Top 18 Questions to Ask a Mortgage Broker
If you’re looking to purchase a property in Australia, it is likely to be easier to go through a mortgage broker. This is especially the case if you’re buying a house from abroad; it can be hard to negotiate loan terms or find the best lender when you’re overseas. However, you also need to make sure your mortgage broker is on your side. Here are a few questions to ask your mortgage broker.
1. How Much Should I Borrow?
You should always choose to buy a property that is within your budget. Stretching your finances or pushing your lending to the limit is the biggest cause of mortgage stress. Therefore, remember always to ask your mortgage broker what you can borrow and what you should borrow.
It’s wise not to borrow a larger home loan that you can reasonably afford to repay. If you share your financial situation (including credit card limits, outstanding debts, and monetary commitments), they’ll discuss your borrowing capacity and how much you should borrow.
2. What Is a Comparison Rate?
Before approaching a mortgage broker, you may have started to shop around for a home loan. If so, you will have seen the comparison rate advertised next to all loan options from lenders with an Australian credit licence. The comparison rate tells you about the true cost of the loan, including interest rates, ongoing fees, and admin charges.
Your mortgage broker is there to assist you with every step of the process. They’ll be happy to answer any questions you may have.
3. What Information Do I Need to Have Ready for My Home Loan Application?
Your broker will inform you of all the necessary documents you’ll need to apply for your home loan. These might include:
- Tax returns
- Bank statements
- Credit history
- Photo ID
Get them ready to share with the broker.
Get a free Australian mortgage assessment today.
4. Will Being an Expat Affect My Application?
You are eligible for most of the same loan types as someone living in Australia as an expat. However, it might be harder to get your home loan. There are typically stricter requirements, and many lenders are hesitant to approve expat home loans.
However, if you work with a specialist mortgage broker, they’ll know the right lenders to approach who will be amenable to work with those living abroad.
5. How Much Deposit Do I Really Need to Obtain a Loan?
Expats are typically asked to provide a deposit of around 20% of the property value. Of course, the higher your deposit, the better your borrowing capacity. However, a good mortgage broker will be able to find a lender to suit your financial situation. You should ask how big a deposit they recommend you save.
6. Why Should I Use a Mortgage Broker Rather Than Going Straight to the Bank?
It’s good to ask your mortgage broker what they offer you that you cannot find yourself. Usually, a mortgage broker will find you a loan with better terms, take the stress out of mortgage hunting and inform you of the loan product in detail. However, make sure they have your best interests in mind and that they will not waste your time.
7. Are You a Licensed Home Loan Broker?
Are you a member of the Mortgage Finance Association of Australia or the Finance Brokers Association of Australia?
Similarly, you should ensure that your mortgage broker has an Australian credit licence to ensure that they are qualified to do the job. Plus, if they are members of the Mortgage Finance Association of Australia MFAA or the Finance Brokers Association of Australia, it will guarantee that your broker knows what they’re doing.
8. How Much Experience Do You Have as a Mortgage Broker?
It’s also a good idea to check that they’re experienced and have the necessary skills to secure you a good loan for your particular needs. This is especially important if you’re living abroad. With such unique circumstances, you want to ensure that your broker has your best interests at heart.
9. Can I Read Some Testimonials or Reviews From Past Clients?
You wouldn’t buy a new phone without checking out the reviews. So why would you entrust your application process and home loan without reading what others have to say? Testimonials and reviews from past clients will tell you whether this broker is right for your particular needs. Most reliable brokers will proudly show you their testimonials.
10. Do You Charge a Brokerage Fee for Getting My Finance Approved?
It is important to know upfront how mortgage brokers get paid. You don’t want to be hit with a surprise invoice. Fortunately, most lenders pay brokers commission, so you don’t have to. However, it is still a good idea to check with your broker.
11. Do You Offer a Range of Different Lenders? Who Is on Your Panel of Lenders?
One of the main reasons people approach a broker rather than a bank is that they offer greater access to a range of loan products. When choosing your broker, check how many lenders are on their panel of lenders. If they don’t offer many, consider finding a different broker.
12. How Will You Decide Which Loan Is Best Suited to My Personal Situation?
This is an important question to ask mortgage brokers. Firstly, you’ll get a good sense of the brokers who prioritise their commission above your best interests. The broker won’t admit to it, but you will be able to tell their motivations from their answer.
Secondly, you’ll be able to discern their thinking and way of working. For example, if they offer an open reply with a range of different recommendations and factors, then you know that they are well-researched and carefully considering the situation. However, if they rush to reply with only one or two options without expanding or giving extra information, it’s best to steer clear.
Get a free Australian mortgage assessment today.
13. Which Type of Loan Is Best?
Of course, the only person who can concretely answer this question is you. However, asking your broker for their recommendations is crucial. They’ll provide you with a range of loan products that suit your situation.
Get them to explain why they offered these specific loans (e.g. are they mostly fixed-rate loans? Would they suggest a variable rate home loan?) so you can weigh up the pros and cons yourself.
14. What Is the Interest Rate?
With all loans, it is crucial that you know what the interest rate is. While you want it to be low, a good mortgage broker will go beyond simply finding you a competitive interest rate. As mentioned earlier, the comparison rate shows you the true cost of the home loan.
When you ask your broker about the interest rate, ensure that a low rate isn’t hiding extra fees.
15. What Are the Fees on the Loan?
Many loans come with extra costs, such as application fees or charges for paying off the loan early. Make sure to get your broker to explain any fees on the loan so that unexpected bills don’t hit you in the future. A good broker should be able to get you a home loan deal with minimal fees.
16. What Features Come With this Loan? Can You Show Me How they Work?
While home loans often come with extra costs, many loans offer additional features. It is a good idea to get your broker to explain what comes with your loan – e.g. a redraw facility or an offset account – and how to use it. Of course, some features come with additional costs, so if you don’t want these extra, maybe it’s not the right loan for your personal circumstances.
17. How Long Will It Take for My Loan to be Approved?
There are three stages to getting your home loan application approved for your investment property.
- Firstly, the lender will offer pre-approval. This can be gained immediately and is not binding or official. It simply suggests that, on the surface, you meet their requirements.
- Secondly, you’ll receive conditional approval. The lender usually examines your credit report and other documents. If their assessment suggests that you will be able to repay the loan, they’ll offer conditional approval within 2-3 days.
- Finally, you’ll receive unconditional approval after 5-7 days. This is when both you and the property have been fully assessed and approved by the lender.
It’s important to note that these are standard turn around times quoted by lenders. These can often change subject to what is happening in the market and demand.
18. Can You Explain to Me What Lenders Mortgage Insurance Is For?
If you have a deposit of less than 20%, your Loan to Value Ratio will be higher than 80%. Not all lenders are willing to lend to people with an LVR of more than 80%. Therefore, they might require you to pay Lender’s Mortgage Insurance. If you’re asked to pay this additional fee, get your broker to explain it to you.
Get a free Australian mortgage assessment today.
Frequently Asked Questions
What Questions Should I Ask a Broker?
You should always ask a broker for their credentials and experience. If you live overseas, it is crucial that you ensure they understand your situation and know a particular lender willing to lend money to expats.
What Should I Not Tell My Mortgage Broker?
You need to be completely transparent with your broker in order for them to get you a good deal. Any mistruths or secrets will only come back to hurt you. Even if you don’t think your broker wants to know about your credit card debts or poor credit history, they would rather know from the beginning than find out at a later stage.
What Do I Need Before Talking to a Mortgage Broker?
Start to gather an idea of the property you would like to buy, how much money you could reasonably afford to borrow and your personal objectives. Then, put together your documents, including payslips and bank statements. It’s also a good idea to try and strengthen your credit score to get a better home loan deal.
What Should I Know About Getting a Mortgage?
Check your borrowing capacity. Your broker and lenders will all do thorough checks of your financial situation and credit history. It is sensible to make sure you know yourself so that you don’t waste your time applying for loans you cannot afford or looking at properties outside of your budget.