Once the habit of saving has been mastered, it’s a process which becomes almost automatic. How long it takes you to master this habit varies, but there’s one thing that’s for certain: it’s hard to slow down a fast-moving train.
In case you missed the metaphor, you are that fast-moving train. And you have a destination, or rather, a goal: buy that Dream Home, once and for all. Having a goal – like saving to buy your first home – has a tendency to give people tunnel vision. Everything must support this goal.
Don’t get me wrong: it’s far easier to save for your first home if you’re hyper-focused on your goal. I have a few tips for this over here.
But in an effort to cut costs and speed up the journey to home ownership, you might be missing an essential piece of the home owning puzzle: a mortgage broker.
But what about the hidden fees? And the extra costs?
Let’s debunk these.
What a mortgage broker does
When you walk into a bank, that bank will only offer products that they have on offer. You won’t get a chance to compare their mortgages to the bank down the road, unless you make another appointment with that lender. Your options will be limited, unless you have the time to book multiple appointments with multiple banks, and do all of the research and comparison yourself.
What a waste of time.
If you go see your friendly mortgage broker, they’re going to save you time, money and energy by giving you more options. They’ll do all the legwork, so that you don’t have to. They’ll know what loans suit your financial needs best, and have a wider pool for you to compare. What’s more, they don’t close their doors at 5pm, and they’ll also talk to you on the weekend.
Scared of mortgage broker fees? Don’t be!
A couple of years back, News Limited reported on the dodgy dealings of a few sneaky mortgage brokers. By recommending mortgage products that saw first homebuyers feeling the pinch all too soon, mortgage brokers were sketched as sly businessmen after a quick buck, duping innocent couples on their way to owning their first house. It’s story of boastful kickbacks and broken hearts, and the press lapped it up.
While I can’t speak for what goes on behind the closed doors of other mortgage broker firms, I can tell you that the mortgage brokering industry is under some fairly tough rules and regulations that put homebuyers interests first. The New National Consumer Credit Protection Act demands that all mortgage brokers ensure that their advice isn’t compromised by a conflict of interest. There are huge penalties for breaches, including jail time.
So how do mortgage brokers get paid?
In most circumstances, a broker’s fees and charges are covered by lenders. When we recommend a product to you, we receive an upfront percentage of the loan amount, as well as an ongoing commission, known as a ‘trail’ fee. Both of these amounts vary from lender to lender and mortgage to mortgage, but it’s generally within a couple of grand for the up-front commission. This fee includes: preparation, research, application process, face-to-face appointments, coordinating with solicitors and lenders, and the admin work for the final settlement.
Trail fees can range from $50 to $100 a month, and they’re collected from the lender – and not yourself – every year for the next five years.
But know this: these commissions don’t affect the interest rate or the fees of the home loan in any way.
In fact, most of the big name banks pay the same commission, within 0.1% of each other. This means our decision to help you find the right mortgage for you won’t be influenced by the bank’s commission rates. If the bank is running a special promotion with higher commission, we’re legally obligated to let our clients know about it. Transparency is very important for any good mortgage broker worth their salt.
The only time a mortgage broker should earn a higher commission is if your loan is more complex with credit issues for example. If you’ve had problems applying for loans with the big banks, we turn to second tier banks, the banks that you probably haven’t heard of.
So, as you can see, working with a mortgage broker is the best way to actually save yourself some time and of course, save your money for your actual house.
We’re up-front and honest about the way we work. Still have questions? We can answer them – and yes, a quick 15-minute chat won’t cost you a thing. We’re only an easy email away. Why not get in touch?