10 Jun Finding the best broker
Jessica Darnborough gives us a look inside the Australian finance broking industry with some good advice about how to choose a broker.
Kevin: More and more, we’re seeing investors right across Australia and New Zealand start to use mortgage brokers, more so than we’ve ever seen before. What are the pros and cons, and why would you want to do it? Jessica Darnbrough from Mortgage Choice joins me.
Jessica, thank you for your time.
Jessica: Thanks for having me.
Kevin: How common is it for investors now to be using mortgage brokers? Are we seeing it grow?
Jessica: We definitely are seeing it grow, and it is becoming increasingly common for investors to use mortgage brokers. Approximately 53% of all home loans are written through mortgage brokers these days, and the same level is for investors, as well. Of the 100% of home loans, about 30% are investors, and of that 30%, 50% are done through mortgage brokers, so they definitely have a big share of that pie.
Kevin: Yes, it’s certainly growing. There’s a lot to choose from if you jump online. How do we make a good choice? What are the steps we should take, and what do we look for?
Jessica: There are a couple of different ways to find a good mortgage broker. In the first instance, you want to talk to your family, your friends, your work colleagues – anyone who has a mortgage, anyone who’s been through a mortgage broker. Ask them about their experiences, who they dealt with, the pros and cons. They’ll be able to give you some really great feedback on whether or not that’s a person that you’d want to touch base with.
In addition, it also helps to get online, do your research, see which brokers are in your local area. It’s always good to work with a local broker where possible because they’ll know the local area, they’ll be able to give you some real estate information, and just generally provide you with some comfort because they know the local area so well.
Kevin: Yes. Of course, we’re seeing real estate agents now get very, very close associations with mortgage brokers. Is that a good way to go? Is that such a good idea to have the real estate agent that closely involved in the loan process?
Jessica: What it is more than anything, is they just refer their clients and customers if they come to open houses and things like that on to mortgage brokers if those clients make it clear that they don’t have their finances sorted yet. They’re not exactly involved in the home loan process, but they do form a nice referral partnership.
While at Mortgage Choice, we don’t have a national alliance – we have one particular real estate agency – some other broking companies across the country do. We don’t have that, but we do encourage our brokers on a local level to get involved with their local real estate agents because they make a really nice referral partnership.
Kevin: Do brokers need to specialize in certain areas – as in commercial or residential – or can they go across the whole lot?
Jessica: Generally speaking, mortgage brokers will go across the whole lot. They’ll be able to look after mum and dad, investors, seasoned investors, negative gearing. They can do really complex investment structures. They can do the whole bing-bang lot. Regardless, if you want a personal loan, a commercial loan, or a residential home loan, your mortgage broker will be able to help you out.
Kevin: They have to keep pretty well up to date, haven’t they? If you go to a bank, they’re only concerned with their own loan type structures, but a mortgage broker has to be across all the lenders. There must be a lot of learning involved.
Jessica: There certainly is, and that’s why a lot of the big broking groups – all of the broking groups, in fact – hold a lot of professional development days for their brokers to make sure that they’re constantly learning and keeping on top of the latest policy and pricing changes. In addition to that, they supply them with exceptional software platforms, so brokers are always knowledgeable about who’s doing what, what lenders are offering what pricing, and what policy changes have been made. They’re really keeping abreast of what’s happening in the market.
Kevin: Do you think because we’ve become so busy, that’s a reflection of why brokers have become so popular? Do you think that it’s easier for us to do it that way?
Jessica: There’s definitely a level of ease there. The mortgage broker does all of the legwork for you, which is really handy, because when you’re taking out a mortgage, even if you just go in for your residential, standard, vanilla-type loan, that’s still quite complex and there’s still a lot involved.
Your mortgage broker will be able to sit down with you. They’ll take you through it all. Then all of the grunt work, all of the negotiating the right price, all of the picking out the right lender, they can definitely do that for you, and that’s a big time saver. It’s also a big comfort thing for Australians.
In addition to that, your brokers are well-educated. They do it every single day, hundreds of loans a year, so they know exactly what they’re talking about and they know exactly what they’re doing. If you haven’t been involved in the mortgage market before, you don’t have a mortgage, or you’ve only had one and you’re looking to maybe purchase an investment, you’re probably not going to be up to speed with exactly how a mortgage works, exactly how the system operates, and a mortgage broker will. That’s why you go to them – for that professional next-level advice.
Kevin: What preparation should I do before I go and see the broker, and what should I be taking along with me?
Jessica: There are a couple of things you should take with you. In first instance, take some form of identification: a driver’s license, a passport, those sorts of things. It’s a good idea to also have any recent pay slips on hand, potentially the last three months’ consecutive pay slips because that can show evidence of income.
Generally speaking, what will happen is once you touch base with a broker and suggest that you want to catch up with them and you are ready to look at your financial situation and you’re taking out a home loan in the near future, your mortgage broker should send you a little bit of a to-do list. It will have a fact find attached to it, just to get a little bit more about you: where you work, how long you’ve worked there, number of children, that sort of thing.
They’ll also send you a list of things that you need to bring, whether or not that be income statements, statements of assets and liabilities, statements around debts, those sorts of things that you might have. They’ll tell you what to bring, but generally speaking, if you’re buying with someone, if you can, make sure both of you are at the meeting if you can because it makes the whole thing run a lot more smoothly and it means the mortgage broker doesn’t have to do multiple meetings with you.
Kevin: Good idea. What if things come off the rail – sometimes they do – and I have a bit of a problem with a broker? Is there a professional body I can turn to?
Jessica: Absolutely. In the first instance, turn to your broker. If you’re getting no love there, turn to the franchise group they work under or broking group they work under. Again, if there’s nothing there, then there’s also the MFAA. The MFAA is the Mortgage Finance Association of Australia, and you can raise any complaints with them because most mortgage brokers – if not all mortgage brokers – operate under either them or the FBAA. Depending on which industry body your broker works underneath, contact that industry body because they should be able to help you with your concerns.
Kevin: Great talking to you. Jessica Darnbrough from Mortgage Choice. Thank you for your time, Jessica.
Jessica: Thank you so much.