10 Questions to Ask Your Mortgage Broker
If you are planning on using a mortgage broker to help you find a home loan, investment loan or commercial loan, there is some information you should find out from your broker before you start.
Use the following check list as a guide when choosing your mortgage broker.
Does the broker have an Australian Credit License (ACL) or is Credit Representative (CRN) of a licensee that has an ACL
All brokers must be registered with ASIC and will either have an ACL or a CRN. Most brokers will be members of an industry body such as the Mortgage Finance Association of Australia (MFAAA) or Finance Brokers Association of Australia (FBAA) They are all required to have professional indemnity insurance and must be a member of a dispute resolution service in the event you need to make a complaint about that broker.
Which lenders does the broker have on their list? Some brokers may be able to offer loan products from over 15 different institutions, while others may only consider loan products from a couple of lenders. Make sure the broker deals with a spread of lender types (banks, mortgage managers and others). The larger and more varied the array of lenders and the number of loans, the better variety of choice you will have.
Most brokers we recommend have between 20 and 40 lenders on their panel, however, this is constantly changing. The lenders include the major banks, foreign banks, mortgage originators and non conforming lenders
How does the broker get paid? Make sure that the broker does not let the size of the commission they will be paid by a lender cloud their judgment. While some lenders pay higher commissions, brokers should not favor higher commission-paying lenders over others.
Brokers must disclose any commissions they receive from the lenders or any other source to the client. They must disclose their lender list, commissions received and conflicts of interests such as bonuses they may receive from a lender. Most brokers do not charge a fee for their service and are remunerated by the lender
What fees does the broker charge? Ask the broker to clearly specify what fees and charges you will incur by using their service. Some brokers charge no fees, they receive a commission from lenders when borrowers take up a loan that was recommended to them. Others may charge you a one-off fee, and you should check what extra services you are receiving for the extra fee you may be paying. You will also need to check under what conditions any upfront fees should be refunded.
All fees charged by the broker and commissions received by the broker must be disclosed in the Credit Guide and the Credit Proposal Disclosure documents.
Ask the broker how they compare loans and how they determine which loan is best for you. Comparing loans is not an easy task. Make sure the broker can provide you with a clear explanation of the methodology and criteria they use. Under the MFAA Code of Conduct, members must only offer loan products that clearly suit the client's needs.
Most brokers have software that searches for the best loan suited to your needs. Then their job is to explain how each of these loan compare to each other and how they suit your financial circumstances.
Find out the Loan Comparison (or true) rate of the loans recommended to you. This rate takes into account the loan interest rate as well as upfront and ongoing fees and charges, to give a better indication of the actual cost of a loan. All brokers should be able to provide you with these rates. Under Federal Legislation Comparison Rate Schedules are to be provided for all loans offered.
All brokers will provide comparison rate schedules for all loans quoted based on your loan amount.
Ask if the broker is a lender themselves - you don't want a mortgage broker recommending loans to you if they offer their own loans (unless you can be guaranteed that they always recommend the best loan for your situation and do not lean towards their own). If they are a lender, ask them to clarify why certain products have been offered for you, and get by your broker to give you a comparison of costs and product benefits (including their commission) for all products discussed.
All brokers must disclose this information
You are within your rights to ask for proof of professional qualifications, information on the broker's experience or references from other clients. All
Feel free to ask any broker about their qualifications and evidence of these qualifications
Does the broker have professional indemnity insurance? Make sure they do. It covers them in the event that they are sued for negligence or breach of professional duty. This means if you have to take legal action against them for some reason, they will be insured against this. All MFAA members are required to carry up to date professional indemnity insurance. All MFAA members are also members of the Mortgage Industry Ombudsmen Service, which is another layer of consumer protection for consumer dealing with MFAA members.
All brokers are required to have professional indemnity insurance. This also a requirement from the companies that each broker aggregates with. They also carry membership with the Mortgage Industry Ombudsman Service for consumers for dispute resolution.
Ask what privacy guidelines they follow when handling your information. They should comply with the Privacy Act Credit Reporting Provisions and the National Principals for the Fair Handling of Personal Information
All brokers must handle your personal information in accordance with the Australian Federal Privacy Act 2001.Mortgage Brokers must also abides by, the Trade Practices Act, ASIC Act, the Fair Trading Act and the UCCC. Generally speaking we follow all the best practices that comply with all legal requirements associated with state and federal law