10 questions to ask your mortgage broker


Nick Bendel

Nick Bendel

( 6 min read )

Getting a home loan can be a highly stressful experience, what with all the jargon and paperwork, not to mention the big dollars at stake.

That’s why a lot of people use mortgage brokers – in fact, a majority of people who take out a home loan now do it through a broker rather than going direct-to-lender.

But that presents its own challenges, because while some brokers are experienced professionals who will provide great service, others are poor operators who will leave you with a bad taste in your mouth. So how do you separate the good from the bad?

To make the process easier, here are 10 questions to ask while you’re shopping around for brokers and then deciding which home loan to select.

What to ask a broker

  1. How much experience do you have?
  2. How many loans have you written during that time?
  3. What sort of clients do you specialise in?
  4. Why should I choose you rather than another broker?
  5. How much hand-holding will you do during the buying process?
  6. How quickly will you respond to my messages?
  7. What happens if you don’t respond to my messages within that timeframe?
  8. How many lenders are on your panel? And who are they?
  9. Why did you choose those particular loans?
  10. What are the pros and cons of each loan?

First, drill down on their level of experience

  1. How much experience do you have?

This is a good place to start, because a more experienced broker will generally be more knowledgeable than a less experienced broker.

Press the broker to give you a specific answer, such as “Five years” or “I’ve been a broker since 2013”, rather than something vague like “I’ve got a lot of experience”.

  1. How many loans have you written during that time?

This is a good follow-up question to ask, as it will give you a better understanding of the mortgage broker’s experience.

For example, imagine two brokers joined the industry in 2013, but that Broker A had written 500 loans during that time and Broker B had written 300. In that case, even though both parties would be able to claim five years of industry experience, there would actually be a clear difference in hands-on experience.

  1. What sort of clients do you specialise in?

Another important question to ask. That’s because while most brokers focus on ‘plain vanilla’ clients, others might focus on, say, sophisticated investors or borrowers with credit problems.

To continue our hypothetical example, Broker A might have done 450 vanilla loans and 50 bad-credit loans, while Broker B might have done 50 vanilla loans and 250 bad-credit loans. So if you were a borrower with credit problems, you might be better off with Broker B.

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Next, probe them about their customer service standards

  1. Why should I choose you rather than another broker?

Organising finance and purchasing property can be complicated and stressful, so you want to know you’re in safe hands. That’s why, before you settle on a particular broker, you should challenge the broker with this particular question.

Don’t let the broker get away with vague statements like “Because I’m the best” or “Because I provide great service”. Use follow-up questions to demand detail. “What specific things make you better than other brokers? What, specifically, do you do to deliver great service?”

  1. How much hand-holding will you do during the buying process?

The reason for this question is so you can discover whether the broker will closely guide you through what is a complicated and stressful process – or expect you to figure it out for yourself.

  1. How quickly will you respond to my messages?

If a problem arises during the loan application process, you’ll want your broker to respond quickly – hence this question.

Again, demand a specific answer – “Within three hours”, say, rather than “Quickly”.

  1. What happens if you don’t respond to my messages within that timeframe?

This is a logical follow-up question. Again, insist on a specific reply.

And once you’ve received answers to questions #6 and #7, ask if the broker would be willing to put both claims in writing. That will indicate how seriously those claims should be taken.

How to find a mortgage broker

There are two types of mortgage broker in Australia. The first kind are affiliated with franchise groups, such as Aussie, Loan Market, Mortgage Choice, Smartline and Yellow Brick Road. The second kind work as solo operators or as employees of finance companies. Regardless, they’re all bound by the same regulations. Brokers generally belong to one of two big industry associations. Click here to find a broker who is part of the Mortgage & Finance Association of Australia or click here to find a broker who is part of the Finance Brokers Association of Australia.

Finally, ask them about lenders and loans 

  1. How many lenders are on your panel? And who are they?

You probably know that mortgage brokers organise loans through a variety of lenders. But what you might not realise is that different brokers work with different lenders – and that brokers can’t work with a particular institution unless they’ve received accreditation from that institution.

That’s why you want to discover which lenders the broker works with. Brokers generally have between 10 and 30 lenders on their panel; some might have as many as 40. Bear in mind, though, that there are about 150 home loan lenders in Australia, so even brokers with big panels will be accredited with just a minority of lenders.

  1. Why did you choose those particular loans?

Assuming you do engage the services of a particular broker, the time will come when that broker presents you with several home loan recommendations. Naturally, you should then ask the broker to justify their selection.

The broker should then explain why those mortgage loans are best suited to your unique circumstances. The explanation might touch on several things:

  • Interest rate (e.g. 4.50 per cent)
  • Interest rate type (variable or fixed)
  • Interest rate structure (principal and interest or interest-only)
  • Loan features (e.g. offset account, redraw facility, extra repayments)
  • Loan fees (e.g. upfront fees, monthly fees, discharge fees)
  • Loan-to-value ratio, or LVR (which might influence whether you have to pay lender’s mortgage insurance, or LMI)
  1. What are the pros and cons of each loan?

Now that the broker has presented you with a shortlist of home loans, you’ll need to choose your favourite. First, though, ask question #10. That way, you’ll be making the most informed decision.

 

What are the pros and cons of using a mortgage broker?

Pros
  • Brokers work with a range of lenders
  • They negotiate with lenders on your behalf
  • They get paid by the lender not by you
Cons
  • Brokers work with only a minority of lenders
  • It’s in their interests to stay friendly with lenders
  • They might force through a loan to earn a commission

 

 

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