Put simply – using an independent broker can be the most efficient method for you to get the best deal and the best loan structure. There are a number of reasons why that is the case, and there are a number of things you need to be aware of when dealing with a broker, so we’ll go into those now.
Firstly, it is amazing how quickly an inordinate amount of time can be spent doing your own research on loans and their types, structures, real costs and requirements. The time expenditure can be huge, and in the end you can still fall short of the best loan because you’re not likely to have considered all the options or taken everything into account, so an application to the wrong lender will affect your credit and can make a follow up application to your most suitable lender fail. This same information is literally at the fingertips of professional brokers, and anything they don’t already know, they have instant access to the banks’ reps and sometimes even the banks’ assessors.
Secondly, they don’t charge you for their service – the bank pays them – this means two very important things – one, they only get paid if the loan settles, so they will try very hard to get you a loan once they’ve invested time into your proposition. You can be assured that all stops will be pulled for you. And two, the banks need to have good enough customer propositions on offer to entice customers – it’s often said that just by their presence, brokers create more competition between the banks, which is great for the end consumer – your broker will take advantage of this fact and shop around for you.
Thirdly, the service provided by a broker should be significantly better than that provided by a bank. Better service will be evident in their ability and willingness to educate you as necessary, answer their phone when you call them, respond quickly to new information, liaise with real estate agents, settlement agents and the lender to expedite the whole deal, and the obvious upper hand on the banks – they can negotiate between different lenders in order to get the best deal. A bank works differently. Not only are they limited to their own products, which may not be the best suited to you, a bank loan officer will not normally provide the above services with any great skill or passion, as they don’t have their income riding on the outcome, instead relying on the bank’s marketing for their constant stream of customers, and will quickly move onto the next customer once the transaction has been completed. A broker relies on his service to encourage his clients to come back to him as their needs change in the future, or refer new business to him when the opportunity presents itself.
Still, there are aspects to be aware of when dealing with a broker which can cause you stress, lost time and in the end give you a less suitable loan. Ideally, you should enquire how much experience in dealing with your type of scenario they have. Experience can make the process so much easier and more likely to succeed. Also, you should get a list of the lenders on their panel, as they can only work with those lenders. If their panel is short or if they only ever use one or two lenders, then you should ensure your situation is their bread and butter, otherwise you might consider keeping on looking. If a broker advises you that you need to pay them upfront with a retainer fee you should also keep on looking, as the broking industry is performance based, and at least in 2012 you don’t need to pay upfront for this service. The same list that provides the names of the lenders also provides a guide to commissions the broker will make – this must be shown to you now under the law, so make sure that is provided. This helps to make them accountable for their recommendations, as you can see what they get out of it.
The mortgage broking industry is now far more professional and regulated than in previous years. A minimum level of qualifications is required, police checks done and Continuous Professional Development programs are mandatory. There is talk in the industry of the minimum education requirement becoming a bachelor’s degree, which will provide more well-rounded skills and add even further legitimacy to the industry, and this is not in vain, as the statistics show that over 40% of home loans are written by brokers, and is on the rise as the banks push their broker avenues to save their own costs.