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What You Need to Ask Your Mortgage Broker posted on the 21st August 2018

The days are lasting a little longer and the sun is shining a little brighter … Springtime is on its way.  There’s no better time than now to list your goals for the next few months, and review your investments to ensure they are set up to work in the best possible way for you.

If you’re aiming to buy your dream home or a new investment property, then your first step is to talk to your mortgage broker.  And here’s what you need to ask them …

 

Top 8 Questions To Ask Your Mortgage Broker

Australian Property Investor

January 2018

So you’re thinking of buying your dream home or a new investment property, and you wonder how much you can borrow, what the best interest rate is, should you get fix rate or not…

Well, there is a lot more you need to consider. Some people get advice from mortgage brokers and lenders who ‘omit’ to tell them of key facts or potential risks and opportunities about their loans. Or they thought they had got the lowest rate but when that wasn’t actually the best option for their unique circumstance. We hear many stories, after the fact.

To help you assess your options and your mortgage specialist, I’ve listed below the 8 top questions you should ask and shouldn’t ask your mortgage broker before buying a property.

 

First, What NOT To Ask

“What’s the lowest rate I can get?” We have had a lot of enquiries this year from investors as well as home buyers.  While interest rates are one indicator of a better loan, they can sometimes be deceiving. Most people don’t realise that loans with the lowest interest rate can sometimes cost you more.  A loan with the lowest rate will not always have the right conditions and in the long run, this can make the loan more expensive than you may realise. And a ‘cheap loan’ usually comes with fewer features including restricted access to your equity, which can potentially hinder your investment returns and cost you more in lost opportunity than you stand to save. So steer your focus away from just the interest rate digits.

So now, here are the top 7 questions you should be asking your mortgage broker or the bank manager.

 

Questions To Ask Your Mortgage Broker

  1. The number one question you should ask a mortgage broker is “how can you help me”?
  2. What’s your role as my broker? What type of service will you provide and what will you do for you me?
  3. What strategies have you got to help me grow my property portfolio? (Even if you’re buying your first home, a good mortgage broker will show you what and how to get prepared.)
  4. Can you explain all the costs associated with buying a property and possible loan features?
  5. What are the benefits and restrictions of any loans recommended including penalties for an early exit?
  6. Is the loan product an introductory offer? If so, will or when will this interest rate discount expire?
  7. How will the recommended loan product/structure suit and improve my situation and my specific goals?

In fact, a good mortgage broker should be asking YOU a lot of questions to better understand your objectives and your reasons for buying a property.  A mortgage broker should not only be clicking a few forms or offering you another loan with a better interest rate.

An experienced mortgage broker should be:

Taking the time to understand your objectives, your current situation, your lifestyle as well as your future dreams and goals;

Keeping your best interests at heart and delivering a customised finance solution based on their experience, as well as an intimate understanding of policies and products; and

Ultimately, coming up with a strategy to MAXIMISE your long-term financial success.

If your mortgage broker isn’t taking the time to consider the above, stay away – as it’s more likely than not that they won’t be advising you of the best option for your circumstances.

Also as mentioned, you need to look further than the interest rate figure. Whilst it might be tempting to go for another loan with a lower rate, watch out for fees such as:

set up costs or annual fees; penalties when you exit your current loan or early exit conditions on the new loan; and interest savings you are missing out on because you don’t have features such as an offset account.

 

Home Loan Refinancing Example

Let’s use refinance as an example. If you’re thinking of refinancing to a lower rate, did you know that you might actually end up paying more because of LMI?

If you refinance your loan and it’s greater than 80% of your home’s value, you might be charged LMI – that means some borrowers will end up paying LMI twice!  Mortgage insurance applies even if you refinance from one bank to another bank.

Therefore, you might save $30 a month on interest but if it’s going to cost you $5,000 to $6,000 for mortgage insurance, this means that over a five year period for the cost of refinancing is now an extra $1,000 per year that you have to pay back on top of your loan, PLUS interest of the WHOLE TERM OF YOUR LOAN (most car loans are 5 years).

On the other hand, if you’re refinancing to consolidate your debt, you might still be better off, even if you do pay LMI.  Say for example you have a home loan, two car loans and a credit card.

If a lender offers to refinance your loans by lowering your car loan and credit card interest rates to a home loan interest rate, it might work out that the amount you save on interest does in fact outweigh the amount of LMI you would need to pay.

But if you’re only refinancing a $20k car loan and a $10k credit card, you would really need to weigh up whether your interest savings are worthwhile enough for you to wear the extra cost of $6,000 for LMI.  You might decide that you’re better off instead paying extra repayments and paying down your mortgage.

A good mortgage broker will do the calculations for you to see if you actually come out on top when refinancing.  They will also make sure that you get a revised valuation done on your home (and, if applicable, any other properties that you own) to try to get you the most competitive rate possible without being out of pocket for LMI.  They will also prompt you to look at all options before considering refinancing.

What it really comes down to is that it shouldn’t be you asking the questions when refinancing. If a broker is experienced and knows what he/she is doing, THEY should be able to ask questions directed at finding out your objectives and goals.

 

Summary

The real value of getting your finance through a mortgage broker is the ability to speak with an experienced professional who can recommend the right loan product and strategy that is customised to your situation.

Therefore, it’s important you work with a mortgage broker who is interested in finding out the purpose behind your financing.

Your purpose for financing can make all the difference in determining the best structure for your loan.

So stop making the mistake of asking for the lowest interest rate and start asking “how can you help me?” And make sure your mortgage broker is actually delivering a customised loan solution that maximises your long-term financial success.

 

Here at Vision Property Group, we are very fortunate to have an experienced and reputable mortgage broker available to assist our clients.  If you have any queries regarding your lending needs, we can happily put you touch.

 

Give Sonia a call for further details …

0403 309 136

Written by Sonia Woolley

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