With zero experience and limited knowledge, entering the property market for your first home on your own can be a very challenging and stressful process. Most people barely even know where to begin. If you consider yourself to be a smart home buyer, you’ll Google anything and everything to help make the process simpler and easier to understand, but employing the services of a mortgage broker can take it one step further: mortgage brokers help home buyers set and achieve goals. You can’t always find everything online – sometimes you need advice from someone experienced. Mortgage brokers are one up on Google because they provide professional financial advice to home buyers that’s personally tailored to their circumstances and financial situation. Mortgage brokers help guide you through the complexities of the home loan application process and minimise the risk of anything going wrong. It’s easy to misunderstand or be led astray, so professional advice can often be less costly in the long run. If you’re buying your first home, here’s what you should look for in mortgage brokers.
Research Mortgage Brokers OnlineOn the topic of Google, it’s a great place to start when looking for a first home buyers’ mortgage broker. You could also use a directory to make the search easier. Before heading to their website, take a look at their Google reviews or other forms of testimonials. These tend to be less biased than those you’ll find on their website. Look specifically to see if there are testimonials from other first home buyers who recommend their services and expertise. You definitely want a mortgage broker who’s registered with an Australian Credit Licence, so browse their website to find proof of this, as well as their qualifications and certifications. These are non-negotiable, and the best mortgage brokers are also members of the Mortgage and Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA). Once you have confirmation of their credibility, search their website for what they offer. It’s best if they work with different lenders and have experience helping first home buyers achieve their property goals.
Listen to What the Mortgage Broker SaysThere are certain things that mortgage brokers should do to prove that they’re professional and have your best interests at heart. Have a chat with the mortgage broker at your initial meeting and take care to listen to his or her answers intently.
1. Are they enquiring about the personal circumstances surrounding your finances?While it may seem too soon to be talking about your finances, income, and credit rating, you need to be sure that the mortgage broker won’t recommend a home loan that you can’t afford and will subsequently be rejected. Being rejected for home loans remains on your credit history, thus a good mortgage broker will recognise your suitability for different loans and reduce your likelihood of being rejected.
2. Do they ask about your personal needs, wants, and goals as a first home buyer?Applying for a home loan with competitive rates isn’t just about choosing the cheapest interest rate available. It’s important to explore and find the right loan features that will best benefit your individual circumstances. A good first home buyer mortgage broker should explain the various home loan features to you and help you identify which one is best suited to you and why. These include:
- Offset account: this is a transactional account linked to your home loan. The amount of money in your offset account is held against your loan balance so the interest rate applies only to your loan balance minus the funds in your offset account. This is an excellent option if you have surplus cash and you can use the offset account as a savings account.
- Redraw facility: a redraw facility is similar to an offset account in that it can also be used to save money, but the funds are paid into the loan account and you will need to take it back out to use.
3. Do they suggest the First Home Loan Deposit Scheme or First Home Owners Grant?The First Home Loan Deposit Scheme (FHLDS) is one of two Australian Government grants to help first home purchasers own their dream home sooner. 10,000 FHLDS places are available to eligible first home buyers starting 1 July 2021 until 30 June 2022. First home buyers with a deposit of less than 20% of the purchase price are generally required to pay lenders’ mortgage insurance. But, first home buyers’ home loans under the FHLDS are guaranteed by NHFIC. This makes the buying process quicker and easier for a first home buyer because they can secure a home purchase with as little as a 5% deposit. A first homeowner grant, now known as the New Home Guarantee, is quite similar. You might be eligible for either of these two things without even knowing it, so your mortgage broker should propose you apply if you are.
4. Do they discuss Lenders’ Mortgage Insurance?If you pay less than a 20% deposit on your home loan, lenders require you to take out lenders’ mortgage insurance (LMI). But, there are various scenarios where LMI is waived, such as if you are a particular professional like a doctor or you have a guarantor. A mortgage broker should cover all costs involved and provide invaluable advice to assist you to buy your first home in the best and most suited way possible.
Key TakeawaysA “good” mortgage broker should have certain qualities and certifications, but a mortgage broker for a first home buyer must be specialised to be able to fulfill your personal home loan needs. Make sure that they have good, unbiased ratings and that people recommend their services to a first home buyer specifically. When you arrange a meeting, take note of the following things:
- Are they enquiring about the personal circumstances surrounding your finances?
- Do they ask about your personal needs, wants, and goals as a first home buyer?
- Do they suggest the First Home Owners Grant or FHLDS?
- Do they discuss lenders’ mortgage insurance?