Why use a Mortgage Broker? This phrase placed in the top 4 most commonly searched phrases.
53% of home loans settled in 2015 were accessed via a mortgage broker, so to hear that many Australians are still unsure of what role Mortgage Brokers play in today's market, was a little bit of a shock to me.
It appears that the most common misconception by consumers is that going direct to your Lender will secure you a better deal. In traditional retail this can often be the case, just look at the factory outlets at DFO - go direct, pay less, that is their selling point.
Having worked for 15 years as an executive in a major bank, my experience tells me this is not the case and I want to share with you my theory.
When a Mortgage Broker is involved in a finance transaction, there are a range of tasks that either legally under government legislation or by policy from the Lender, that the Mortgage Broker is responsible for:
- Understanding the clients financial goals
- Researching the current market for finance options
- Preparing and presenting a lending proposal to the client
- Preparing a loan application on behalf of the client
- Gathering the relevant financial information
- Transferring that information into an electronic assessment system
- Collecting and sending supporting documents to the lender
- Liaising with the client, lender, solicitor, real estate agent, outgoing lender or any other third party involved in the transaction
- Assist the client with signing their loan documents
- Maintain the client relationship after settlement
All of these tasks take man hours (on average between 10-12 hours per loan) and the biggest cost to any Lender is staff. If they can effectively outsource 10-12 man hours per loan to a Mortgage Broker and then pay the Mortgage Broker an upfront fee to cover their time, plus a small ongoing fee to manage the client going forward, then they have reduced their selling costs on each home loan accessed via a Mortgage Broker.
If the Lender's selling costs are less per loan via a Mortgage Broker then they have some "wiggle room" when it comes to interest rates, which they can pass onto clients via Mortgage Brokers to help bring in more business through this channel.
Who is the winner in all of this? Well you are of course, all you need to do is access your next loan via a Mortgage Broker and see what benefits await you!
