Questions to ask a broker

It’s easy to get confused when every real-estate, mortgage and money ‘expert’ gives their two cents’ worth on a subject. But when choosing a mortgage broker and a home loan through a broker, you should always ask a few key questions so you can make an informed decision. Here are our top five.

Are you a licensed mortgage broker?

The most important thing you should find out, before you ask anything else, is whether the broker is fully licensed to practise as a mortgage broker. You can ask to see proof of their licence if it’s not displayed prominently in their office or on their website.

The Australian Securities and Investments Commission (ASIC) regulates everyone operating in the finance sector, including mortgage brokers, and you can check the ASIC Connect Professionals Register to be sure your broker is licensed to practise.

What is your fee structure?

Even if you’ve used a mortgage broker in the past, it’s wise to ask about your new broker’s fee structure, which might not be the same for every broker.

As the government’s MoneySmart website points out, most (though not all) brokers earn money on commissions paid by the lender. If one particular lender offers the broker more generous commissions than any other lender on their books, the broker may be more inclined to push you towards that particular lender.

Also, some lenders charge borrowers a fee for their services, and others rely solely on their commissions from lenders. Be sure to find out exactly how the broker is paid before you use their services so you know exactly how they are earning their money and what that could mean for you.

Why should I use you as a broker instead of going to the lender directly?

It probably goes without saying, but a broker who can’t answer this question is not worth your time – let alone your business.

The Mortgage & Finance Association of Australia (MFAA) gives a clear breakdown of the role of a broker. Fundamentally, the broker’s job is to save you a lot of time and hassle in identifying which loans you are suitable for and then arrange the setup of the loan you decide on. A good broker will be able to tell you straightaway about the service they provide and even give you examples of when their involvement made a real difference to a borrower.

You can even ask to see testimonials from previous customers as evidence of the broker’s skill and professionalism.

Which lenders do you have access to?

There is a large number of lenders operating in Australia. These range from the big four Australian banks to foreign and international banks with local operations, as well as smaller regional banks, lenders and credit unions.

A good broker will have access to loans from a range of lenders, big and small, which gives them more scope to find the very best loan package for your circumstances. They will also have familiarity in dealing with most, if not of all, of these lenders. As such, they will have an understanding of the little nuances in each lender’s method of determining new loan applications, as well as of the time each lender typically takes to approve a loan.

How do you determine which loan(s) to recommend to me?

Asking this question is a test of the broker and how they work. They should be able to clearly outline how they source loan products from lenders and what process they use to funnel through these options to find the right loan or loans to offer you based on your particular circumstances. They should also know off the top of their heads the types of information you need to provide to secure a loan.

Using a mortgage broker to secure your home loan can take a lot of the hassle out of the process – but be sure to use a reputable, experienced broker to reap the most benefits. You’ll find an extensive directory of mortgage brokers on Domain; also visit the MoneySmart website for loads of useful mortgage broker tips.