Is It Worth Going Through a Mortgage Broker?

The truth is you can secure a mortgage on your own, even as a first-time borrower. It is not impossible, and plenty of Australians do this—roughly one-third of borrowers, while two-thirds use brokers.

You can also pull a rotten tooth on your own, but most of us choose to use a dentist.

The common thread between these scenarios is expertise. Dentists know a great deal more about our teeth than most of us do, just as mortgage brokers know a great deal more about home loans than most of us do.

They spend their time analysing and comparing home loans, day in and day out, while most of us only look at or think about home mortgages when applying for one.

Read on to learn more about some of the most common questions and concerns from borrowers about working with mortgage brokers.

Are Mortgage Advisors Worth It?

In almost every case, we would give this one a resounding yes. Mortgage advisors (or brokers) are dedicated to helping you find the ideal mortgage for your particular circumstances, this is what a mortgage broker does.

The right mortgage for the single working mother with two young children will not be the same as for a retired, childless couple with a considerable savings account. A borrower benefits greatly from an advocate who understands their unique circumstances and financial situation, ensuring that time is not wasted analysing loan products that would not work for them—or loans they would ultimately not qualify for anyway.

Mortgage advisors cut down on time wasted wading through loans that are not a fit. They have the expertise to narrow the focus to the types of loans that will work best for the borrower. If you asked borrowers who used them in the past, “is it worth going to a mortgage broker?” the answer will almost certainly be “yes.”

Do Most People Use a Mortgage Broker?

At this point, a sceptic might ask, “if mortgage brokers are so helpful, why doesn’t every borrower use one?” So is it really better to use a bank or a broker? The truth is that two-thirds of Australians do use mortgage brokers, and the one-third of the population who does it on their own probably fits in one of two categories:

Borrowers with a background in finance or banking who have some degree of expertise in reviewing loan products without assistance
Borrowers who are unaware that most mortgage brokers do not charge a fee. Rather, they are incentivised by commissions from the mortgage lender

What Is a Substantial Disadvantage to Using a Mortgage Broker?

The only real disadvantage to a borrower is a case where they pay high fees to a broker. The good news is you can avoid this by asking questions upfront and looking at the broker’s fee structure (where applicable).

A reputable and qualified broker will be willing to discuss these matters openly and honestly and steer you toward the best possible loan products, not just the loans with volume to increase the commission.

Are You More Likely to Get a Mortgage With a Broker?

One of the most common fears for first-time borrowers is that they will not qualify for home loans.

While using a mortgage broker does not guarantee you will be accepted, it does give you a leg up in terms of seeking out the right loan products and those you are most likely to qualify for successfully.

Mortgage brokers have experience tackling most any challenge for a borrower, from short credit history to limited access to funds for a down payment.

That takes us to an important piece of the borrowing puzzle: credit history.

Mortgages and Credit Scores: How Brokers Can Help

If you have poor or non-existent credit, you may fear the worst regarding your mortgage application. And the truth is it can be quite difficult to secure loans with bad credit.

Difficult … but not impossible.

There are some loans designed to work for those who may have struggled in the past with credit, and savvy mortgage brokers will know how to steer you in the right direction.

Credit scores and history play an important role in how lenders assess borrowers. If you have never paid attention to or checked your credit score or history, now is the time to start.

Your credit score indicates to the mortgage lender the likelihood that you will default on your loan. A bad credit score tells a lender you are a serious risk as a borrower; a good credit score tells the lender you are likely to make your payments on time.

Your credit score is determined by several factors, such as the amount of time you have used credit, whether you have repaid your debts, the mix of loans you have secured, and your debt to credit ratio, to name a few.

The credit score is not the only measurement used by mortgage lenders but is important.

Lenders may not always share their specific credit score criteria, but you can consider the following as general guidelines:

A bad or below-average score will be a number below 509, and lenders may not want to assume the risk of working with you
An average score of 510 to 621 puts you in a slightly better position to secure a loan, but it will probably be one with a high interest rate, or you may need someone to co-sign with you and guarantee the loan on your behalf
A good score of 622 to 725 will make it fairly easy to secure a mortgage loan with more competitive interest rates than those offered to average or bad credit score holders
A very good score of 726 to 832 will make it extremely easy to qualify for a loan with attractive terms
An excellent score of 833 to 1200 puts you in a position to choose from the absolute best options in home loans, making you a mortgage broker’s dream client

Only a very small percentage of Australians are in this top tier, and most can benefit from the guidance of a mortgage broker, especially borrowers who need to improve their credit history.

A good mortgage broker can honestly assess whether you need to take corrective steps first to increase your chances of qualifying—such as paying off a specific debt, consolidating your debts, etc.

Bad Credit and Borrowing

Some non-conforming home lenders in Australia will consider special circumstances and grant mortgage loans to individuals with bad credit. A mortgage broker can offer the best guidance for these specific scenarios. If you currently have a less than ideal credit history, the answer to whether it is worth going through a mortgage broker should be clear.

Can a Mortgage Broker Get You a Better Deal?

One reason you may have considered reaching out to a mortgage broker is the potential for a better loan. It’s true. Sometimes, a mortgage broker can get you a better deal.

Why do mortgage brokers get better deals? Because they have access to loans beyond those that an individual can secure.

If you are approaching an individual lender on your own, they will only offer their products. However, a mortgage broker acting on your behalf has access to a wider variety of loans, making it possible for you to secure one with more competitive interest rates or better terms than you might be able to negotiate on your own.

Just as you might rely on a real estate agent who has access to the newest home listings and a network of contacts that may be able to connect you with your dream home, a mortgage broker is an advocate for you to secure the loan needed to make homeownership a reality.

Can Mortgage Brokers Get You a Bigger Mortgage?

One critical component of mortgage loans is what is known as borrowing capacity. A mortgage broker’s financial expertise will truly come in handy here. Brokers can advise you on elements of your loan application that could ultimately increase your borrowing capacity, enabling you to secure a bigger mortgage in some cases. This could mean the difference between homes you feel lukewarm about purchasing versus the home of your dreams.

Can I Remortgage Without a Broker?

For some homeowners, refinancing an existing mortgage can be beneficial. You may be able to secure a better interest rate or more attractive terms if your financial situation has improved in the time since you first applied for a loan.

Refinancing is extremely common, and it is indeed something a borrower can do on her own, without a broker.

However, that same guidance and expertise valuable in a first loan application can certainly come into play with a remortgage.

If you approach your existing lender, they will only consider their own products as part of a refinancing deal. A mortgage broker can look at various options for you to remortgage. Is it worth getting a mortgage broker to refinance? In most cases, yes, it is!

Is It Worth Paying a Mortgage Broker?

While many brokers do not charge the borrower and only receive payment in the form of commission from lenders, there are some cases where direct fees to the borrower may come into play.

This does not always mean the payment is not worth considering; the benefits of working with the broker in terms of the types of loans they can facilitate could outweigh the fees you pay.

What is most important for a borrower is to have a clear understanding of those fees from the outset. Any broker unwilling to share that information upfront is one you should steer clear of and seek assistance elsewhere.

Tips For Finding the Right Mortgage Broker

If you think you could benefit from the services of a mortgage broker when seeking a new home loan, you should always look for:

A licensed and credentialed broker with impeccable references
A broker willing to take the time to answer all of your questions; you should never feel rushed or dismissed
A broker with flexible appointment times who can work with your schedule and meet when it is convenient for you
A broker who asks thoughtful and detailed questions about your circumstances and financial situation to find the best possible loan products for your needs

Most qualified and reputable brokerage firms are more than happy to meet with you at no charge to determine what sort of services you need. And if they do have a fee structure in place that would involve more than just commissions from lenders, they should be willing to tell you about it upfront.

Is a Mortgage Advisor Worth It?

Applying for a home loan can be daunting, and mortgage brokers can make the entire process easier and flow seamlessly for nervous first-time buyers. Even if you are an existing homeowner looking to refinance, a qualified mortgage broker may be able to save you time, effort, and ultimately money.

As long as the broker’s fee structure does not create a financial hardship, the result is typically a better mortgage than one a borrower might have secured on their own.

Mortgage brokers can steer you toward loan products that will work for you (and away from the ones that won’t), help you navigate issues with your credit history, find ways to improve your credit score and the information in your loan applications, and act as a general resource for any parts of the mortgage process that may make you uneasy.

Mortgages can be complicated, and the application process can be scary, but having an advocate on your side throughout the process is incredibly beneficial for many borrowers.

At Zanda Wealth, our dedicated and passionate team of mortgage brokers are ready to help you take the next step toward becoming a homeowner or refinancing your existing mortgage to one that works better for you.