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Why you should consider making a plan to see a broker in 2021

Why you should consider making a plan to see a broker in 2021

You can shop for a home loan yourself and you can go to a bank, but a broker might just get your financial needs a little more clearly and help you land a home, writes Leigh Stark, Content Manager for RateCity. 

When I visited our local bank for a home loan, I went in with high expectations. I'd been a customer for well over a decade and close to two, and I wanted to have a serious talk about what we could do. I left feeling dejected and broken, as if my money wasn't worth much, and as if the bank was laughing at me. As if the bank didn't actually want to help. 

I was determined to change that: to find a way to secure a home loan for my family, and to escape the tenure of renting in Australia, all the while finding a bank that I could connect with.

Going to the bank made my face some hard truths about buying a home, and while many were around the expectations I'd had of my bank, they also made me rethink how I should get my home loan approved. 

I'd assumed, perhaps naively, that being a loyal customer to my bank would mean something to the institution. That the dollars in my account and how long they'd occupied a spot on their digital transaction sheets would mean something in the long run. 

But that's not what happened at all. 

Rather, my attempts to get them to look at my finances, which had steadily improved over the years, became a rather obtuse source they could use to poke holes in any argument of taking a usable chunk of money out, and instead also look to the highest rate they could provide. 

It's not as if buying a home is a small exercise, either; the moment you take this step, you're committing to spending and paying off a big chunk of change with a bank or lender. But part of the problem of getting a bank to see your worth is understanding the bank in the first place, and that comes down to some seriously hard truths worth seeing. 

You're just a number to your bank: you represent dollar signs, nothing more

One of the problems is that you might see yourself as a valued customer -- the whole "customer is always right" mantra we tell ourselves to believe -- but to a bank, you're just a number. Nothing more. 

Face reality: to a bank, we represent the number of dollars and cents that can be pushed behind our name, all of which we can access at a moment's notice, but that is also used as a way for the bank to make more money from your money overall. 

To a bank, you're a customer and a bridge to economic and financial success, and they owe nothing to you, more than perhaps the service you pay them for in the first place. 

You owe nothing to your bank, and can switch whenever it suits

It goes both ways, though. The bank may owe you nothing more than the service they provide, but you also owe them nothing more than what you actually owe. 

You'll need to pay back any loans or debts, clearly -- bad credit is not a goal of anyone, and it can do severe harm to your credit score -- but you don't owe your bank any specific loyalty, and can switch whenever you want to. 

Switching banks is easier nowadays, especially now with open banking. It means banking institutions are a little more open than they once were, and so your details can be linked to a different group, transferring from one bank to another without as much frustration as switching banks would have once incurred. Much like switching super, it's a whole lot easier today than 20 years ago. 

And because switching banks is easier, looking around is easy, too. 

You might want to take out a home loan, yearning for that prized spot of land where you can set up shop, raise a family, and hope to never have to deal with a landlord again. But you don't have to do it with the bank you've been using, the bank you've been begrudgingly bemoaning. 

Finding a new bank can be helped with a mortgage broker

If you've already made the decision to switch away from a bank, great. Now you just need to find one that suits your purpose. If that purpose is going to be a home loan, you might want to consider talking to a mortgage broker

You can always compare your options with comparison tables, as these can provide a solid understanding of what sort of loan options are out there in the world. It's especially handy if your current bank has said you can get one rate, and yet the rate tables say something else. 

However a mortgage broker's use goes beyond simply providing the rates, and it's all in the name of what they do: a mortgage broker will "broker" the most competitive rate they can from a lender to help secure the purchase you're after. That means you essentially have someone in your corner, because it's incumbent upon them to succeed otherwise they don't get paid either. 

But it can go deeper than that.

A good home loan broker should know the ins and outs of the system. This means they are going to be looking at your finances and potentially work out how best to make your current finances work for you. That might mean looking to what's available, and to suggest other options a bank may not consider, such as paying off current debts in order to secure more money, to look to the parents for a guarantor loan, to consider whether an investment loan is your best chance of beginning, or to explain your career plans to the lender to indicate further ability to pay that home loan in a timely manner.

Meanwhile, your current bank only has direct access to your funds and how you spend them, and it may not be able to see the bigger picture, and may not even care. 

In the wake of the responsible lending laws, banks are a little more proactive and diligent about checking, and so won't give you scores of money without a good reason. Buying a home in Australia tends to require scores of money, however if you don't match specific requirements, you might miss out on the amount you desire, and that can leave you feeling like you're a nothing in a market of somethings. 

Talking to a broker can help you get past that feeling, and may give you some alternatives you'd not considered. It's their job to understand how your finances can work for you, which in turn gets them paid. 

It's not a free service, of course -- brokers make money from what they do -- but it means getting closer to what you envision, and possibly ending up with a bank that can actually help you get there in the end.   

Look for a broker near you

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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