6 Tips for selecting a Mortgage Broker

Mortgage brokers can save you hours of legwork, save you heaps of money and help you find the loan that suits your needs best. But it pays to be cautious and do your cross checking when selecting the right broker and loan for you.

A mortgage broker's role is to work with individual consumers to determine how much you need to borrow. They will then help you select the most suitable loan from a variety of sources and then manage the loan process until final settlement.

1. Industry accreditation
Standards of training vary widely across the mortgage broking industry. So choosing a broker with an industry accreditation, like belonging to the MFAA (Mortgage and Finance Association of Australia), will mean they are impartial and obliged to adhere to an industry Code of Practice. Ask your friends and family if they can recommend one and check their industry accreditation before commencing.

2. Fees
Brokers are remunerated by a commission from the lender and other benefits, so their service should not cost you anything. Paying an upfront fee to a broker is not standard industry practice and is actually illegal in many states. You should not pay any fees at all until your loan is approved.

3. Borrow only what you need
This applies equally whether you borrow through a broker or go direct to the lender. The more you agree to borrow, the higher the commission the broker receives. Don't be swayed if they encourage you to borrow more than you need; it just puts you further into debt and places you at higher risk of defaulting on the loan.

4. Find the right loan
Brokers are expected to have a greater knowledge of the types of loans available compared to the average consumer. A loan will be selected from their 'panel of lenders' which varies in size from broker to broker. The panel contains all of the banks, non-bank lenders and mortgage managers they will source loans from. As a general rule, the wider that list the greater your options. You can ask to see a broker's lender panel.

5. Read the fine print
Your broker should be clear and upfront about all of your loan terms and provide them in writing. This information should include the loan amount, the loan term, interest rate, loan establishment fees, any fees for a redraw facility or any exit fees.

6. Complaints
If you're not satisfied with the conduct of your mortgage broker, you can take your complaint to the industry-funded Credit Ombudsman. They deal with disputes and hand down binding determinations. Visit www.creditombudsman.com.au

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