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What does a mortgage broker do?
A mortgage broker helps you compare and apply for home loans from lenders they work with. Australian brokers must act in your best interests when helping you with credit. Lenders usually pay them fees called commissions for their work. Some brokers also charge you a fee, which they must tell you about.
Updated
What happens between a broker appointment and loan settlement?
The broker asks about your finances and what you need the loan to do. They compare loans they can access and explain the ones they suggest. They help send in your forms and the records that support them.
They can help deal with questions while the loan is approved and settled. But they do not lend you the money or control the final loan decision. Their work relies on what you tell them. It also depends on which lenders' loans they can access.
What does a mortgage broker's best interests duty require?
A broker must act in your best interests when helping you with consumer credit. If your interests clash with theirs, yours must come first. A loan they suggest needs to fit your situation. Their payment from a lender cannot be the only reason for the choice.
Cost matters, as do the features and how the loan fits your needs. A broker with a limited panel is not comparing every Australian lender. Their explanation should help you understand both the choices and why they suggest a loan. It should also make relevant limits clear.
How are mortgage brokers paid for arranging loans?
Lenders tend to pay a fee at the start and a further fee over time. The later fee is often called trail commission. These payments are commonly linked to the loan amount or debt still owed. The broker must disclose how the commission works.
Some brokers charge you a fee as well. Moneysmart says you must sign a written quote before they provide the service and ask for payment. Even if a lender pays the broker, the loan can still have fees. It does not mean all loans cost the same.
Illustrative example4 steps
A broker compares an extra feature fee with the borrower's needs
- Assume one eligible loan has a $200 annual package fee and another has a $450 fee.
- Difference in annual fees: $450 minus $200 = $250.
- Over an assumed 3-year comparison period, the fee gap is $250 multiplied by 3 = $750.
- The broker's recommendation must also explain rates, features and suitability; this fee calculation alone cannot identify the better loan.
For investors
An investment application needs lending expertise as well as property information.
A broker can explain how lenders count rent, other rental debts and the homes used to back a loan. Their role in lending differs from an accountant's tax work or a buyer's agent's search for a property. Where you borrow for several homes, the loan choice needs to explain security links as well as payments. Those links can affect a later sale or loan switch.
Common questions
Questions about mortgage broker
Keep learning
Property is a complex world.
Mortgage broker is one piece of it. Lending rules decide how much you can borrow, and how soon you can buy again. Next, read about borrowing capacity, comparison rate and cross-collateralisation.
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