You’ve spent months – OK, reality check, this is Sydney in 2019 – YEARS saving for your first house deposit. You’ve scrimped and saved every penny, put your hand up for every possible minute of overtime at work and have become known around the office for your famous homemade lunches al desko. Realestate.com has officially overtaken Insta as the most used app on your phone and you can’t remember a time when your Saturday mornings didn’t involve traipsing around open houses, making awkward small talk with real estate agents.
Yep, you are officially in ‘first home buyer’ territory, and that light at the end of the tunnel – getting the keys to your shiny new home – is tantalisingly close. It probably feels like you’ve already done the hard yards, but in many ways they’re only just beginning. There are home loans to find, pre-approvals to get and interest rates to figure out… that’s where a mortgage broker comes in.
What is a mortgage broker?
For first home buyers, a mortgage broker is a bit like a physio when those first little niggles of your 30s start to crop up – you don’t know you need one until you really, really need one. When you’re navigating the world of home ownership for the first time, it makes sense to have someone by your side who has done this many, many times before.
Put simply, a mortgage broker is someone who does exactly that – brokers mortgages. They’re the middle man (or woman) between you and your lender. They’ll research all the options that are currently available and find the best deal for you, based on your budget, individual circumstances and financial goals.
When most people think of mortgage brokers, they think of the role they play when you’re buying your first property. Your broker is there to guide you through the whole buying process, from the moment you nervously raise your hand at your first auction to when you turn the key in the door of your brand-spankin’-new home. They will help you make an offer, deal with the agent and liaise with your solicitor.
All the other ways a mortgage broker can help you
But they can help in other ways, too. Before you even rock up to an auction, mortgage brokers can advise on how much cash you’ll need to secure that dream 3-bedder in Glenmore Park, and help you map out a realistic savings plan to get there. At the other end, long after the sale is done and dusted and you and your significant other have argued over ‘ecru’ or ‘eggshell’ for the living room walls (hot tip: they’re pretty much the same colour), they’ll keep working away over the life of the loan to make sure you’re still getting the best deal years and decades down the track.
Essentially, your mortgage broker is the mortar that sticks all the bricks together. The solicitor will help you with the legal legwork, but they don’t know anything about the finance and negotiation side of things. And that real estate agent you’ve been making awkward chit chat with at every open house? Their slightly-too-white smile might be dazzling, but they’re ultimately acting in the vendor’s best interests – not yours.
When should you see a mortgage broker?
You can make an appointment with a mortgage broker earlier than you think. You don’t have to wait until your mortgage is 1000% viable and you’ve checked off all the boxes on that ‘101 ways to get a home loan’ list you found on Google that time. Maybe you just want to have a conversation about what you’re planning and find out what you can do to help you get there, even if home ownership is still a few years off. A mortgage broker can look at what you’ve done so far, map out a timeline of when you’ll hit your goal based on your current savings plan and provide advice on things you can be doing now to increase your chances of getting a home loan.
Remember mortgage brokers are dealing in decades, not months or years, so they’re generally happy to offer no-obligation advice if it means they’ll still have you as a happy customer when you’re both middle-aged, having a cuppa on the veranda of the home they helped you buy and complaining about the kids next door.
What does a mortgage broker do?
All the things! There are multiple answers to this question depending on what stage of the process you’re at. As we mentioned, one thing a lot of people don’t know is that a mortgage broker will monitor your mortgage for the life of the loan. And considering home loans can have 20- or 30-year terms, a lot can change in that time. When life happens – babies, new jobs, redundancies, divorces, the list goes on – your mortgage broker can help you navigate those changes to ensure your mortgage is still the right one for you and ease any financial stress you might hit otherwise.
How a mortgage broker can help with a variable loan
And as with the ups and downs of life, they can also help with the ups and downs of interest rates. If you’ve got a variable rate (that is, an interest rate that’s at the mercy of what’s happening in the broader financial markets), your mortgage broker will perform an annual review to make sure that rate’s still looking as sexy as it did when you first ‘swiped right’ on it. If it’s let itself go a bit, your broker will tap you on the shoulder and say, “Hey, here’s three other products that you’re eligible for according to your last financials, are you interested in making a move?” Even better, they can give your bank a tap on their metaphorical shoulder and say, “Hey, this current rate sucks, can we get a lower one?” Basically, they’re keeping an eye on your rate so that you don’t have to.
How a mortgage broker can help with a fixed rate loan
If you’re on a fixed rate (that is, an interest rate that remains at a set level for a certain period of time), mortgage brokers can help with that too. A lot of borrowers with fixed rates have a ‘set and forget’ mentality when it comes to their loan and just let it roll, but that can be riskier than eating that week-old chicken at the back of your fridge. Why? Because when your loan hits the end of its term, it triggers a new variable rate – and that can be a complete car crash.
However, with a mortgage broker, they’ll call you a couple of months before your fixed rate’s ready to roll and have a conversation about whether you want to stay with your bank or look elsewhere. If you’re happy with your rate you can stay put, but if you want to see what else is out there, your mortgage broker will do that running around for you (which means more time for Netflix).
Speaking of running around, there’s a lot of it when it comes to home loans. From the initial application to rate changes and random queries throughout the life of the loan, get ready for a lot of dead time stuck in phone queues – or have a mortgage broker do it for you. Think of them as the buffer between you and your lender so you don’t have to sit there getting tangled in red tape, becoming more and more pissed off as Karen passes you to Susan who passes you to Janet who passes you back to Karen, all while tinny hold music rings in your ears. Just one quick call or email to your broker and they’ll handle it all for you.
At the end of the day, your mortgage broker is your trusted advisor. It’s in their interests to keep you happy and informed, because if you’re not? You’ll go somewhere else, and they want to make sure you’re still hanging out together on the porch swapping stories about all your aches and pains and those damn kids next door.
Why should I go to a mortgage broker instead of a bank?
Again, it comes back to that whole old-guys-sitting-on-the-porch thing. An independent mortgage broker is in it for the long haul, they’ve decided to make this their career and are passionate about helping their clients. If you go into a bank branch and speak to one of their lenders, they’ll provide all the information you need, but you’re unlikely to get the same person when you go back in a few years to update your rate or secure a new loan.
The banks also don’t conduct annual reviews of their clients in the same way that independent mortgage brokers do. It’s not mandatory and, just quietly, not really in their interests to do so. If you’re on a higher rate they’re making more money from you, so why would they proactively give you a lower one? Furthermore, they will only ever offer you their own products. They might know that Bob down the road has a better rate at the moment, but they’re never going to tell you that because they want to keep you as a customer – they’re the clingy girlfriends of the home loan world.
A mortgage broker, on the other hand, not only wants to find you the cheapest loan but also the one that’s the best fit for you. No matter how weird or wacky your circumstances might be, a mortgage broker has seen them all. If you don’t fit the criteria for the big four, they can weigh up your other options and point you in the direction of lenders you might not have even heard of but that suit your circumstances to a tee. And that means you’ll be in your dream home before you know it, arguing over ecru or eggshell for the living room walls.
The fine print
The material on this website is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances, and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based on the information in this publication.