The Biggest Misconceptions About Mortgage Brokers
Mortgage brokers are quite familiar with being misrepresented or asked totally baseless questions about their profession and their role in financial service industry. So we have compiled some of the more popular misconceptions we hear, why they are wrong and how using a mortgage broker is a great move for you and your finances.
Mortgage Brokers Recommend Loans with the Highest Commission
A pervasive false narrative that regularly does the rounds is that mortgage brokers push clients into loans with lenders paying the most commission. This could not be further from the truth. A broker is obliged to act with a duty of care and present a range of options of which the client can choose. Further to that, each client has their own unique circumstance which often prevents them from qualifying with every lender anyway. It is also the clients decision what product to proceed with in any case. But most importantly, the differences in commission rates between lenders are marginal.
Mortgage Brokers Get “Kickbacks”
This is rather an inflammatory statement to make but is often tossed around in the media by various “commentators”. The only “Kickbacks” mortgage brokers receive are the commission payments made by lenders when clients are referred to them. By brokers receiving this lender commission, the client is not charged by the broker to use their service. The word “kickback” makes the process appear nefarious, casting an unfair shadow on the mortgage broking business model and is clearly a misrepresentative label.
A Free Service Must Equates to Hidden Fees
There are no hidden or undisclosed fees when using a mortgage broker. As they derive an income from receiving commission from lenders for referring clients to them, there is no need to “charge” any sneaky fees. In fact the interest rates they secure are competitive and often cheaper than those advertised by the lender as they are frequently successful in obtaining additional discounts.
Its easier to go to your Bank direct
If you prefer doing all the groundwork, due diligence, paperwork, and love being on hold for hours on end to find out status updates, then maybe going to the bank direct is preferable for you. But if you would prefer to let someone else manage the process, deal with the paperwork, advocate on your behalf to meet deadlines and have direct channels to ensure the application proceeds correctly, then using a mortgage broker should be your only option. Handing over the administrative and mental load to an experienced professional will most certainly be beneficial from both a time managment and stress alleviation stand point.
Brokers don’t act in your best interest
You can rest assured that your mortgage broker will indeed act in your best interest. From January 2021 the Best Interest Duty for Mortgage Brokers came into effect. This legal duty requires the broker to act in the best interest of the client with regards to the potential cost benefits of the loan along with how the proposed credit aligns with their requirements. Interestingly, banks are not bound by this and therefore do not have to act in your best interest as a client. So if you go to a bank direct, how can you be truly certain that the options they present are actually in your best interest?
Brokers do nothing for their Trail Commission
Mortgage brokers receive ongoing trail commission whilst the client’s loan is still active with that lender. Most brokers will provide ongoing service by way of regular reviews with the client to ensure their facilities are still appropriate and cost effective as well as be on call to answer questions and offer ongoing financial guidance. Its common for brokers to send newsletters and regular updates like, for instance, when the Reserve Bank announces the monthly cash rate. In contrast, your bank manager is unlikely to personally pick up the phone when you call but your mortgage broker will.
The question you should ask is not “why would you use a mortgage broker?” but “why wouldn’t you use a mortgage broker?” There are a lot of misconceptions that pop up from time to time but all are easy to debunk. Mortgage brokers are an invaluable service that make the process of securing competitive home loan products easy and stress-free.
After all, the 60% of Australian mortgage holders who used a mortgage broker for their home loan finance in 2021 can’t be wrong.