Things to ask your mortgage broker, and why

Almost three-quarters, or 73.7%, of all new home loans in Australia were provided through a mortgage broker in the June 2024 quarter. That’s up from 57% in June 2020.

Increasingly, home buyers are turning to mortgage brokers to help them navigate Australia’s crowded home lending market and secure the best loans for their purposes at the lowest interest rates available to them.

A good broker can take the angst out of finding a home loan. But, like most things, it pays to do your own homework as well.

Before you meet with a mortgage broker

It’s important to be clear about your financial position. A mortgage broker will want to know details about the deposit you’ve saved, your income and employment situation, other assets and debts you have, and details about the property you wish to purchase. It pays to have this information at hand.

A mortgage broker will likely also ask you questions about how you see yourself paying off the loan - if you’d prefer to keep your repayments lower or if you’re aiming to pay the loan off as soon as possible by topping up your regular repayments. Give some thought to what you’d be more comfortable doing or, perhaps, whether you’d like the flexibility to do both over the course of the loan’s term.

Questions to ask a mortgage broker

In addition to having answers ready for your broker, there are important questions you should be asking:

1. What are your credentials?

Your mortgage broker should be licensed. This ensures they meet minimum standards of training and are bound by rules and regulations. Importantly, licensed mortgage brokers are required to act in the best interests of their clients when recommending a loan, or else face a hefty penalty.

As a minimum, your broker should have an approved qualification such as a Certificate IV in Finance and Mortgage Broking (FNS40821) and an Australian Credit License (ACL) authorised by Australia’s financial watchdog, ASIC. They should also be a member of a professional association such as the Finance Brokers Association of Australia Limited (FBAA) or the Mortgage & Finance Association of Australia (MFAA).

2. How many lenders do you deal with?

Mortgage brokers should have a large and varied panel of lenders that they deal with regularly. Ideally, it should be a combination of banks and non-bank lenders. There is no magic number but if a broker has more than 20 lenders on their panel, you can feel comfortable there should be enough options to cover your individual circumstances.

The MFAA says its brokers can typically access between 30 and 60 lenders to drive a good deal on behalf of their clients. Arguably more important than the number of lenders on the panel is the broker’s knowledge of the products and features available on the market and their ability to match them to your needs. Be sure to ask whether the panel is dynamic and reflects the best rates and features on the market.

3. How will you get paid?

Typically, brokers don’t tend to charge upfront fees for their services. Instead, they generate income through commissions and bonuses paid by lenders for the loans they write. Although brokers are legally required to act in your best interests, it’s important to ask how they'll get paid if you take up the loan product they recommend.

Ask also how their payment will be structured. Will they get an upfront payment or one that continues to give them a cut for the time you hold your home loan, or both. Mortgage brokers in Australia are obliged to disclose their commissions to their customers. It’s also worth asking if some lenders pay them more than others and which lenders they write the most loans for. This is all information worth assessing when deciding whether the mortgage your broker recommends will be the best for you.

4. What is the interest rate?

This question probably goes without saying. It’s a vital consideration in choosing a home loan, but there’s a bit more to it than might meet the eye. Just as important as the interest rate is a home loan’s comparison rate, which essentially allows you to compare an accurate cost of a loan against other loan products. A good mortgage broker should explain this.

Another important consideration is whether the rate will be variable or fixed. There are pros and cons associated with each, and your broker should explain these to you, as well as why they might recommend one as better for your circumstances. Some home loans have the ability to be split – in effect having both a variable and a fixed interest rate for different portions of the loan. This should also be covered by your broker.

Make sure you ask the broker why they've settled on the home loan and the rate they have. It pays to compare it with what’s available on the wider market to be comfortable you're in the ballpark of the best rates on offer. Here’s a good place to start:

Important Information and Comparison Rate Warning

5. What are the fees on this home loan?

A comparison rate can give you some indication of the fees associated with a home loan, but it still pays to ask your broker to provide a full list of fees and explain them in plain English. Ensure you’re clear on exactly what the fees are, whether there are ongoing or monthly fees, annual package fees, or fees associated with having extra features attached to the home loan.

Also ask them to explain any terms you don’t understand and what they mean in practice. Check with the broker if the product they’ve recommended is marketed as a ‘no fee’ or ‘low fee’ home loan.

Sometimes a low-interest rate home loan can come with an array of fees. These may see you paying more than you would on another home loan with a higher interest rate and fewer fees.

Many loans come with fees, but you need to be satisfied the fees are not excessive. Some may also come with features you may not use, so it’s important to match your needs with the product on offer. Your broker should do this for you, but it’s still worth checking.

It’s particularly important to ask whether there are fees associated for making extra or additional payments on your home loan. Paying off your loan sooner can save you thousands of dollars in interest. However, some lenders will charge you fees to make additional repayments on fixed loans, while others will allow extra repayments, up to a certain threshold.

6. Is the home loan on offer the best you’ve got?

It’s worth asking to see a couple of alternative home loan options, particularly ones with lower fees and/or a lower interest rate and consider how they differ from the mortgage the broker recommends. It pays to go through this exercise before you sign up to anything, if just to feel assured you’re getting a competitive loan with the features you need for a comparable price.

7. What information do I need to provide?

A mortgage broker should walk you through all the official documentation you’ll need to submit to a lender so they can consider approving you for a loan. Many mortgage brokers will take care of the application process as part of their service. Ideally, a broker should get you on the case of gathering the required documentation as soon as possible so it can be submitted seamlessly with your application to give you the best chance of a timely approval.

8. How long will it take for my home loan to be approved?

There are different levels of approval for a home loan and it pays to be aware of what they mean and how they apply to you. Your mortgage broker should explain this and lead you through the process.

• Pre-approval
  Pre-approval can give you an idea of what you can borrow without drawing up a formal mortgage agreement. Your broker should be able to organise your pre-approval which should give you confidence you'll be able to obtain a home loan. It may also work in your favour when submitting offers for properties. It can take around one to three days to receive home loan pre-approval, depending on the lender. Your broker may be able to get you pre-approved faster than if you were to apply yourself.

• Conditional approval
  This is a step-up from pre-approval. To receive conditional approval, you’ll need to submit all the documentation required for home loan approval and your lender will assess it. The loan is then generally conditional on the property you buy. The time it takes to receive conditional approval can vary between a day and a week, depending on the complexity of the borrower’s circumstances and the lender’s processing backlog.

• Full approval
  As the term implies, full approval comes when you and the property you’re wanting to buy have both been approved by the lender. You’ll need this before you bid on a property at auction. Before providing full approval, the lender will likely need to organise a valuation of the property. Again, this can take a couple of days, a week, or more.

9. What if I change my mind?

It’s wise to ask your broker what would happen if you were to change your mind before you go ahead and make a formal application. Generally, once you submit your documentation to the lender and pay your application fee, as well as any other upfront fees such as valuation or legal fees, you’re unlikely to be refunded if you decide not to go ahead.

10. Will you let me know if a better loan comes along?

Many mortgage brokers will keep you on their books as a client and do a periodic review of your home loan and circumstances after you successfully buy your home. Regularly reviewing your mortgage is the best way to ensure it’s still the best home loan available for you.

A good mortgage broker can keep an eye on your home loan and, if they believe they can get you a better deal, negotiate with your lender on your behalf. They'll also be able to work out if it’s cost-effective for you to switch to another home loan product or to a different lender offering a better deal for your circumstances, known as refinancing. Refinancing a home loan can result in long-term savings but usually demands a short-term outlay – your mortgage broker can do the calculations for you and outline the case for staying with your current home loan or switching to another.

A mortgage broker can also be a good place to turn if you're experiencing difficulty meeting your loan repayments. They can negotiate with your lender on your behalf to help you devise a short-term and long-term solution to issues you might face.

Finally, it’s worth asking your broker whether they'll still provide services to you after your home loan is written. If your loan is generating an ongoing income for the broker, it’s fair to say they should.

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