Mortgage Broker 101 — Simplified For Beginners

Mortgage Broker 101 — Simplified For Beginners

what does a mortgage broker do

What does a mortgage broker do?

A mortgage broker is used by home buyers and investors to access the largest source of mortgage loans. In simpler terms, they help first-time home buyers, home up-graders and refinancers in finding the perfect home loan for their needs and in closing them.

There are a variety of mortgage providers in the Australia — there are literally hundreds of thousands.

This wide variety of products available includes interest only payments, repayment, and interest only loans. This is where brokers come in; they work with lenders to find the right mortgage product for you based on your individual needs.

A broker’s job is to give you an honest assessment of the mortgage loans available to you and advise you as to which product will give you the best return on your investment. In most cases, brokers receive commissions on each product they sell.

So in most instances the brokers services are free to you — the mortgage provider pays the commission to the broker.

Mortgage brokers typically work with mortgage providers from a list of hundreds of lenders.

As the number of lenders increase, so do the types of products offered by them. Some lenders specialize in certain types of products, such as variable rate mortgages, credit mortgages or even low-doc mortgages.

So in the end, you’ll have to do some research to find out which lenders provide the product you need and to get the best deal.

How do I know what my mortgage options are and what they’ll cost?

You’ll get a complete overview of your mortgage options from your broker at the time of your application.

Brokers are not permitted to provide personal advice to you without any assessment. Instead, the mortgage broker takes it upon themselves to assess your financial position and then advise you on the product that will give you the best return.

The good news is that regardless of what type of mortgage you have or want, you can still use a broker’s services to shop for the best interest rate and package deal.

By using a broker you will have a good general idea of the mortgage options and any additional costs involved that may come your way in advance. Read our article about the 9 things to consider about home loans and the different mortgage options by Moneyhelper.

mortgage broker

What are the merits in having a broker when it comes to mortgage lenders?

Mortgage brokers may also be referred to as “non-traditional mortgage brokers” or “altra lenders.”

They have access to many lenders through their connections with a major online mortgage aggregator. This aggregator often times acts as the “underwriter” for the application, so you’re only going to get an almost unlimited number of lenders to choose from.

Since these brokers are paid by the lender, you’ll typically have better rates and terms available to you than you would when you go to a traditional lender directly.

Another advantage of hiring brokers is that they often work as independent contractors rather than being employed by a specific lender. They will get paid for their services once they find a loan for you.

There are some disadvantages, to using mortgage brokers, of course.

Most of them get paid based on the money they refer you to lenders. Since most people rarely know how much a specific product or service is worth until they try it themselves, some people could occasionally  wind up paying more than is necessary.

The bottom-line in mortgage loans:

In general, a mortgage broker does all the shopping around for you.

They contact the different lenders to work out the best deal for you. Sometimes though, they may charge you a fee for this service (vary rare though). Brokers receive payment from the lenders for their services, so they are often willing to forgo fees to the customer.

Overall, brokers are quite useful because they allow you more control over the loan process and can save you a lot of money.

If you need a mortgage quickly but don’t want to use the traditional process, you may be able to get a better deal this way. Typically however, you should not pay any fees to a broker unless you absolutely need to.