Questions to ask your broker
1. What are your qualifications?
Before discussing your own finances, check that the mortgage broker is fully qualified to give you professional guidance. As a minimum requirement, an Australian mortgage broker should have a Certificate IV in Finance and Mortgage Broking, and they should operate under their own Australian Credit Licence (ACL) or as a credit representative under another entity’s ACL.
2. Do you have a range of lenders?
One of the main benefits of consulting a mortgage broker is that they have the ability to sort through a wide range of products from a wide range of lenders on your behalf. This saves you the stress of trying to assess all the different products on the market in order to work out what is best for your needs.
If you feel that your broker is only offering you a limited number of products, feel free to ask why, or to find a broker who can give you a more comprehensive view of your options.
3. What kind of clients do you specialise in?
You want a mortgage broker who is highly experienced with your particular situation. If you have a steady job, a decent-sized deposit and you are looking to buy a residential home, then your loan will be fairly straightforward. But if you are planning to build an investment portfolio, if you have a complicated financial history or even if you are self-employed, you will need to find a broker who knows from experience how to help you.
4. What is the best loan for my circumstances?
Your broker should be asking you plenty of questions in order to make a decision about the best loan for you. They should also give you a few different options and explain the relative pros and cons of each one, so you can make an informed decision.
When your broker explains why they chose a particular loan for you, they should cover the interest rate, the interest rate type and structure, along with the loan features and loan to value ration (LVR).
Home loans generally include special features, such as the availability of a redraw facility or an offset account, or the ability to make additional repayments when you wish. Talk to your mortgage broker about your plans for the future – such as whether you intend to start a family or renovate the home – as these plans will have an impact on which features could be more beneficial for you. It’s also useful to consider which features would be helpful in a “worst case” scenario, such as sudden unemployment or long-term health issues.
5. How much can I borrow?
In order to answer this question, your broker should be making calculations based on the information you provide. You will need to tell the broker how much deposit you have saved and your intended purchase price, along with your current income, living expenses and any outstanding debts. It is also important to note whether you are planning to purchase a residential home or an investment property.
6. What fees will I incur on the loan?
While mortgage brokers are generally paid by commission, some will also charge you a fee for their services. There could also be fees for more complex loans, such as if your deposit is less than 20% of the purchase price or if you are refinancing a loan. Ask your broker whether they will charge you any fees before you sign any paperwork.
7. What will the true cost of my home loan be?
Your mortgage broker should be able to tell you how much you will spend on the property in the long term, based on the length of your loan term, the size of your deposit, and whether you are paying principal and interest or interest only. This is an excellent opportunity to assess how you could adjust your payments to reduce the length and overall cost of the loan. Paying a little more of the principal each month, for example, may not cut into your regular budget too much but it could save you thousands over the life of the loan.
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