6 min read | 16 May 2019
Just as there are many modes of transport when you travel, there are also many ways to achieve your home ownership dreams when it comes to securing or refinancing a home loan. We’re not here to tell you that there’s only one correct way, because we are all individuals, and all have different circumstances when it comes to securing finance for our homes.
Unless you have been living under a rock, you will know that this year there has been an enormous focus on banking and finance through the Banking Royal Commission, and mortgage brokers have really felt the heat with Commissioner Hayne recommending that borrowers, rather than lenders, pay their commissions, and trail commission should no longer be paid at all. Trail is the portion of a broker’s commission paid for every year a customer stays with a lender.
The current government has rejected that recommendation, leaving the lender-pays commission and trail in place, while Labor is in favour of increasing the amount of the upfront lender-pays commission and getting rid of trail commissions.
As a borrower, none of this directly impacts you, except to know that any commission paid has to come from somewhere, and that may come out in the interest rates a lender offers, or even in higher fees.
We are by no means saying you should never see a broker for your loan because brokers provide a valuable service to many customers, but there are many alternatives depending on your situation and needs. However, unless you have specific needs from your broker, why wouldn’t you just cut out the middle man, and go direct for price and simplicity?
Some reasons you may consider a broker include that they are valuable when it comes to customers with complex financial needs, like self-employed borrowers who may not have payslips, steady income or meet other traditional expectations of document proof for lenders.
They are also useful when you have had financial hiccups in your past that have impacted your credit rating. In those cases, brokers can direct you to the bank and non-bank lenders that may best accommodate your circumstances.
The right broker may be useful at hand-holding for first home buyers, helping you to navigate the often complex home loan approval process and find any grants that may apply to you.
Not all brokers are equal though, so take the time to shop around the major companies, and smaller independent brokers, to find someone you trust and feel comfortable with. After all, buying a home, or refinancing your home loan, is probably the biggest investment you will make.
If none of these scenarios best describes your requirements, there are certainly loads of benefits to going direct for your loan.
Reasons you might want to consider directly approaching a lender are that you have a good handle on your financial situation, and your financials are in order. It may also not be your first time at this rodeo, and you can spot a good deal when you see one. You get the added benefit of dealing directly with your lender and building a relationship from day one. Not via a third party in the middle.
Brokers can be great and offer a broad panel of lenders, but that panel is finite, so you may want to approach a lender in the wider market who is not on the panels of the major brokers. Or you may want to access a non-bank lender or smaller digital lender with lower overheads, and who will pass the cost savings back to you through lower rates or fees.
Before you decide how you will approach getting a loan (broker or direct), it is worth shopping around to see what sorts of rates and offers are out there. Compare the market and head to sites like Finder, Mozo, Ratecity, or Canstar. There are some excellent rates around, and many are from non-banks or smaller newer lenders. Of course, see what the big four banks have on offer too, but don’t feel limited to only looking at their rates because that is what you are familiar with. Research the best for your needs and check out who backs those companies and a bit about them.
You should also see what rates and charges they have because sometimes a great deal is not so sweet when rate creep kicks in after a honeymoon period. Investigate what features the loans offer that you might like (think offset accounts or redraw facilities, credit cards or repayment holidays.)
If you like to manage your life online (and many of us rarely set foot inside a bank branch these days), make sure your preferred lender offers an excellent online experience (but also ensure you can reach them easily by phone if you need to).
The websites above are useful to see how lenders compare, but you can also check out sites like Trustpilot which is a user-review site for all types of businesses, including banks and other lenders.
We recommend researching the market regardless of whether you are a first home buyer or buying your third investment property, and if you have relatively straightforward borrowing requirements and your financial records and payslips are all in order, it might be worth your while to go direct to a lender for your loan. When you think about it, it has gone through fewer hands, meaning there are less parties making money from it, and it stands to reason, you could get a much better rate.
Our digital model saves us a lot of money, and we pass those savings onto our customers. Being a ‘non‑bank’ lender we also have access to funding at wholesale rates.
We encourage, rather than penalise, people to pay their home loan off sooner. We reward you for staying with us. We have real, local people on the other end of the phone.
We don’t charge you to join (we only pass on third party costs) or any on-going fees. And we can save you a significant amount of time, money and stress over the life of your loan. How do we do all that? We’re not a big bank.