Should You Use a Mortgage Broker to Obtain the Best Home Loan?

You’ve decided to look into a mortgage but you’re not sure about the best way of going about it.  You could head down to your bank and ask the manager about the available options.  But what if the best home loan choice for you isn’t offered by your current bank?  You could do all of the research yourself, but that would take a lot of time and effort and you still might not identify all of the possibilities.  Or you could contact a mortgage broker to do the work for you.  Roughly half of the mortgages that are approved in Australia these days are initiated by customers through brokers.

Advantages of Using a Mortgage Broker

There are a number of potential benefits to using a mortgage broker.  These include:

 

  • Options.  Mortgage brokers typically have access to numerous lenders and most, if not all, of each lender’s offered mortgage products, which leads to far greater choice for the borrower.  This improves the likelihood of identifying the best option for each borrower and the likelihood of securing approval for a mortgage.

 

  • Expertise.  Mortgage brokers spend all of their professional time dealing with home loans, so they’re familiar with the entire process.  They can serve as a thorough information source.

 

  • Advocacy.  A broker is supposed to work for you, not for the lender.  And they typically only are paid if the mortgage goes through, so they have an incentive to see the process to a successful conclusion.

 

  • Value.  In some cases, there is no fee for engaging a broker.  In such cases they are paid through a fee tied to the lender.  In that instance, however, the advocacy factor is brought into doubt because they are effectively being paid by the lender.

 

Potential Red Flags

In a sense, if you choose to use a mortgage broker you should probably shop around for one in the same way you’d shop around for the mortgage itself.  Some brokers now charge borrowers a fee for their services.  While this does provide a clear incentive for them to work for you, rather than lenders, it does entail added expense to the borrower.  And while brokers technically open up avenues to many lenders, in practice some are heavily tied to just a small number and tend to steer borrowers to those lenders.  As with all facets of the mortgage process, it pays to do your homework when selecting a broker.

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