By Jesse McPherson

Over the past two decades, more and more Australians have been turning to brokers to manage their mortgages. There are good reasons for this, but you still need to know how to find the broker that’s right for you. Jesse McPherson tells you how.

20 years ago, only 20% of home loans were brokered. The latest figures put it at 71% to 72%. In that time, buying a house has become increasingly difficult, and people are looking for an advocate who’ll be in their corner, working hard for their interests.

This is precisely what a mortgage broker should be doing. But it’s a jargon-heavy industry that many people, understandably, find hard to navigate. So I’ve drawn on my decades of experience as a broker to explain why we’re so popular at the moment, how to spot a good broker, and why ongoing support is crucial.

Mortgage brokers vs the banks – why brokers are winning the battle

There’s been a significant rise recently in the percentage of people using a broker instead of dealing directly with a lender. This is in no small part due to legislation known as Best Interest Duty, which legally requires brokers to act in your best interest. Banks don’t have this obligation. This gives you more confidence that a broker is recommending a loan that works for you, not just them or the lender.

When looking for the right loan, you might come across brokers who tout having access to fifty lenders on their panel. Truth is, most brokers do. The good thing about this is that it gives us greater opportunity to find a loan that works best for you and your situation.

Red flags vs green flags – the signs of a good mortgage broker

Not all brokers are created equal. Given this is a jargon-heavy industry that most mortgage-hunters aren’t overly familiar with, it can be tricky knowing how to find a good broker that truly has your best interests at heart. While the Best Interest Duty legislation has certainly made a difference, the process can still be gamed. Here are what the green flags to aim for and the red flags to avoid.

Green flags

• Are they willing to educate? This is the most important asset of a good mortgage broker. It seems like a really simple concept, but are they explaining to you the options and the reasons behind choices, so you’re confident you are in a better position. Or are they purely transactional i.e. just focused on pushing to get a deal done?
• Do they have the capability to educate? Mortgage brokers live and breathe the industry on a daily basis. Their knowledge should be deep. Even if you feel well-versed in the mortgage world, you should still walk away from a conversation with a good broker with some new insights about your mortgage options.
• They ask the right questions. In order to find you the right loan, brokers need to know your circumstances. Not just your income or how long you’ve held your current position, but what your aims are in the short and long term. As we’ll discuss shortly, rates aren’t everything. Other considerations are equally important.

Red flags

• Constantly talking about one lender. Brokers have an obligation to offer you choices when it comes to your loans. These choices should be comparable. If they provide an option that looks good and the other options are obviously poorer, it generally means they haven’t done their job.

The reality is that some brokers get comfortable with particular lenders, either because they’re familiar with the process or they get on well with the business development manager. It could also be because they’re a small brokering company and they can’t be across all the lenders. It might even be that you don’t meet the policy requirements.

None of this necessarily means they’re doing a poor job or haven’t presented you with the right option. What matters is communication. If they can explain well why they’ve presented you with these offers, then that’s fine. But if they can’t satisfactorily tell you why they’ve given you one good option and two seemingly poor ones, that’s a red flag.

• They only talk about rates. Obviously, interest rates are important. But they shouldn’t be at the front of every conversation. There are so many other aspects that could lead to a better outcome for you. Maybe that’s getting you an extra couple of hundred thousand dollars to help you secure that house you really want and will live in long-term, or securing you the best possible loan given you’ve only been self-employed for one year.

Rates are important; they’re just not the be all and end all. If they are, it can become detrimental for you. Look for brokers who are interested in your situation, ask the right questions, know what you want and talk about the big picture.

Brokers (should) provide on-going support

A mortgage isn’t just about securing a loan; it’s about ensuring that your mortgage remains competitive and suited to your needs as they evolve.

Most people know that brokers receive trail income from your mortgage. Our view is that if we’re getting paid, we should be doing something to earn it.

At Kingsbridge Private, we have a dedicated team member whose sole focus is to look after our existing clients. This is where we justify our trail income and why we have a strict annual review policy, ensuring that we remain in contact with you throughout the life of your mortgage.

At the minimum, we contact our clients annually. But we also keep any eye out for trigger events. Fixed rate expiries, significant changes in the market – anything like this and we get in touch with you. If we notice a bank softening their pricing with a view to getting out of the market, we’ll do a blitz with all our clients who have a loan with that bank and see if we can improve their margins.

As you can see, annual contact is an absolute minimum.

We also use this as an opportunity to see if you’re still happy with your setup. We’ll show you where you sit in the market and you’ll tell us if you’re happy with that. If your equity has improved, we might go to the bank, do a pricing scenario and improve your situation.

At the end of the day, our goal as mortgage brokers is to provide ongoing support and ensure that you’re not left in the dark once your loan is settled. Whether it’s through annual reviews, proactive rate checks, or just being available when you need us, we’re here to make sure that your mortgage works for you now and in the future.

Kingsbridge Private can secure you the future you want

More people are turning to brokers than ever before. We provide a greater range of loan options and we provide crucial on-going support. Buying a house in Australia is more difficult than ever, so having an expert broker in your corner is crucial .Get in touch with us at Kingsbridge Private to find out how a broker can help you secure the future you want.