How can a mortgage broker help you to refinance your home loan?

Homeowners may consider refinancing their mortgage for any number of reasons, whether it’s to get a better interest rate or gain access to loan features they don’t already have.

Sometimes it can be because their circumstances have changed and they feel a different loan would better suit their needs.

But if you’re thinking about refinancing your home loan and scouring the market, the information overload can be overwhelming. That’s when a mortgage broker can come in handy.

What does a mortgage broker do for you?

A mortgage broker is essentially a middle person who deals with a cross-section of lenders to help you secure a home loan or refinance, if there’s a better deal for you on the market.

They do the early legwork in gathering your financial information and understanding your needs, then try to match you with a home loan that’s best suited to your circumstances. They also guide you through the application and approval process.

As at the March 2024 quarter, a record 74.1% of borrowers signing onto a new home loan went through a mortgage broker.

Is it cheaper to go direct to a lender when refinancing a mortgage?

It’s a fair question to ask how a mortgage broker gets paid.

Generally, it shouldn’t cost you anything to go through a mortgage broker. Brokers are usually paid a commission by the banks and lenders who provide home loans to brokers' clients. In many cases, an ongoing commission, known as a ‘trail’ commission, will continue to be paid to the broker for the life of the loan.

Some brokers may also charge a fee to cover the expenses involved in processing mortgage applications, but this is usually to cover the fees charged by the lender.

It can pay to ask a mortgage broker how they will be paid for the service they’re providing and whether there might be better options for you from a lender who pays brokers less or isn’t a lender they deal with. Licensed mortgage brokers are obliged to disclose this information.

Bear in mind too that some of the lenders offering notably competitive mortgage interest rates don’t work with brokers. Other mortgage providers have home loan or refinance products that are only offered to borrowers who apply directly. Take CommBank’s Digi Home Loan for example.

As with most major financial decisions, it’s always wise to do your own independent research as well as seek expert advice.

Why should I use a mortgage broker to refinance?

If you’ve already got a mortgage, you may think you know enough about the products, processes, and procedures to navigate your own way to finding a better home loan.

If you’re confident to compare competitive home loans and select the right one for you, you can cut out the middle person – a broker – and apply directly.

However, if you’re not so confident, there are a number of advantages to engaging a mortgage broker to take on the task. Let’s run through them.

A mortgage broker must serve your best interests

Mortgage brokers are required by ASIC regulations to act in the best interests of consumers when they provide credit assistance.

When there is a conflict of interest, brokers must prioritise the interests of their clients. So, if you go through a broker, you have some assurance they’ll find you a good deal for your needs.

They're also obliged to tell you if refinancing your home loan isn’t the best option. For instance, if the cost of breaking your existing mortgage may negate the financial reward you were hoping for.

As a general rule, you should aim to recoup any fees you paid to refinance in interest savings within 18 months.

It could be worth running through those figures yourself first so you have some idea whether refinancing is a good option for you.

A mortgage broker has market knowledge

Brokers deal with a network of mortgage lenders and have access to a wide range of home loan products.

Although brokers may not deal with all lenders on the market, they generally ensure their home loan offerings cover all the necessary bases to ensure their clients are well catered for.

In saying that, they might not be able to offer the best deal available to you, simply because they don’t have partnerships with every lender out there.

A mortgage broker can specialise

As well as providing access to a range of products, a mortgage broker can guide you towards specialist mortgage products to suit your individual circumstances.

Some of these may include so-called low doc home loans for people who may not meet standard home loan eligibility criteria, such as the self-employed or those on changeable incomes.

A broker can assess your credit score and target a suitable mortgage

A mortgage broker will take the information you provide and find a lender that’s more likely to approve your refinancing application based on their knowledge of home loan lenders' policies.

They can also suggest ways of improving your credit score and other steps that may help you realise a better interest rate or other more favourable terms and conditions.

If you were to go direct to a bank or other mortgage lender and have your application rejected, a credit enquiry could be recorded on your credit file, which may work against you in securing the best home loan with the lowest rate.

A mortgage broker can help you to get the best home loan features for your needs

Mortgage brokers can provide independent advice and education on the best use of offset accounts, redraw facilities, extra payments, and other strategies to minimise how much your refinanced home loan might cost you.

They can also advise whether it will be best for you to consider a variable or fixed rate of interest.

While home loan lenders will generally offer you the same information, some may be reluctant or too pressed for time to advise you on what would be best for your circumstances.

A mortgage broker will tell you what fees you might pay when refinancing

Brokers will generally outline exactly what refinancing costs you will be up for. They should also be across special promotions or incentives, such as cash back offers or other deals that could see some lenders' fees waived or reduced.

Again, this is information you may not receive if you go direct to a lender.

On the other hand, some lenders have been known to ‘one-up’ a competitor's offer when an existing borrower notifies it that they want to refinance.

It could be worth picking up the phone to your current mortgage provider before you take the first step of refinancing. It could be a way of getting a better deal.

A mortgage broker can help with the paperwork

Mortgage brokers can help you stay on the top of the documentation required for home loan refinancing. It's part of the service they offer.

They're also generally aware of which issues may delay your application and can help to keep the process rolling along.

A good mortgage broker will keep an eye on your home loan

Many mortgage brokers will continue to monitor your home loan after you refinance.

They may contact you before any fixed rate or interest only period is due to expire and see how you’re faring with your repayments and if you’re comfortable with the changes ahead.

At this stage, they may provide home loan advice or offer to negotiate with your lender on your behalf to extend the period. They might even promise to see if there’s a better rate they can secure for you.

A broker might also keep tabs on your predicted credit score and if they expect it’s made a marked improvement, they may reach out to see if you’d be interested in renegotiating a better rate with your lender.

Of course, you can do all of these tasks yourself. Keeping on top of the expiry of fixed rate or interest only periods is part and parcel of having a home loan and you can check your own credit score for free once every three months.

Though, as brokers work with lenders and credit agencies on a regular basis, they will have more experience in doing so.

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