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Using
mortgage brokers for your home loan
Are
you looking for a home loan?
These days, with so many different loans and lenders in the
market, you might rely on a mortgage broker to do the legwork
for you. Mortgage brokers may be able help you find out about
suitable loans and arrange special deals.
However, as with any adviser, do some checking and shopping
around yourself. Make sure your broker is finding a competitive
loan package or you could end up paying more than you need to.
Most brokers offer only a limited range of loans. They get paid
a commission and some may receive other benefits from the lender
as well. Mortgage brokers are not financial advisers, and are
not obliged to find you the best possible deal unless they specifically
agree to do so.
If you just use a broker, you may miss out on some of the cheapest
loans in the market. Some of these loans are provided by lenders
that don't pay commissions and are therefore not included on
the panels of lenders from which brokers select their loans.
Even a small difference in the interest rate can make a big
difference to the amount you pay. For example, take two loans,
one charging 6% in interest per year, and the other charging
6.5%. The half a per cent (0.5%) difference on a $150,000 home
loan over 25 years, can cost you an extra $13,900 if a broker
sells you the more expensive loan.
Easy ways to shop around
Shopping around for a home loan, especially on the internet,
is easy.
Check magazines
Various consumer and personal finance magazines devoted to mortgages
or money can also show you what the going rates are, and then
you're much more likely to find the best loan.
Special offers?
Banks, building societies, credit unions and non-bank lenders,
including superannuation funds, make special offers as well
as standard deals. You may have to phone and ask specifically,
but special offers may exist for:
- larger
loans
- super
fund members. A number of superannuation funds offer home
loans to members at competitive rates
- professional
groups
- shareholders
- staff
of employers with whom the bank has special relationship
Smart
ways to use mortgage brokers
Once you know the kind of loan you want, note down the interest
rate and fees you will probably have to pay. Then contact two
or three mortgage brokers over the phone. Tell them briefly
about what you want, and see what they can offer.
They might also have some special deals. If so, get a written
promise that the terms and conditions are the same or better
than the lender will offer you direct. Some lenders may offer
a similar sounding product through brokers, but impose special
conditions, for example higher fees for paying out the loan
early.
Internet brokers have their offers in writing, and you can print
the pages you need. Phone brokers can also be quick and convenient.
Make a note of their offers, the name of the person you
spoke to and the date and time you spoke to them. This can prove
essential if there's any dispute later. Some brokers rebate
to you some of the commission lenders pay them which will save
you money.
If you decide a broker's offer suits you, check to see if they
belong to an independent complaints scheme just in case anything
goes wrong.
Tips when dealing mortgage brokers
While most mortgage broking companies operate in a business-like
way, standards of training and personal qualifications vary
widely across the industry. Almost anyone can set themselves
up as a mortgage broker. Some States insist on registration,
but this does not guarantee professionalism or fairness.
Large loans and refinancing
The more you borrow, the greater the commission for the broker.
Reputable brokers will act responsibly, but you must also be
a responsible borrower.
Make sure you can afford the loan. Ask the broker to explain
what you'll be up for, and double check with them that you can
realistically afford the loan you want. Be conservative, and
make sure you will have enough money to live reasonably even
if interest rates go up a little.
Refinancing means paying out your old loan and taking out a
fresh one. If this is suggested, make sure you will really be
better off. Refinancing may add extra fees, payable to your
old and new lenders as well as stamp duty. Check first if your
existing lender will offer you an attractive deal to stay with
them.
Home visits
Some brokers may ask to visit you at home. If you have shopped
around and a broker is really offering you the best deal, then
a home visit may prove convenient to settle the deal.
If you are unsure and are still looking around, think twice
about allowing a salesperson to visit you at home. Once you
have invited a salesperson into your home, it can sometimes
be surprisingly difficult to get them to leave without committing
yourself too quickly.
Fee for service
If you are just looking for a home loan, most mainstream brokers
will not charge you any fees for their services. Even if you
have had a troubled credit history or your financial situation
is too unusual for mainstream lenders, you can probably find
brokers who will assist you free of charge.
Never, in any circumstances, pay a broker an upfront fee to
arrange a loan. Avoid brokers that charge you up-front.
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