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Why Save the Mortgage Broking Industry?

A mortgage broker is a professional who is a freelancing agent.  

They go between the lenders and the borrowers (that’s you) and are paid a commission from the lenders for securing a good borrower.  

They don’t work for anyone, they work for themselves and they compare the rates from dozens of lenders.  

It’s important to remember that mortgage brokers are not actual lenders themselves. 

They are connectors – they seek out people interested in borrowing for a home and fix them up with a lender that works best for their situation.  

Mortgage brokers work by getting to know you, calculating what you could be approved for, sending your application, and discussing with you what would work in terms of a fixed or variable mortgage & fixed or closed term. 

They can often get a better rate than if they went directly to a big bank.  

A good mortgage broker can help you get approved even though your credit history wasn’t so hot by shopping around to different vendors, giving you the benefit of leverage.

50pc Of home loans in Australia go through mortgage brokers. It’s a tried and tested process that helps the lender on a number of levels 

Mortgage Broker Pros:

  • They can meet you on your time – or if you go with an online broker they make it very easy to communicate via email, Skype, etc.
  • Understanding how to save yourself a percentage point here or there can mean an extra trip with your family, a maxed-out RESP, or speeding up that retirement date by a couple of years.
  • You get to see all of your options and are basically guaranteed to get the lowest rate possible.
  • Brokers often have more flexibility in terms of getting you approved with non-traditional lenders.
  • If full-contact negotiating isn’t your thing, have no fear, mortgage brokers will do the dirty work for you.
  • They will sometimes pay for things like inspections or appraisals out of their own pocket.  The idea here is that they wish to secure your loyalty for the long term so that you’ll go back to them for your next mortgage term, as well as recommend their services to others

Mortgage Broker Cons

There is none 

Loan Officers at Big Banks

When you go to one of the  banks for a mortgage they will usually have you sit down with a loan officer.  They’ll guide you through some of terminology involved with mortgages and make a recommendation to you based on what you tell them.  

Big bank loan officers will usually negotiate with you if you play hardball. (Hint: the rate they post on their website and in their brick-and-mortar locations is definitely not their best offer). 

Loan officers usually get paid through some combination of salary + commission + bonuses, and they won’t ever recommend that you look elsewhere.  

Loan officers have no real incentive to snag you the best deal possible – indeed, it’s sort of the opposite.)

Big Bank Loan Officer Pros

If you have a relationship with the bank , you are dealing with your business banker on a number of loans, personal and business – making the process easier.

Big Bank Loan Officer Cons

  • A higher interest rate on your mortgage (just a few tenths of a percentage point will mean thousands of dollars less in your pocket).
  • You only get to negotiate with one institution – meaning you don’t know what leverage you have because you don’t know what others are offering.
  • Getting a competitive rate involves shopping around and a time-consuming negotiating process that turns a lot of people off. 
  • Big banks have fairly specific rules about who they can extend a mortgage to, and often depends on the banks situation 
  • There isn’t as much flexibility as with a broker.

Why would the royal commission propose the mortgage brokers demise?

This is a royal mistake and anti competitive! 

It does not make sense??


Posted on February 14, 2019

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