When should I see a mortgage broker?

Jodie Humphries-13/10/2020- 5 min read

Many Aussies find the process of applying for a home loan challenging - from selecting the right lender to understanding the lender’s mortgage criteria. By consulting a home loan mortgage broker, you can take advantage of their experience in dealing and having a relationship with a variety of lenders. If you’re wondering "do I need to see a mortgage broker", here are ten reasons why most borrowers might consult mortgage brokers.

1. Brokers manage the whole mortgage application process from lender selection to home loan settlement

If you have any doubts about applying for a home loan, consider meeting a mortgage broker. They are licensed experts deeply familiar with the process of applying for a home loan. A good mortgage broker should be able to help you with almost every aspect of the home loan application process until you sign the loan agreement and sometimes even after that.

2. Brokers can point to the right lender for the right circumstance

Through their industry networks, mortgage brokers have a great deal of information about banks as well as non-bank lenders who offer home loans. They may have even assisted someone with a profile similar to yours, and can therefore leverage that to give you the advice you need and direct you to the most relevant lenders.

3. Broker are experts at navigating the complexity of a bank’s lending criteria

You may visit a mortgage broker only to confirm that you’ve chosen a suitable home loan offer and can’t get a better deal.

However, mortgage brokers are usually qualified to review your income, savings, and credit history in much the same way as many lenders. By doing so, they may be able to give you the lender’s perspective on your home loan application without the risk of your application being rejected and impacting future applications.

4. Brokers can negotiate with lenders to get you a better interest rate

In most cases, mortgage brokers recommend a lender from their list of preferred lenders, called a Lender Panel. Even outside this panel, they would have dealt with multiple lenders and therefore developed relationships with the lenders. These relationships can help ensure that you get favourable loan terms, such as a lower interest rate or low initial deposit. They may even have exclusive deals with particular lenders.

5. Brokers may handle much of the application process for you

When you consult a mortgage broker, you’ll get an insider’s perspective on the home loan application, including the documents lenders prefer. For instance, you may be self-employed and not have payslips or even sufficient tax returns. In such a case, a mortgage broker can help you regarding other documents accepted by lenders, or lenders who require fewer documents.

Consider asking if your mortgage broker can connect you with an accountant in case you need to prepare financial statements as a self-employed borrower. You will then just need to supply the documents, and they handle the inputting of the information into the application.

6. Their expertise speeds up the application process

A good mortgage broker will have a thorough knowledge of the Australian home loan market including the fine print of most loans., They can leverage this knowledge to speed up your application process. For example, a mortgage broker may be able to negotiate with a lender and not just get your loan pre-approved faster, but also reapply on your behalf when the pre-approval expires with minimal input from you. Which can get on the path to owning that dream home as soon as you find it.

7. Brokers can make applying for a home loan cheaper

Applying for a home loan can get expensive when you add up all the upfront costs, and you aren’t eligible for discounts or government schemes for borrowers. When you discuss your situation with a mortgage broker, they may be able to spot opportunities for savings on these costs such as which lenders have lower fees.

8. Brokers may help you avoid damage to your credit rating

If you don’t have much experience with home loans, you may end up applying for multiple loans at once. Which can affect your credit score negatively, impact the chances of any application being approved and make it harder for you to apply afresh for a mortgage. One way to avoid this is to use a mortgage broker who can offer advice regarding the right lender who can meet your home loan requirements.

9. A broker can offer you personalised borrowing choices

Seeking a mortgage broker’s advice on home loans can get you personalised offers rather than offers loosely tailored to borrowers with similar circumstances to yours. This knowledge can help you avoid a prolonged negotiation or, worse, applying without fully taking into account your specific circumstances.

10. They may not cost you anything at all

Most of the advice you get from a mortgage broker is invariably free of charge, as they get commissions from the lenders on their Lender Panel.

As part of their licensing requirements, mortgage brokers need to disclose to you whether their services come with a cost. If you retain their services to help you monitor available loans after you’ve been approved for one, you may have to pay them a consulting fee.

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Jodie Humphries

Content Writer

One of RateCity's Personal Finance writers, Jodie has worked for banks and comparison websites for a number of years, and now spends her time working on ways to make money make sense for everyone else.

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Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.

In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).

These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for, actually meet your needs, and don’t prove unnecessarily challenging for you.

Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.

If you find a mortgage broker giving you generic advice or trying to sell you a competitive offer from an unsuitable lender, you might be better off breaking up with the mortgage broker and consulting someone else. Breaking up with a mortgage broker can be done over the phone, or via email. You can also raise a complaint, either with the broker’s aggregator or with the Australian Financial Complaints Authority as necessary.

As licensed industry professionals, mortgage brokers have the responsibility of giving you accurate advice so that you know what to expect when you apply for a home loan. You may have approached the mortgage broker, for instance, because you have questions about the terms of a home loan a lender offered you.

You should remember that mortgage brokers are obliged by law to act in your best interests and as part of complying with The Australian Securities and Investments Commission’s (ASIC) regulations. If you feel you didn’t get the right advice from the mortgage broker, or that you lost money as a result of accepting the broker’s suggestions regarding a lender or home loan offer, you can file a complaint with the ASIC and seek compensation.

When you first speak to a mortgage broker, consider asking them about their Lender Panel, which is the list of lenders they usually recommend and who may pay them a commission. This information can help you decide if the advice they give you has anything to do with the remuneration they may receive from one or more lenders.

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

Many home loan lenders don’t provide bad credit mortgages
Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

You have a secure job
You have a steady income
You’ve been reducing your debts
You’ve been increasing your savings

Mortgage brokers are finance professionals who help borrowers organise home loans with lenders. As such, they act as middlemen between borrowers and lenders.

While bank staff recommend home loan products only from their own employer, brokers are independent, so they can recommend products from a range of institutions.

Brokers need to be accredited with a particular lender to be able to work with that lender. A typical broker will be accredited with anywhere from 10 to 30 lenders – the big four banks, as well as a range of smaller banks, credit unions and non-bank lenders.

As a general rule, brokers don’t charge consumers for their services; instead, they receive commissions from lenders whenever they place a borrower with that institution.

In Australia, mortgage brokers are defined by law as being credit service or assistance providers, meaning that they help borrowers connect with lenders. Mortgage brokers may not always need a consumer credit license however if they’re operating solo they will need an Australian Credit License (ACL). Further, they may also need to comply with requirements asking them to mention their license number in full.

Some mortgage brokers can be “credit representatives”, or franchisees of a mortgage aggregator. In this case, if the aggregator has a license, the mortgage broker need not have one. The reasoning for this is that the franchise agreement usually requires mortgage brokers to comply with the laws applicable to the aggregator. If you’re speaking to a mortgage broker, you can ask them if they receive commissions from lenders, which is a good indicator that they need to be licensed. Consider requesting their license details if they don’t give you the details beforehand.

You should remember that such a license protects you if you’re given incorrect or misleading advice that results in a home loan application rejection or any financial loss. Brokers are regulated by the Australian Securities & Investment Commission (ASIC), as per the National Consumer Credit Protection (NCCP) Act.

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements.

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out.

Select a number of years to see how much money you can save with different home loans over time.

e.g. To see how much you could save in two years by switching mortgages, set the slider to 2.

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget.

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

Higher-income to show repayment capability for both the loans
Clear credit history with no delays in bill payments or defaults on debts
Zero or minimal current outstanding debt
Some amount of savings
Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.

Applying for home loans with multiple lenders at once can affect your credit history, as multiple loan applications in short succession can make you look like a risky borrower. Comparing home loans from different lenders, assessing their features and benefits, and making one application to a preferred lender may help to improve your chances of success

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

Some lenders will allow you to apply for a mortgage if you are a contractor or freelancer. However, many lenders prefer you to be in a permanent, ongoing role, because a more stable income means you’re more likely to keep up with your repayments.

If you’re a contractor, freelancer, or are otherwise self-employed, it may still be possible to apply for a low-doc home loan, as these mortgages require less specific proof of income.