What is a mortgage broker? Do they help save money?

Are you considering using a mortgage broker? Is that the right decision? Let us understand what is a mortgage broker? difference between going to a mortgage broker and a bank, pros and cons of using a mortgage broker, who pays a mortgage broker? and how to find the best mortgage broker?

what is mortgage broker
what is a mortgage broker? how to find the best mortgage broker?

What is a mortgage broker?

A mortgage broker is an adviser specializing in mortgage products. In Australia, mortgage brokers are regulated under the NCCP Act. Mortgage brokers should be

  • CertIV in Finance and Mortgage Broking
  • Credit License holder OR be credit representative of the credit license holder

A mortgage broker should understand a customer situation and goals and find the right mortgage product without being biased to a particular lender.

What is the difference between going to a bank and going to a mortgage broker?

The difference between going to a bank and going to a mortgage broker is in a variety of mortgage products that bank and mortgage brokers can provide. A bank only has access to mortgage products designed by the bank. A mortgage broker has access to products designed by multiple banks.

A mortgage broker should

  • understand the customer situation and goals
  • match customer profile against the credit policies of various banks
  • identify at least 3 mortgage products that optimally suits the needs of the customer

This process allows the mortgage broker to create competition between banks.

Advantages of using a mortgage broker

The advantages of using a mortgage broker can be better understood by understanding the way a mortgage broker works. In Australia, along with having the required qualification and accreditation from ASIC, a mortgage broker must have the right tools and mortgage lender accreditation to be successful in meeting the goals of the consumer.

An important tool for a mortgage broker is a software called mortgage aggregator. A mortgage aggregator is software that provides information about products from multiple lenders in a single user interface. There are more than 20+ mortgage aggregators in Australia. Some of the important aggregators are – AFG, Plan, FinSure, Connective, VOW Financials etc. The aggregators allow mortgage brokers access to mortgage products from multiple lenders, meet compliance requirements and collect commission from lenders.

Disadvantages of using a mortgage broker

While more than 56% of Australian homeowners chose to use mortgage brokers to help them obtain a mortgage in 2018, there are certain disadvantages of using a mortgage broker. Productivity Commission report and the Royal Commission into banking have brought out some glaring issues with mortgage brokers. Mortgage brokers are paid by lenders on the settlement of a mortgage.

  • Productivity Commission report has indicated that most of the mortgage brokers have 4 preferred lenders, which means the mortgage products which might be unsuitable to customers may be recommended by mortgage brokers.
  • Productivity Commission and Royal Commission into banking have also found that incentives provided by lenders (commission and soft dollar benefits such as a trip abroad, electronic goods etc.) are being offered to mortgage brokers which may tempt mortgage brokers to recommend an unsuitable mortgage product to the customer.

Who pays a mortgage broker?

A mortgage broker is paid by the lender whose product the mortgage broker recommends to the customer. A mortgage broker is paid after the mortgage is settled with the customer.

  • A mortgage broker gets a commission known as an upfront commission on the settlement of a mortgage. Commission amount is based on mortgage amount
  • A mortgage broker also gets a commission known as a trailing commission based on the loyalty of the customer to remain with the same lender

Different lenders have different rates of commission.

These conflicted remuneration models can sometimes influence mortgage brokers recommendation of the mortgage product to the customer. A mortgage broker is legally obligated to disclose to the customer the commission received by the mortgage broker for recommending lender products to the customer.

How FairBroker® helps you find the best mortgage deal?

FairBroker® platform allows the consumer to find the best mortgage broker or lender with access to the best mortgage deal to meet borrower situation. FairBroker® achieves this in an unbiased manner. FairBroker® does not charge either consumer or mortgage broker/lender to use the platform.

This creates a level playing field for all the mortgage brokers and lenders to compete against each other. FairBroker® not only allows mortgage brokers and lenders to compete to find the best mortgage deal for the borrower but also allows mortgage brokers and lenders to offer additional value-added services such as house visits to collect documentation, consultation to structure your mortgage better etc.

FairBroker® also has a ‘Fee for Service’ model where the mortgage broker is obligated to share all the commission received from the lender in return for a fixed fee.

It is our mission to ensure transparency and the best outcome for the borrower and hard-working mortgage broker. Looking for a mortgage or looking to refinance your existing mortgage? Create a deal request on FairBroker® and get unbiased mortgage advice and assured commission share from mortgage brokers.

You can also download our app from the google play store or the app store for iOS devices