The fun begins when you unlock the front door and step inside the wondrous new place you now call home. But first, you have to jump through some pretty adult hoops to finance your dream. And this is where a mortgage broker comes in. For many of us, a broker can help alleviate the rigours of the home loan process – as long as we find the right one.
As an online mortgage broker, uno enables you to reap the benefits of a traditional broker without having to leave your home or office. Our expert advisers work closely with our specialised mortgage broking technology to help customers structure their loan. Our advisers are paid salaries, not commissions (uno as a company receives the commission), so you can rest assured they won’t be favouring one lender over another.
No matter which broker you have your eye on however, the following six questions will help as a guide to stimulate the kind of conversations it’s important to have.
Question #1: Why should I use a broker?
In the quarter to March 2018, brokers settled 55% of residential home loans in Australia, according to market share data sourced by the MFAA. The question is, why do so many Australians use one? According to Deloitte Access Economics’ July 2018 report, The Value of Mortgage Broking, there are many benefits valued by consumers in using a broker:
- They can help pair a consumer with a home loan product and lender to best meet their needs
- They can be a valuable source of education and advice for consumers who need to navigate the often-overwhelming complexities of the home loan process
- They have the potential to introduce customers to more affordable products in some circumstances, on account of their reading of the market; they can also empower customers to bargain more confidently with lenders
- In the majority of cases, a consumer’s access to a broker service is free of charge
Ask your broker what they can do for you. At uno, our advisers provide credit assistance to our customers free of fees and charges and we have a panel of 20+ lenders to help you source the right home loan for your needs. Our advisers can also negotiate with lenders on your behalf to ensure you’re getting the best deal for you.
Question #2: How much experience do you have?
The Australian Securities and Investments Commission (ASIC) stipulates brokers need to have a Certificate IV in Finance and Mortgage Broking to meet the minimum requirements to operate legally in Australia. Brokers are required to operate under their own Australian Credit Licence (ACL) or as Credit Representative under another entity’s ACL too.
It’s always worth checking that your broker has these qualifications before you proceed. It’s also important to consider investigating your broker’s area of expertise. If you’re a first home buyer deciding between a broker with five years’ experience and one with a decade’s, the former might be preferable if they specialise in working with first home buyers, for example.
Question #3: How much can I borrow?
The big question plaguing home buyers tends to be, ‘how much can I borrow?’ As a starting point, uno’s borrowing power calculator will give you a good indication of the approximate amount you can expect to borrow. To use it, you’ll need to know your intended purchase price, how much of a deposit you’ll have (in Australia, you’ll usually be required to save 20% of the house price, but some lenders will require less), how close you are to buying, whether you intend to live in the property or use it as an investment – and your income.
Once you speak to us, however, we’ll be able to give you a much more accurate indication of your borrowing capacity. Brokers act as the go-between for you and the lender. Lenders will need to know your living expenses, debts, credit score and whether you have dependents. A broker can factor all these things into the right loan.
A broker can also explain home loan terms you’ll need to know, such as LVR, which is the initialism for Loan-to-Value Ratio and refers to the percentage of the total loan amount you seek to borrow. They can also explain things like Lenders Mortgage Insurance (LMI) and principle and interest repayments (P&I).
Question #4: What will the true cost of my home loan be?
A great way to utilise the knowledge and experience of a broker is to get them to work out the true cost of your home loan. Based on whether you’re paying principal and interest or interest only, how much of a deposit you have and the length of your loan term, your broker will be able to work out how much you’ll actually pay to the bank over the life of the loan.
By maximising your deposit amount and minimising your loan term, you stand to significantly reduce the overall cost of your loan. However, there is much more to answering what the true cost of your home loan will be. Upfront fees such as valuation fees, conveyancing and legal fees need to be added to the total cost. Ongoing fees such as those you can incur for using a redraw facility, monthly service fees and annual fees can be costly. And exit fees such as fixed rate break costs can amount to thousands of dollars.
While it’s impossible to forecast the entire cost of your home Ioan to the cent – and let’s not forget how life circumstances and changes can affect your ability to pay your loan too – a broker can can help clarify the big picture details. uno’s state of the art technology, POE, delivers results tailored for your personal needs and our team of advisers can use this information to help you decide which loan is best for your circumstances.
Question #5: What features should my home loan have?
Much like cars, computers and TVs, home loans are stacked with features. Depending on your personal circumstances, some of the features of your home loan will affect the total cost more than others. Things to ask your broker about include the ability to make extra repayments, the use of a redraw facility and/or an offset account: what they mean and which ones are best for you.
Different personal scenarios and situations will affect the features you require. You might also anticipate some changes to your situation – children, downsizing and renovations – and others that might surprise you, such as illness and job loss. A broker will help you rank the features in order of most important to least important to you.
Question #6: How can I prepare to work with my broker?
After you’ve set up an account with uno, a consultant will give you a call and go over your details. They will then let you know what you’ll need to supply to progress with your loan application. It’s a good idea to have the following documents ready to share with your broker: ID, payslips, transaction history, tax returns, employment history and proof of funds for a deposit.
With these things in hand, you’ll be well equipped to start the home loan process and well on you way to getting those shiny new keys to the door.
It’s important to note that the information we give here is general in nature – no matter how helpful or relatable you find our articles. Even if it seems like we’re writing about you, it’s not personal or financial advice. That’s why you should always ask a professional before making any life-changing decisions.