Many Aussies have used a mortgage broker to help them get a home loan and guide them through the process. In doing so, some have had great experiences where they continue to use that broker for refinancing or purchasing an additional property. Others have not had great experiences, which have made them ask if they can switch mortgage brokers.
If you’re not sure what a mortgage broker is, they are licensed professionals regulated by the Australian Securities and Investments Commission (ASIC) who act as a go-between between borrowers and lenders. They’re required to work in your best interest when helping you to choose a mortgage. Mortgage brokers are legally obligated to not offer you an unsuitable loan, but this doesn’t mean you’ll always be 100% happy with your loan. Or you may not have found their service that great, which will cause you to consider if you can switch mortgage brokers when you go to refinance.
Why might you use a mortgage broker?
You aren’t required to use a mortgage broker to get a home loan, but there are many advantages to using their services. If you’re a first-time buyer, you may find the home loan market quite overwhelming, making the purchase process more stressful than needed. A mortgage broker can help review your finances, discuss your goals and help guide you through the home loan process whilst also getting you a great deal.
If your circumstances are outside the norm, such as being self-employed or having bad credit, a mortgage broker may be the right choice for you. They can help you avoid getting rejected by lenders by helping you find lenders more likely to approve your application. There are also many other ways a mortgage broker may help you with your home loan.
How much do you pay for a broker’s service?
Nothing! Mortgage brokers usually offer their services for free to borrowers, which means you can benefit from their expertise without paying a cent. Typically, lenders pay mortgage brokers a commission for every mortgage application that is approved. Some lenders also pay mortgage brokers something called a trail commission, a small amount paid over the period you keep the mortgage with the lender.
Since it doesn’t cost you anything to use the services of a mortgage broker, you may think it’s super simple to switch brokers, but there are some things to consider. Like anything to do with home loans, you should always check the terms of any agreement you sign with a mortgage broker. Check to see if they charge you if you refinance or switch brokers soon after finalising your loan.
Can I change mortgage brokers before finalising my mortgage application?
Yes, you can switch mortgage brokers. However, unless you feel that a mortgage broker is really not working in your best interests, you may want to think twice about changing brokers during the application process. Not only is it unfair to make them do all the hard work for you and then switch to another broker, who will get the commission, but it’ll put you back at square one in your home loan journey. Be sure to try chatting to your broker if you have any concerns.
A good mortgage broker works in your best interests. Therefore, it’s worth making sure you select the right broker in the first place to make your home loan journey as seamless as possible. To help you in this process, you can have an initial chat with a few brokers, seek recommendations from friends and family. You can also do some research to prepare a list of questions to ask a broker before deciding to work with them.
Some things to look for in a good broker include:
- They’re part of the industry associations and have the requisite licenses.
- They have a minimum of 20+ lenders on their panel.
- They have experience in the type of loan you’re looking for, especially if you’re applying for a niche loan, such as a commercial loan, SMSF loan or a reverse mortgage.
- They have an empathetic approach and good communication skills.
- What’s their position regarding clawback fees?
You can also search our database to find qualified mortgage brokers in your area and compare reviews and ratings from their customers before making a choice. Finding the right mortgage broker before you begin should avoid any need to switch brokers before your application is finalised. But remember that the broker is there to help you through the process, so if you have any concerns, chat to them about it, and they should help you.
Switching mortgage brokers after your home loan is approved
If your home loan application has been approved, but you’re considering using a new mortgage broker to refinance, there are some things you need to consider. Once your home loan application is approved, your broker receives a commission from the lender for bringing your business to them. Additionally, some brokers may also get paid a trail commission during the loan term, which gets suspended if you repay your home loan or refinance it through another broker.
This trail commission incentivises your broker to ensure you have a suitable home loan. It also encourages them to provide ongoing services to ensure that the loan continues to suit your needs. Which should prevent you from switching to a new broker.
If you do want to switch brokers after finalising your home loan, you can. However you should check the contract or agreement you signed with your original broker to see if they mention clawback fees. This is where the broker will be required to repay any commission paid by the lender. The broker may then ask you to repay them for the cost of that lost commission. Clawback fees typically only apply within the first few years of a home loan, assuming most people will not refinance for a few years.
Whatever your reasons for switching mortgage brokers, you should try to chat to your current broker first to see if they can address any concerns you have. If you still don’t feel satisfied with the service they offer after chatting to them, you’re more than welcome to switch mortgage brokers. Just be aware of any possible costs you may incur by checking the agreement you signed with your original broker. If you’re searching for a mortgage broker, use RateCity to find qualified mortgage brokers in your area.