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The ACT boasts high levels of home ownership compared to some other parts of the country, and for many home buyers in Canberra, a mortgage broker can offer support with the financial side of property. If you’re looking to take out or refinance a home loan, we explain what a Canberra mortgage broker may offer and how to find one that suits your needs.
As the nation’s capital, Canberra plays a key role in Australia’s political and economic life. It’s also an increasingly desirable place to buy property. The rate of home ownership in Canberra is bucking the trend of some other state capitals, rising from 67% in 2017/18 to 69% in 2019/20 (the most recent period analysed), according to the Australian Bureau of Statistics.
If you’re thinking of buying a home in the ACT, a mortgage broker in Canberra can be one way to get advice and support on your lending options.
As Australians learn to live with higher home loan interest rates, it has become especially important to shop around for the home loan that’s best suited to your needs. There is certainly a wide selection of home loans to choose from. Canstar’s database of home loan providers extends to over 130 different lenders, for example, but that level of choice can seem like a lot of work for some borrowers. This is where a mortgage broker’s services can be helpful, although it still pays to do your own home loan research. As we’ll see, mortgage brokers don’t work with every lender in the market.
How does a mortgage broker work?
A mortgage broker is a finance profession who acts as a go-between to link borrowers with lenders. Initially, your broker will ask you for information to help them identify your needs and goals, and will advise you if you are in a position to take out a home loan. From there, the broker will present a selection of loans they deem to be suitable, from the panel of lenders they work with.
The key point of appeal for many borrowers is that a mortgage broker will do the hard yards on your behalf, helping you complete a loan application, submit it to the lender, and respond to any queries the lender may have.
Local mortgage broker may even offer additional support to Canberra-based borrowers, such as by helping eligible clients apply for the Home Buyer Concession Scheme available in the ACT.
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How many lenders can I access through a Canberra mortgage broker?
This will depend on the specific broker. Mortgage brokers in Canberra, as elsewhere, do not work with every lender in the market. Rather, they help you find a home loan from the selection of lenders they partner with, known as their ‘panel’ of lenders.
The number of lenders on a broker’s panel varies widely. For example, the big mortgage broking franchises can have over 30 different lenders on their panel, with some also offering their own brand of home loans.
A smaller broker may have as few as 10 lenders on their panel, which would significantly limit the range of lenders and loans a borrower in Canberra would have access to. However, a smaller broker may offer a more personalised service, niche advice for specific kinds of borrowers and strong knowledge of the local Canberra market.
How much does a mortgage broker in Canberra cost?
A mortgage broker’s services should not cost you anything. That’s because brokers do not usually charge a direct fee to customers. Instead they are typically paid a commission by the lender you choose when you successfully apply for a home loan.
Mortgage brokers in Canberra can receive two types of commission from lenders:
Upfront commission
An upfront commission is paid to the broker by a bank or lender when you – the borrower – first take out a home loan.
How much the broker receives depends on the lender involved. If a bank pays, say, a 0.5% commission and your mortgage broker signs you up to them for a $700,000 home loan, your broker would make a commission of $3,500 upfront. Remember, though, that the borrower does not pay this. The commission is paid to the broker by the lender.
Trail commissions
Trail commissions are smaller than upfront commissions, but are paid out periodically. In some cases, a bank or lender will pay a trail commission to a broker for each year that a borrower remains in a home loan.
How do I find the best Canberra mortgage broker?
Like Australia’s other capital cities, Canberra is well serviced by mortgage brokers. In fact, the hard part in finding a broker could well be narrowing down your options. One approach could be to ask friends, family or work colleagues for their recommendations of a mortgage broker in your part of Canberra.
Referrals can be especially helpful if you are looking for a broker with particular experience – for example, working with borrowers who are self-employed or advising borrowers who hope to buy a home with a low deposit. Or, in rapidly-growing Canberra where 30,000 new homes are expected to be built in the next five years, you may prefer a mortgage broker with experience in construction loans.
Online reviews can also be a useful tool to check if a mortgage broker has delivered on their promise of great service.
The Australian Government’s Moneysmart website also suggests that those who are in the market for a mortgage broker can search for one through a professional association. The Finance Brokers Association of Australia Limited (FBAA) and the Mortgage and Finance Association of Australia (MFAA) both have websites with searchable databases of licensed brokers, so buyers in Canberra can narrow down their options based on their postcode.
Questions to ask a mortgage broker in Canberra
Canstar has a detailed list of tips on how to find a good mortgage broker. There are a number of key questions you might consider asking to find out if a broker is the right person for the job. You may ask a broker:
Do they hold a licence? Anyone doing business as a mortgage broker in Australia needs to be licensed to give credit advice. Licensed brokers are bound by statutory duties, and foremost among these is a duty to act in the best interests of their clients when recommending loan products. If you’re wondering whether a broker is licensed, you can enquire with a professional body such as the FBAA or MFAA.
How do their fees and commissions work? Mortgage brokers in Australia typically do not receive upfront payment from clients. Instead, they are paid in the form of commissions and other perks from banks and lenders. You may wish to ask your broker how they are paid, and if certain lenders offer more attractive remuneration than others.
How many lenders do they deal with? There is no hard and fast rule as to how many lenders should be on a broker’s panel. Indeed, a broker may have a small number of quality options for you or a large number of unsatisfactory ones. All other things being equal, you may feel that the more lenders a broker deals with, the greater the chances that they will find you a suitable home loan deal.
Do they favour a particular lender? If a mortgage broker sends the greater proportion of their business to one particular lender, you may wish to know why, so you can enquire as to why this is, and if they are rewarded in some way for doing so. Even though brokers are required to act in your best interests and offer you a suitable home loan option, you may be concerned that there is an even better deal out there that you are missing out on if your broker favours just the one lender.
What is their ownership structure? When assessing a mortgage broker, it may be worthwhile asking if a major bank or lender has an ownership stake in their business. You may be concerned that the broker will try and direct your business to this particular institution, causing you to miss out on an even better home loan deal if one is available elsewhere. Likewise, it may be important to you to know that your broker is independent.
What post-settlement services do you provide? Mortgage brokers in Canberra will help you organise a home loan, but for some, their services extend beyond this. Some brokers go a step further by conducting an annual review of your loan to make sure it still meets your needs, and may even contact the lender on your behalf to negotiate a rate discount. It’s worth asking what sort of service your broker will provide after your home loan has settled because it can help you remain confident that you have the loan that meets your needs into the future.
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