6 key reasons to engage the services of a mortgage broker

There is a lot of talk in the media and political circles about the recently announced Royal Commission into the financial services sector, with most of the attention centring on the major banks. Whilst this article isn’t designed to throw mud at the banks, it aims to educate potential borrowers on the key benefits of engaging an independent mortgage broker

• Competition equals better interest rates

One of the big misconceptions by borrowers is that approaching a bank directly will result in a better interest rate. I mean, surely involving a mortgage broker as an intermediary will cost more?  Actually, the reverse is often true. Brokers are typically paid a commission by the lenders, but in the vast majority of cases, this commission is entirely funded by the bank, not the borrower.  In fact, in many cases brokers are able to negotiate better pricing for their clients than if their clients approached the bank direct because they are better placed to create competitive market situations between different lenders, thus resulting in reduced interest rates for the borrower.

Banks are also not in the business of informing existing clients that their previously competitive interest rate is no longer competitive. In order to maintain their client relationships, mortgage brokers are motivated to review their client’s situations regularly. With access to a large panel of lenders and armed with competitive new borrowing packages, a professional mortgage broker will typically renegotiate a better rate with their clients existing lender or find a better interest rate with a new lender. Unlike a bank, if a mortgage broker does arrange a better interest rate with a different lender then the mortgage broker will be remunerated for the new transaction.

• The value of independence

Many mortgage brokers are often small business owners or employees of independently owned businesses. Good mortgage brokers justify their existence by putting their clients’ interests first and providing value to those clients. They aim to develop long-term relationships and their businesses prosper through referrals from satisfied clients. When borrowers approach a bank directly, they are dealing with an employee who works for a large financial organisation answering to institutional shareholders. A bank employee will be tasked with implementing the best outcome for the lender and generally, their key motivation is profit above all else.

For example, when a bank lends money to a borrower, they tend to take a legal charge over as many of the borrower’s assets as possible in order to ensure they have the maximum possible security should the borrower default. A mortgage broker, on the other hand, will tend to negotiate borrowing for their clients with as little security as possible, in order to provide the borrower with the greatest level of flexibility in the future.

• Convenience and accessibility

In the today’s time-poor world, compiling vast amounts of paperwork and completing forms can often be a major hurdle when arranging a loan. Bank employees tend to be branch based and available during the traditional working hours of 9am -5pm, however, this is often not convenient for many clients who also work during these hours.

Many mortgage brokers conduct their client facing appointments after hours to fit in with their clients’ busy schedules. In order to make things easier, they will pre-complete much of the paperwork as possible and can often attend meetings in convenient locations such as their client’s home or work.

• One size doesn’t fit all

One of the big advantages of engaging the services of a mortgage broker is their ability to access a much wider range of products and services. If you approach CBA, their staff will only be able to offer you products and solutions from CBA, whereas most brokers can offer solutions from numerous major banks and many smaller tier lenders. Quite often it’s the smaller tier lenders that have greater flexibility around their policies, which could make the difference when trying to obtain finance.

Many borrowers don’t actually realise that applying for a loan unsuccessfully can negatively their credit score and, as a result, harm their ability to obtain a finance approval. Banks are conservative by nature and when one bank says no, other banks tend to get concerned. A lot of the ability to achieve a successful result first time comes down to understanding the policy details of the specific products. A good mortgage broker knows how to match their clients’ individual situation with the lender and product that best matches their circumstances

• Developing the right borrowing strategy

Sometimes you just don’t know what you don’t know. When a borrower approaches a bank, they tend to direct the bank to take out finance to meet their immediate financial requirements. Often little thought is given to how these facilities will impact their future financial strategy.

An experienced mortgage broker, on the other hand, will explore a client’s short, medium and long-term financial objectives. When talking to borrowers, a mortgage broker will take into account factors such as future investment objectives and the tax impacts of their borrowing strategy. A good example of this is the use of offset accounts for tax strategies. Whilst brokers are not in the business of providing tax advice, many have a good understanding of how offset accounts can be utilised to maximise tax deductions and are willing to partner with a borrower’s accountant to achieve the best outcome for their clients.

• Project management from an experienced hand

Purchasing a home or an investment property can be a time consuming and stressful experience at the best of times. Add to the mix having to become the chief facilitator between the various solicitors, property agents, valuers and banks – and you’re now talking about a reasonably significant time commitment!

One of the key benefits of engaging a mortgage broker is their ability and experience to project manage their clients through the property purchase process. Having completed hundreds and sometimes thousands of transactions, experienced mortgage brokers are well placed to guide their clients’ through any potential pitfalls. The best mortgage broking firms have client services teams who are employed to ensure their clients’ needs are constantly monitored and met. Banks, on the other hand, tend to be concerned with arranging the finance only, leaving their clients to fend for themselves when it comes to other aspects of the overall transaction.

To better understand how an experienced and independent mortgage broker can add value to your financial strategy, contact the team at Orium Finance on 02 8238 0800.