How does mortgage broking work?
Last time we looked at what a mortgage broker does and why you might use one. So let’s have a look at how it works. Something that comes up regularly is whether you have to pay for a mortgage broker to help you. The short answer is not usually.
Currently, if a mortgage broker arranges a mortgage for someone, the lender that gets the new business pays the mortgage broker a commission. This commission is usually sufficient to cover the cost of the mortgage broker’s time. Sometimes however, it may not, in which case there may be a separate charge to plug this gap. However all mortgage brokers operate differently, so it’s important that you check before starting down the process.
Potentially this arrangement could be seen as a ‘win-win-win’ situation:
- The home-buyer wins because they get a mortgage that works for them, may be more likely to have the application approved, and they have someone helping them with the process and paperwork
- The lender wins because they get a new customer
- The mortgage broker wins because they help someone out and get paid for it
So, are there any downsides? One concern raised at the Royal Commission was that brokers may choose a mortgage for a client based on the commission they would receive. Whilst this may be possible, I would expect and hope that anyone who really cares about their clients wouldn’t even consider this. It would also seem that a mortgage broker that has clients going back to them for every new mortgage, is probably looking after those clients very well and doing the right thing.
I catch up with Lillian Dang, a mortgage broker with Zenrg Finance, on a regular basis. She fills me in on what’s going on in the industry, and the latest news with regards to how strict banks are being with mortgage applications. This is valuable for me, because as a financial adviser I have a lot of clients who are saving for their first home. I love that Lillian gets really excited about getting great results for her clients.
I asked Lillian to give her number 1# reason for using a mortgage broker:
“Mortgage brokers are familiar with all the paper work and how applications are assessed and approved. Using a broker will help give your application a better chance of being approved.”
Got a question about mortgages or buying a home? Feel free to get in touch!
Alison Kaigan – Your Canberra Financial Adviser