Mortgage Broker/ - What Questions you should (really) ask.

Hi all,

As I have been reading through as many threads here and also on the SS forums, I am wondering what a property investor needs to ask their mortgage broker (financial planner as well?) to enable them to reach their financial goals.

I have stolen this from " Your Mortgage" which is there 21 questions to ask but I know after reading these forums that there is so much more to ask, such as (structuring) that these questions are more general in nature and not inclusive for property investors who are looking to build a portfolio.

1. How much experience do you have as a mortgage broker?
2. Why should I use a mortgage broker rather than going straight to the bank?
3. Are you members of the Mortgage Finance Association of Australia (MFAA) or Finance Brokers Association of Australia (FBAA)?
4. Do you have your own Credit License or are you a Credit Representative?
5. How do you decide which loan is best suited to my personal situation?
6. Do you charge a brokerage fee for getting my finance approved?
7. What commissions do you get paid for writing my loan?
8. Do you offer a range of different lenders?
9. How much of a deposit do I really need to obtain a loan?
10. What impact will my credit card limits have on my borrowing capacity?
11. What fees will I incur when taking out a home loan?
12. What is a comparison rate?
13. What features are included in my new loan?
14. What information do I need to provide you to obtain my finance?
15. What are the procedures that I need to follow in order to obtain my finance and settle my loan?
16. Can I choose to fix my interest rate in at a later stage?
17. If I choose to take out a fixed interest rate can I choose to lock my fixed interest rate in prior to settlement?
18. How long will it take for you to obtain the appropriate finance for my needs?
19. Can you explain to me what Lenders Mortgage Insurance is for?
20. Will you process the First Home Owner’s Grant for me?
21. If I have a default on my Credit Report will this impact on my ability to obtain a loan?

If this has been asked before - apologies in advance (I promised I searched!)

Regards,

Martin

 

What happens when my IO period expires?
Do you x-coll my loans?
What does my servicing look like after this loan goes through?
Do we need to review my current loans to see how this new loan will affect their IO rollover?

 

Good questions and a few are answerable with a quick Googling (such as 12 and 19) but one thing I've learned from PC when choosing The Team is to ensure that they have a portfolio themselves so they know what they're talking about.

Most of the brokers on here have decent portfolios and write a lot of investor loans so they'll be more versed in the nuances of these kinds than the average broker than mainly writes OO loans. They'll also be able to set you up more strategically as they'll be thinking long term.

 

If you're an investor (you likely are) it's about ensuring your broker understands the finer details of investment based strategic lending.

I was at a broking conference last week - the question was asked about what percentage of their business was investment lending, the average broker was putting through <10 deals per year in investment loans. That's just not going to cut it in ensuring you don't accidently put a client in a poor long term position.

As per the questions above, they're rather generic and won't provide that much in terms of value for a client, it's about understanding the brokers greater business model and target demographic which will determine whether they're a good fit.

 

Rather than a checklist of generic questions, a good, communicative relationship where the broker can identify current and potential future strengths and issues, forward plan, and clearly explain what's important and what isn't (and why) is going to win hands down over a few check boxes that may have limited meaning to the clients circumstances.

 

@Jess Peletier @Corey Batt @House
Thanks for the feedback and much appreciation for the Great Points.

 

I believe the questions I posted up from the online magazine are very general (and mostly obvious) but this is the kind of stuff you see posted / printed on finance sites. Until you find a place like PC or SS of course.

 

Indeed. I think PC is where an everyday investor can easily get that Slight Edge™ in property which can help them get ahead. The advice and contacts (such as brokers with portfolios) on here is just incredible.

 

1. Do you post on Property Chat?

 

I don't think any of those questions you've listed in the original post are worthwhile. Just about all of them will be things you can either look up yourself or will be on the credit proposal documentation they'll send through to you.

Like any profession, it's important to find out what situations they've handled before.

 

That should be number one for sure.

 

These questions are so trivial that if a broker can't answer all of them easily I'd be very concerned. If the person you're dealing with can't answer any these questions you shouldn't be dealing with them at all.

For example, question 3, FBAA or MFAA - All brokers are required to be a member of a professional association and these are the only two realistic options. If a broker isn't a member of one of them, it's a clear sign they're not a legitimate mortgage broker.

In general you really need to be asking questions about why they're recommending a specific lender and a specific product. What alternatives are there? The answers need to be relevant to your circumstances and should be aligned with your longer term goals.

Investors should probably focus on a longer term strategy and how the outcome of this purchase/loan will affect the next move. How much more borrowing capacity is there beyond this purchase? Where are the road blocks going to be? How can these be dealt with or mitigated?

Experience really counts when looking at long term planning, in many respect the first question (how long have you been a broker for) is probably one of the most important. Someone who's worked with clients through events like the GFC will have a better understanding of assessing risky lenders as opposed to someone who's only been around for 2-3 years.

Equally important is the type of experience the broker has had. A first home buyer specialist is good at filling in a FHOG form - big deal. An investment specialist will be able to give you advice on lending strategy and long term planning. They can't give tax advice but they should know enough to structure a loan to maximise the tax effectivess of the loans.

One easy way to assess a broker is to simply read a lot of their posts on this forum. Most of the brokers here are quite good at their job but there have been cases in the past where a broker posted a lot, got a few recommendations, but didn't actually say much. It turned into a disaster for many of his clients. Make sure what the broker is posting has some substance and again, make sure they're in it for the long haul.

 

What's the point of all those questions, if you don't know some of the answers yourself?

No point asking a question, getting a bs answer from a broker and nodding your head like an oracle.

Invest in yourself first, then you can sort of the wheat from the chaff.

 

I did know most of the answers myself as I have purchased property already, so I used those questions as an example of what is fairly general in nature (obvious) and for a starting point for the conversation.

 

There is a little bit more to it than that Pete, credit scoring, rent as genuine savings, LMI capping, lender turnaround, finance clauses and valuation policy etc.

And don't underestimate how difficult it is to complete the fhog form correctly, there's a whole lot of double negative questions designed to confuse.

 

Yes.

 

The FHOG form isn't that hard, you just need to pay attention.

The rest of it isn't that difficult either. You could apply those challenges to just about any sort of deal. Any good broker should be used to working with those criteria.

 

Much of this checklist won't be able to tell you the difference between brokers - as there'll be a pretty standard set of responses. Some of them are just standard requirements to be a broker.

In general, i think rather than having a prescriptive basic questionnaire, seeking someone that has makes you think.

The questions you ask should be in line with finding out some of the answers to these. This will likely involve a discussion about your goals, what your looking to do, your experiences, etc.

1. Do you believe their knowledgeable and have the skills/vision required to get you to your goals.
2. Do you connect with them and like their communication style.
3. Do you feel that they working in your best interests?
4. Do you have the confidence in their desire/abilities to get the best outcomes for you (brokers role does sometimes involve batting for you).
5. Do they explain things in a way that works for you.