How To Select The Right Home Loan Broker: 7 questions should be asking
When choosing a broker to help you secure your home loan - whether you’re refinancing, buying or renovating - having confidence and certainty in your choice will set you up nicely for the rest of the journey.
Let’s face it; getting a home loan will never exactly be a fun experience. It can, however, be a stressful one. If your chosen adviser can’t guide you seamlessly through the process or shield you from lender administration hassles, it’s likely to be a more painful process than it should be.
Be Prepared
As with pretty much everything in house buying, it pays to do your homework early and be prepared before any decision needs to be made. Excitement, nervousness…even dread; there are a lot of emotions involved, and they can (and often do) wreak havoc with our ability to make rational decisions.
So when choosing a broker, you need to ask the right questions to feel confident about whether they are the right partner for you. Here are the key questions HoLo expects new clients to ask when they first approach us.
1. What’s your licence and accreditation situation?
This may sound like a no-brainer, but you’d be shocked how many people simply assume the broker is properly set up to advise them. Fortunately, the vast majority are, yet it pays to be sure you’re not speaking to a bad apple.
Look for membership in the Mortgage Finance Association of Australia (MFAA) and/or the Finance Brokers Association of Australia (FBAA). All brokers in Australia must have either their own Australian Credit Licence (ACL), or be a registered representative under another entity’s ACL. HoLo, for example, is an authorised representative under Connective’s ACL.
2. How do you ensure each client gets the right home loan?
Notice how we don’t say ‘best home loan’ here? That’s very deliberate. Every loan application is different, despite many applicants all getting a particular home loan. You’re looking for the broker to specifically talk through how they will understand your specific circumstances, your goals and then how they will match those with different products with particular features.
Like HoLo, a good broker will start by walking you through your borrowing capacity and presenting you with options based on your current, and future, affordability. They should offer you guidance and advice on how to secure the loan you need, which may require adjustments to your financial lifestyle.
3. How many lenders do you deal with?
It’s not all about the Big Four anymore; there are heaps of banks out there fiercely competing for business from people like you. A good lender should have access to plenty of choice for you. HoLo has access to over 40 different lenders, all offering a broad range of products with differing features.
Sounds good having access to all that choice, right? Well it is, if you have the right experts to guide you through it, properly finding the right loan for your circumstances and goals. That’s why it’s good to understand the broker’s customisation process alongside their lender range.
4. What’s the best rate for me?
OK, so the word ‘best’ has snuck in there, though it’s probably the way most people would phrase this question. A good broker will immediately say that they need more information about your circumstances before quoting any specific rate.
A great broker, however, will add to this by explaining the difference between the interest rate and the comparison rate, which will help you to understand the difference between the cost of different loans when all the various costs and fees are included.
5. What home loan features would you recommend for me?
This one’s a bit of a trick question, since the broker won’t know what features are right for you if this is still your first conversation. If you start hearing recommendations at this point, that’s probably a bit of a red flag.
You’re looking for reaffirmation that they need to know more about your specific circumstances before making any recommendations. That said, it’s an opportunity for you to hear what features they can consider for you, and if they’ve got a reasonable range of lenders there should be plenty. HoLo can walk you through the features different loans offer, like extra repayments, offset accounts and redraw facilities, so that when the right loan options are selected, you’ll be able to choose the features that match your situation.
6. How do you get paid?
This one may feel a bit direct, but there’s a good reason to ask it. Most brokers receive commission from banks when a home loan is settled, so it’s unusual (though not impossible) for borrowers to be charged by brokers, but worth confirming.
It’s also worth confirming whether there are any secondary commissions that are paid to the broker for referrals for things like lenders mortgage insurance (LMI) or conveyancers. These may be useful, or even essential, yet it’s important to be certain you’re getting the right deal for you, not just because the broker will take a finder’s fee.
7. How will you make this the best experience possible for me?
Last, but definitely not least, what’s the journey together going to be like? The previous questions will help you feel confident that the broker knows what they’re doing, is qualified and fair dinkum, but what’s the day-to-day going to be like? There’s lots of information to be exchanged, lots of communication between you and, potentially, it needs to be done quickly.
Getting an idea of their workflow process lets you know what kind of commitments you’ll need to make. HoLo manages everything through its online portal. The entire application process is managed through your personal dashboard, with 24/7 access to document transfer, financial data entry and communication with your assigned expert, whether that’s email, phone or scheduling a video chat.
There’s no need to stress about finding time to get to the branch with signed papers, or agonising about how to make the appointment work when you need to be in two places at once. A smooth, flexible process goes a long way to making the experience memorable for all the right reasons - not all the wrong ones.
Feeling good about who you choose
Mortgage brokers - by law - must put their clients’ needs first. Banks, by comparison, don’t have to (this came out of the banking Royal Commission - go figure!). So, if you do decide to use a broker, it’s probably a smart decision. Even so, applying for a home loan is a big responsibility. Asking a potential broker these questions will help you ensure that you have the right finance team to guide you through the process to your particular goal.
Feel like asking HoLo some of these questions? Schedule an chat below or contact us.