In search of your dream home, you have already completed the necessary research for home loans in Melbourne and naturally, your hunt is now for the best mortgage broker or a home loan broker in Melbourne. During all the hours you have spent researching for multiple factors related to the acquisition of your home, you could not have missed the term ‘mortgage broker’. But, it is unlikely that you have ever had firsthand experience with a mortgage broker or strained yourself to understand how a loan officer at your bank differs from a mortgage broker.
Mortgage broker defined
First things first – let us understand what a mortgage broker means and how he can help you in your pursuit. Basically, the job of a mortgage broker involves working with multiple lenders on your behalf, and getting you the most beneficial interest rate, that also answers your needs. An established mortgage broker always has a well-developed group of lenders to work with and that can potentially make life much easier for you. Mortgage brokers are also regulated and licensed professionals who do much of the legwork checking out your credit history, collecting your documents, verifying your employment and income, and incorporate the information gathered in your application for loans with multiple lenders over a short space of time. Once you have zeroed down to a lender that best suits your interest, your mortgage broker, or home loan broker Melbourne continues to collaborate with your banker whose underwriting department, the real estate agent, and closing agent for the transaction to achieve smooth closure on the designated day.
Remuneration of a mortgage broker
In most situations, mortgage brokers receive their remuneration from the lenders, though this may come from the borrower in an odd instance, but never from both. Generally, lenders pay between 0.5 and 2.75% of your loan amount. You also have the liberty to negotiate compensation with the mortgage broker and the fact that you, the borrower is paying the compensation can be documented. This way, you also have the opportunity to do a bit of shopping around and understand how the compensation pans out. Generally speaking, no mortgage broker gets more than 3% of the loan amount by law.
How mortgage brokers are different from bank’s loan officers
Loan officers receive a fixed salary since they are employees of a lender and may receive bonuses for the loans they write. Mortgage brokers on the other hand work with multiple lenders and the bulk of their earnings come from the fee paid by the lender/borrower. In other words, mortgage brokers work like freelancers and enjoy the liberty to carry the same mortgage proposal to different lenders. A loan officer on the other hand can only work within the framework of his employer. However, you should also take care not to confuse a mortgage banker with a mortgage broker. While a mortgage banker can close a mortgage in their name, a mortgage broker is not empowered to do that. A mortgage broker, as the term denotes, can only liaise with different lenders and help you identify the most beneficial loan arrangement.
A mortgage broker can save a significant amount of time for you
A significant advantage when you work with a mortgage broker in your pursuit for home loans in Melbourne is that you save plenty of time which is otherwise consumed in collating various documents, applying to multiple lenders, communication with regard to the underwriting of the loan and keeping the transaction on track. Perhaps you can check with your friends who have handled this process without involving a mortgage broker to get an in-depth idea of time consumed in all these.
Apart from the interest charged on your mortgage loan, there are several other factors you should be aware of to strike the right comparison between multiple offers. While many of these costs are straight forward and charged upfront, you should use a magnifier to understand the fine print and how it impacts your overall liability. For instance, if you want to exit a 15-year loan at the end of 5 years, most lenders will charge you a fee for the early closure. For instance, the ongoing pandemic has a serious impact on real estate and demand for new loans. This has resulted in a steep drop in interest rates on home loans. You may therefore want to short close your existing mortgage carrying a higher interest rate and take a new loan at the lower rates prevailing now. But, before you initiate any action, you should understand the cost of making such a swap.
Choosing your mortgage broker
We now come to the act of finding your mortgage broker. The best way to go about this is to speak to your relatives or friends for referrals. When you get these referrals to remember to check if they have used the particular mortgage broker and if they are happy with the services received. If the referral has no direct connection with the person providing the referral, you can save the information and check out referrals that come with a direct connection. This way you will have a more useful basket of information than mere names with no background information.
Your real estate agent is another source of valuable information. Ask them for contact information of a few mortgage brokers that they have worked with and are trustworthy. Some real estate companies may even have in-house mortgage brokers as part of comprehensive services offered by them, though you are under no obligation to pick that part of their service.
When you find a mortgage broker who is just right for you, you have also found your mortgage lender. Ideally, you should be speaking to at least 3 or 4 mortgage brokers to understand the scope of services offered by them, length of experience they have and how they propose to simplify the whole process.
Yet another reliable source is the licensing authority in your state who can provide a list of mortgage brokers with good standing. You can use the list to further verify the credentials through your local business bureau before arriving at a final decision.