terms and associated fees.
• Support and guidance - They will guide you throughout the entire mortgage process, answering your questions and addressing any concerns. Good mortgage brokers will work with you throughout the life of the loan to conduct periodic reviews of your loan to ensure it is still competitive and suitable for your needs.

Advantages of using a mortgage broker

Mortgage brokers can provide assistance in a number of key areas, including:

• Access to a wider range of options - Mortgage brokers have access to a researched and approved network of lenders, from major banks to niche lenders. This gives you access to a broader range of mortgage solutions and a better chance of finding a suitable loan for their specific needs.
• Market knowledge and expertise - Mortgage brokers are up to speed with an ever-changing mortgage market. This can be invaluable in identifying the best loan options and securing competitive rates on your behalf.
• Efficiency - Shopping for a mortgage can be time-consuming and stressful, involving multiple meetings with different lenders. A mortgage broker streamlines this process by doing the legwork for you, saving you time and effort.
• Tailored advice - A mortgage broker assesses your financial situation and goals to provide personalised recommendations, ensuring you choose a mortgage that aligns with your needs.
• Navigation through complex situations - If you have a unique or unusual financial situation, or credit issues, a mortgage broker can help you find lenders who may be more willing to work with you.
• Deal making skills - Brokers have experience negotiating with lenders, which can lead to more favourable loan terms and interest rates than if you were negotiating alone.
• Best Interest Duty - Mortgage brokers have a legislated "Best Interest Duty" to put you interest first in all circumstances. This is something the Banks don't have given the limited choice they can provide.
• Financial Wellbeing - Your lending and debt management is fundamental to your financial wellbeing and your mortgage broker is qualified to address this help you reduce financial stress.

Disadvantages of using a mortgage broker

When deciding whether to engage the services of a broker, it is important to consider the following:

• Experience & qualifications - It is important to gauge a mortgage brokers' experience and qualifications, as they may not be an experienced finance professional.
• Fees - Whilst mortgage brokers earn a commission from lenders when they successfully match a borrower with a mortgage product they may also choose to charge a fee for their service. In this case, they will provided you with a Credit Quote setting out the applicable details.
• Potential bias - Some mortgage brokers may have preferential relationships with certain lenders, potentially limiting the range of options they present to you.

Should you use a mortgage broker?

Whether you should use a mortgage broker depends on your personal preferences, financial situation, and comfort level with the mortgage application process. Consider the following factors when making your decision:

• Complexity of your financial situation - If you have a straightforward financial situation and a good credit score, you may find it easy to navigate the mortgage process independently. However, if your financial situation is complex or you have a low credit score, a mortgage broker's expertise can help find the most appropriate solution for you.
• Better access to mortgage products - If you want access to a broad range of mortgage products and lenders, a mortgage broker can facilitate this quickly and easily. Some lenders, especially smaller or non-bank lenders, may not deal directly with the public. A broker can help you access these lenders and their solutions, expanding your range of options. If you have unusual financial circumstances or need specialised loan products (e.g., low deposit loans, self-employed loans), a mortgage broker can help you find lenders who cater to your specific needs.
• Time constraints - If you have limited time to research and compare mortgage options, a mortgage broker can save you a significant amount of time and effort, reduce the stress and expedite the process.
• Understanding mortgage terms - If you are not familiar with mortgage terminology or find the process overwhelming, a mortgage broker can simplify the information and guide you through each step.
• Cost considerations - While you may be concerned about the potential cost of using a mortgage broker (although there generally is no cost), it's essential to weigh the savings they can offer through competitive rates and loan features against any associated fees.
• Best Interest Duty - A mortgage broker has a legislated Best Interest Duty meaning you can rest assured they are accountable to the regulators for any advice given.

In summary

A mortgage broker can play a key role in simplifying the home loan process for you. They offer access to multiple lenders, expert advice, and personalised loan recommendations, potentially saving you time and money and removing the stress for you through the process.

Whether you should use a mortgage broker depends on your individual financial situation, preferences, and comfort level navigating the lending market independently. By carefully weighing the pros and cons, you can make an informed decision on whether a mortgage broker is the right choice for you. 

Remember to choose a reputable and licensed professional who can guide you through the process of securing a home loan that aligns with your financial goals and needs. 

Disclaimer: This document has been prepared by IOOF Finance Choice Pty Ltd ABN 74 129 728 963 ACL 385191 (IOOF Finance Choice). The information in this document contains general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document you should assess your own circumstances or seek advice from your financial adviser. You should also obtain and consider a copy of the relevant Product Disclosure Statement before you acquire a financial product to determine if it’s right for you. While IOOF Finance Choice has taken all reasonable care in producing the information in this document, IOOF Finance Choice makes no representations in respect of, and, to the extent permitted by law, excludes all warranties in relation to the accuracy or completeness of the information. IOOF Finance Choice, its officers, employees, directors and contractors exclude, to the maximum extent permitted by law, all liability whatsoever for any loss or damage howsoever arising out of reliance, in whole or in part, on the information in this document.