With home loan borrowers facing an ever increasing choice of home loans, it’s not surprising that many engage the services of a mortgage broker to find that home or investment loan that is just right for their particular needs and personal situation, but make sure that the broker you choose is definitely the broker for you, here is a list of important questions you should ask.
Are they a Member of the MFAA?
As a member of the MFAA the mortgage broker you are dealing with subscribes to the industry Code of Practice which promotes professionalism, ethical behaviour and transparency in all stages of the loan process.
What happens when interest rates change?
Where your mortgage (or part thereof) is going to be on a variable interest rate, it’s important to know what happens when interest rates rise. Ask your mortgage broker to quantify what your repayment would be if interest rates were to rise 1%, 3%, or 5%.
Don’t necessarily let these calculations scare you off property investment, but be aware that your 25 or 30 year mortgage term is a long time, and interest rates won’t remain the same forever. Knowledge and forward planning is your best defence.
What are the fees and charges on the mortgage?
Ask for a clear indication of the fees and charges you will be liable for with the mortgage. These charges may relate to the mortgage set-up, application fees, property valuation fees, ongoing monthly fees, variation fees and break costs.
Do your maths to understand the impact of these fees and remember that sometimes a large upfront fee is going to work out cheaper than a small monthly fee.
What is the application/approval process like?
Ask your broker to explain how the application/approval process will work, what you have to do, and how long it is going to take. Ask whether you should be getting pre-approval for your mortgage now or wait until you have found your property.
What experience and expertise do they have?
Don’t be afraid to ask how long your mortgage broker has been working in the industry or what their qualifications are. This person is going to help you make one of the biggest purchases of your life so make sure they are someone you trust and have confidence in.
Can I switch from a variable to a fixed interest rate and vice versa?
While borrowers have the option of switching loan types, it is important to know the costs involved and the pros versus cons of switching. Take your time when deciding on an interest rate type in the beginning, to avoid the extra costs that can arise when switching.
Can I choose when I want to make my repayments?
Opting to halve your monthly repayment and repay it fortnightly can make a big difference. This is because there are 26 fortnight’s in the year, meaning you can make the equivalent of 13 monthly repayments.
How much can I borrow?
Before you start looking for a property, you need to know if it’s in your price range. Several factors come together to determine how much money a lender will offer you, including your income, other debts and credit history. Different financial institutions have different lending criteria, so ask your mortgage broker or shop around.
The second important aspect of this question is, how much can I afford to repay? How much you can comfortably repay based on your lifestyle and other commitments is often less than the maximum amount a financial institution will lend you.
What commission is your mortgage broker being paid?
Don’t be afraid to ask a broker what they are being paid for their home loan recommendations. MFAA’s Code of Practice requires its credit advisers to reveal the commissions they are being paid by a lender on a particular home loan product. To borrow with confidence, only deal with an MFAA accredited mortgage broker.