Mortgage brokers Melbourne

A mortgage broker can assist you in the process of applying for a home loan, so how do you find a good one in Melbourne, and what do you need to know?

The bustling city Melbourne, with its iconic laneways, vibrant eating and drinking culture and love of the arts, is an exciting place to call home. Even with some choosing to leave city life behind following the city’s COVID-19 lockdowns, the average dwelling price in Melbourne rose by nearly 10% in the year to March 2022, with property still in high demand according to the Australian Bureau of Statistics.

Whether you’re in the market for an inner-city apartment or a quieter house out in the suburbs for you and your family, then getting a good deal on a home loan might well be on your mind at this time. If you’re looking to buy a property in Melbourne, then connecting with a good mortgage broker could be one way to help you find a home loan that suits your needs.

How does a mortgage broker work?

A mortgage broker is essentially an intermediary, connecting people who wish to borrow for a home loan with banks and lenders who may be able to offer them a good deal. A major part of a mortgage broker’s job is to get to know you as a client, and form a picture of your needs and financial position, in order to present you with suitable home loan options from the ‘panel’ of lenders that they work with.

How can you find a good broker in your area of Melbourne?

If you are looking for a broker who knows Melbourne, then old-fashioned word-of-mouth might be the best place to start. You may well have friends and family who have bought in the city and who went through a mortgage broker, and they may be able to recommend a broker who has good local knowledge and who was able to find them a favourable deal. Likewise, friends and family may also be able to steer you away from brokers with whom they may have had a less than positive experience.

The Australian Government’s Moneysmart website also has advice for those seeking a mortgage broker. They suggest searching through a professional organisation, such as the Finance Brokers Association of Australia Limited (FBAA) and the Mortgage & Finance Association of Australia (MFAA). Both of these bodies have websites with a searchable database of licensed mortgage brokers, which could be useful when it comes to finding one in your area.

Advertisement

If you’re wondering about some general things to look out for and questions to ask, Canstar has a detailed breakdown on how to find a good mortgage broker. Here are some questions and enquiries you might make when establishing if a broker is the right person for the job:

• Are they licensed as a mortgage broker? Mortgage brokers in Australia must have a licence to give credit advice, and this means that they are bound by a number of statutory duties. A key one is a duty to act in the best interests of clients when recommending home loan products. If you’re unsure whether a broker is licensed, you can search for them via the FBAA or MFAA websites.
• How do they get paid? Mortgage brokers in Australia typically do not charge upfront fees to clients. Instead, they are remunerated by banks and lenders in the form of both commissions and perks. If you are curious about how your broker’s commissions are structured, you can ask them about this, and whether they receive higher commissions or more perks from one particular lender.
• How many lenders do they deal with? Mortgage brokers generally work with a ‘panel’ of different banks and lenders, who will offer a variety of different home loan options. There is no hard and fast rule about how many lenders a broker should work with, however, you may feel that the greater the variety of lenders a broker works with, the greater the chance that they will be able to find you a suitable deal on a home loan.
• Do they send most of their business to a particular lender? Even if a mortgage broker has a large panel of lenders, you may find that they send most of their business to a particular one. If this is the case, you may want to ask as to why this is, and if they receive particularly favourable perks and commissions from that lender. Even if that lender’s products may be suitable for your needs, you might be concerned that there is an even better option you’re missing out on if your broker has a bias towards a particular institution.
• Are they independent or owned by a lender? If you’re considering using a mortgage broker, it may be worthwhile to ask if they are independently owned, or if a major bank or lender has an ownership stake in the business. If this is the case, you may be concerned that they will try and direct your business towards this particular institution, and that you might be missing out on an even better deal you could find elsewhere.

How does a mortgage broker get paid?

Generally speaking, mortgage brokers in Australia do not charge upfront fees to their clients, meaning you are unlikely to pay anything to use one. Brokers are instead paid by banks and lenders in exchange for referring your business to them. These payments typically come in three forms: upfront commissions, trail commissions and soft-dollar benefits. The first two are forms of direct payment, while the third is based around perks.

• Upfront commissions: A bank or lender may pay an upfront commission to a broker upon successfully signing you up as a home loan client. There is no set amount for upfront commissions, and they can vary depending on the bank or lender. If a mortgage broker signs you up for an $800,000 home loan and the lender in question pays a 0.5% commission, this means that your broker would make a commission of $4,000 upfront.
• Trail commissions: A trail commission is a commission that is paid out over a number of years, with a broker typically receiving an amount of money for each year that you stay on a home loan product after a lender signs you up. Trail commissions are controversial, and the 2017 Banking Royal Commission recommended scrapping them altogether. This has not yet happened, though, so you may still encounter brokers who accept them.
• ‘Soft dollar’ benefits: ‘Soft dollar’ benefits are non-monetary ways that banks and lenders reward brokers for bringing them clients. One example of such a benefit might be a bank that offers favourable commission rates to brokers for bringing them customers, or a higher commission rate if they hit a certain threshold of referrals. Another example might be perks such as trips to conferences with hotel stays, or client lunches.

If you are thinking about refinancing your home loan and want to find out which loans you may be eligible for, Canstar’s eligibility checker tool can help you understand your options and connect you with a mortgage broker.

Check Refinance Eligibility

Cover image source: ChameleonsEye/Shutterstock.com