Mortgage brokers - a bit over rated?

Discussion in 'Loans & Mortgage Brokers' started by pwnitat0r, 21st Dec, 2017.

Join Australia's most dynamic and respected property investment community
Thread Status:
Not open for further replies.
  1. pwnitat0r

    pwnitat0r Well-Known Member

    Joined:
    27th Nov, 2016
    Posts:
    323
    Location:
    Sydney
    I recently got a loan and went through the bank. My reasons for believing it is better go to the bank direct are:

    - no third party middle man
    - a loan is a very simple product - variable/fixed, P&I/IO
    - get a better rate than what mortgage brokers can get since the bank pays them commission
    - the bank knows their products better than mortgage brokers
    - less hassle, paperwork and much more stress free

    I am thinking mortgage brokers may be over hyped. There's no such thing as a free lunch and while you don't pay the mortgage broker directly, you do pay indirectly.


    cheers
    pwnitat0r
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,672
    Location:
    Australia wide
    The quality of mortgage brokers out there is not good. but going with a bank is generally not so good either as they will only be able to offer their own products. Rates are no different with either.
     
  3. pwnitat0r

    pwnitat0r Well-Known Member

    Joined:
    27th Nov, 2016
    Posts:
    323
    Location:
    Sydney
    Would it be a fairly safe bet to assume one of the big 4 will be the cheapest? I'm assuming they can borrow money cheaper than Newcastle Permanent, etc.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,672
    Location:
    Australia wide
    No. Usually the big 4 are on the high side.
     
    Lindsay_W likes this.
  5. Morgs

    Morgs Well-Known Member Business Member

    Joined:
    7th Dec, 2017
    Posts:
    1,791
    Location:
    Sydney NSW
    It is a shame you think that, perhaps not had a good experience in the past? A good mortgage broker should be able to take the work out of finding the most appropriate product on the market for your situation and do this in a seamless way with no cost to you.

    Without a broker you'd clearly need to put the work into finding the best deal yourself and knowing every product and niche that each bank has out there so that you can find the ideal fit for your situation.

    By cheapest do you mean best rate? No.. the big 4 won't be the cheapest.
     
    Perthguy, wylie and Lindsay_W like this.
  6. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    Personally I think there's other things to consider...

    - The third party middle man is your advocate, as opposed to someone who is employed by the bank is going to advocate their employer.
    - Products are simple, strategy and advice are not. In my experience discussions around strategy and advice are rare through a bank. For me it's the most interesting part of the job. Did your bank do a cash flow analysis and comparison of P&I vs I/O? Do you really understand which is better suited to your short and long term needs?
    - Sometimes you can get a better rate going direct, sometimes brokers get better rates with that lender. Usually you get exactly the same rate. I do know that the guy in Bank A won't tell you what their competitors are offering.
    - As you say, the bank products are essentially simple. My experience is bankers know their products (it's not really that hard), but they have less experience in using them strategically.
    - I'll agree somewhat on simplicity. Banks seem to make brokers work harder to get loans approved than their own staff. In theory there should be no difference. I've had plenty of comments from clients indicating that they found it much easier and less confusing dealing with a broker. In truth the experience depends on a number of factors which neither channel can take credit for.


    There definitely is no such thing as a free lunch. The bankers salary (and substantial bonus') need to be paid. The branch itself needs to pay rent, ongoing maintenance, etc. They have advertising and 1000s of other hidden costs associated with them. Regardless of which channel you choose, there are substantial costs associated. Either way, it's paid for by you, indirectly through your loan repayments.

    It's worth noting that brokers only get paid on success. Someone working for the bank gets paid their salary regardless of the outcome of your loan.


    I can't comment on the Big 4s borrowing costs, but I can think of a number of lenders with cheaper rates right now. That doesn't mean they're the most suitable however, as they all have different credit criteria. Rate really isn't the most important component of a home loan.
     
    Last edited: 21st Dec, 2017
  7. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    4,982
    Location:
    QLD/Australia Wide
    Interesting assumptions, I'm particularly interested in this one "get a better rate than what mortgage brokers can get since the bank pays them commission" - just this week had a client telling me the branch manager of one of the big 4 banks couldn't match the rate I could get him... maybe it was a one off but branches do cost money to run.
    Curious, have you ever used a mortgage broker before?
     
    Last edited: 21st Dec, 2017
    Jamie Moore and Morgs like this.
  8. srirang

    srirang Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    128
    Location:
    Melbourne
    Spot on!
     
  9. Redwood

    Redwood Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    691
    Location:
    Melbourne
    Out for the bite? everyone is entitled to their own opinion. The value of a mortgage broker is generally the "credit" advice you receive - that is how to structure your loan. So many times the banker will not do this. Further to this there are more options than one bank, they have access to most if not all lenders which will generally provide a better rate.

    Again, I believe in choice.

    Cheers Ivan
     
    Jamie Moore and Lindsay_W like this.
  10. DaveM

    DaveM Well-Known Member

    Joined:
    14th Jun, 2015
    Posts:
    3,761
    Location:
    Adelaide & Sydney
    If you are a basic simple PAYG borrower with no complications and a tiny portfolio (if any), then going direct to bank is probably fine.

    However if you have a number of properties and complex lending structures, a bank is going to go ERRRWTF and make dogs breakfast of it (prob all x-coll too). I could spend endless hours talking to 20 lenders to see if I would service with them, or I can say to my broker "I want to buy XYZ can you finance it" and let him do all the hard yards to find out. If he can source me funding then he gets payment for his time and effort, and I have saved myself endless hours of calling and emailing and bank visits.
     
    pwnitat0r and Lindsay_W like this.
  11. Tranquilo

    Tranquilo Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    469
    Location:
    Mascot
    If I didn't have @Redom who knows what crossed mess I would be in
     
    Wukong, Redom, radson and 1 other person like this.
  12. Anthony Brew

    Anthony Brew Well-Known Member

    Joined:
    18th Feb, 2017
    Posts:
    1,176
    Location:
    Australia
    I used a broker on this forum and there was not one word of discussion about strategy, advice, cash flow analysis, how it will fit into the broader picture. Also did not mention anything about effects of paying off student loan on lending or how even having a credit card affects it. Or how P&I will affect my situation. I have since realised I need to learn all of this on my own and have done so.
    I think you are making a mistake by assuming other brokers (off or on this forum) offer the service that you provide.
     
    Ben John1, pwnitat0r and vbplease like this.
  13. vbplease

    vbplease Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,575
    Location:
    Brisbane
    I found exactly the same.. I started off with a well known broker from SS and there was absolutely no talk about strategy. As a newbie, you don't know what you don't know.. so it can be a bit hard to know what questions to ask. I later found out they were a licensed financial planner :confused:
    When asked if they could negotiate a better rate, the answer was no - but try asking directly.

    Since I've found the serviceability is a lot better going direct to the bank, I'm not sure if I'd ever go back to using a broker. There are definitely good ones and bad ones..
     
    pwnitat0r and Anthony Brew like this.
  14. pwnitat0r

    pwnitat0r Well-Known Member

    Joined:
    27th Nov, 2016
    Posts:
    323
    Location:
    Sydney
    I can only detail my experience based on a few mortgage brokers.

    One mortgage broker has told me you do a 10% deposit or a 20% deposit, doesn't seem to be aware that 12% deposit is the "sweet spot" for reducing LMI.

    I've only ever been asked if I want variable or fixed and been told what the interest is.

    My experience with the bank also got them lopping 0.97% off my IP loan without even asking.... what's the mortgage broker who wrote the loan initially doing? I had another mortgage broker who didn't write the initial loan suggest swapping to P&I to reduce the rate, but that's still not as good as IO at a higher rate and claiming deduction for 100% of the interest as I now have a PPOR loan which is non-deductible.
     
  15. tobe

    tobe Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,814
    Location:
    Melbourne
    What is this cheapest mortgage you speak of? Share the details. How does it rate against those outlined in Canstar?
     
    Jamie Moore and Morgs like this.
  16. pwnitat0r

    pwnitat0r Well-Known Member

    Joined:
    27th Nov, 2016
    Posts:
    323
    Location:
    Sydney
    Is that directed at me?

    Don't think I ever claimed to get the cheapest rate... getting the cheapest rate will depend on a few factors such as what I can assume are 20% deposit, PAYG. We had 12% deposit and got the loan under one name who is a contractor.

    Had a mortgage broker quote me more than what we got from the bank which is 3.83% with no ongoing fees or application fee. My LMI was only $9,900, so I saved myself $6k going to the bank.

    Received the below from a mortgage broker:

     
  17. Simon Moore

    Simon Moore Residential & Commercial Mortgage Broker Business Member

    Joined:
    4th Mar, 2016
    Posts:
    556
    Location:
    Level 2 287 Collins St Melbourne VIC 3000
    It's all a mixed bag, you get some good and some bad in every bunch. I do think the average broker is better at the advice side of things than your average banker. The average broker and business owner is another step up again.
     
    pwnitat0r likes this.
  18. Zoolander

    Zoolander Well-Known Member

    Joined:
    15th Dec, 2016
    Posts:
    668
    Location:
    Sydney
    Dont some banks offer lower rates if the loans are written via their broker network? Maybe OP just hasn't found a competent broker yet.
     
    Lindsay_W likes this.
  19. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,672
    Location:
    Australia wide
    LMI wouldn't change if you went via a broker or direct. Rate difference may be due to different product or the fact that the broker hadn't submitted a pricing discount yet.
     
  20. pwnitat0r

    pwnitat0r Well-Known Member

    Joined:
    27th Nov, 2016
    Posts:
    323
    Location:
    Sydney
    My point was mortgage broker didn't inform me I could do a deposit between 10-20%, she made it seem like it was a binary option of 10% or 20%. Banker was kind enough to let us know 12% is the sweet spot in reducing LMI
     
Thread Status:
Not open for further replies.