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SuperRatings' Pension of the Year 4 years in a row4
Looking for a new place to call home, or a property to rent out to kick off your investment in bricks and mortar? Finding the perfect perch for yourself, or rental pad for your portfolio, can be a tough call and choosing the best loan to fund the purchase almost as challenging again.
Australians in the market for a mortgage are currently spoilt for choice – although as a side note, APRA did recently announce additional supervisory measures to reinforce sound residential mortgage lending practices. Nevertheless, borrowers do have potentially dozens of lenders and hundreds of home loans to select from. Comparing home loan options can be a mammoth undertaking, and a mortgage broker may be able to help you narrow down the possibilities and identify loans which best suit your circumstances and borrowing requirements.
Here are some things you might want to know when deciding whether to find a home loan via a broker.
A mortgage broker acts as an intermediary between clients and home loan lenders (which may be banks, building societies, credit unions and other credit providers). Their role can include assisting you to determine the type of loan that will meet your needs in both the short and long term. This might mean weighing the certainty of a fixed interest rate against the potential savings generated by choosing a variable rate, or deciding which type of investment property loan will help you maximise your after-cost return.
A mortgage broker can negotiate with prospective lenders on your behalf and manage the loan application process from initial enquiry through to settlement day when keys – and funds – change hands.
Australian Securities and Investment Commission (ASIC) undertook a review of the mortgage broking market and made the following findings:
Source: ASIC: Report 516: Review of mortgage broker remuneration March 2017
Few people would be likely to view arranging a mortgage as fun and having a third party do the legwork can seem like a no-brainer, but it does pay to conduct a little research of your own if you want to ensure the home loan you end up with is right for you.
While borrowers often assume a broker’s remit is to track down the cheapest and best finance available to them, it’s not necessarily the case. In Australia, brokers usually work on commission, paid by the lender that receives their – meaning your – business.
Commission rates and broker incentives can vary between institutions and the result in some instances could be a conflict of interest.
ASIC’s review into mortgage broker remuneration1, released in early 2017, found that conflict of interest was a significant issue which may have contributed to poor consumer outcomes.
Using a broker may also mean you’re missing out on an opportunity to educate yourself about home loan products. Given your mortgage represents a debt which could stay with you for up to 30 years, it makes sense to become familiar with the features of the various packages on offer, such as interest rates, offset facilities and fee structures.
Thinking of using a broker to organise your home loan? Here are a few questions to ask whilst considering a deal.
Are you licensed? Brokers who aren’t licensed are operating illegally. Check their credentials via ASIC’s Infoline or ASIC Connect’s Professional Registers.
How many lenders do you work with? Competition is key to getting a good deal so it makes sense to team up with a broker who can offer an array of options.
Are you able to provide a comparison of the loans you’ve shortlisted? Including the features, fees and charges associated with each. Having this documented formally makes it easier to compare like for like.
What’s in it for you? Asking your broker to disclose the commission and other payments or benefits they’ll receive may help you determine whether the loan they’ve recommended is better for you, or for them.
1 Source: ASIC; Report 516: Review of mortgage broker remuneration; March 2017
2 The rebate is calculated on the amount of ongoing commission (excluding GST) payable by the lender to QInvest. For some lenders, the rebate applies from year two and isn’t available to GST registered borrowers.
QInvest Limited (ABN 35 063 511 580, AFSL and Australian Credit Licence Number 238274) (QInvest) is ultimately owned by the QSuper Board (ABN 32 125 059 006) as trustee for the QSuper Fund (ABN 60 905 115 063). QInvest is responsible for the financial services and credit services it provides.
The credit services advertised are provided by QInvest Limited. QSuper doesn’t receive any direct payments or commissions from QInvest Limited as a result of members using the LoanFinder service. You should make your own decision about how suitable this service is for your individual needs.
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