Mortgage brokers get paid by you (the borrower) and/or the lender. It’s important to ask your broker how he or she gets paid to understand whose interest they value more – yours or the lender. Good brokers won’t avoid answering this valid question.
Some mortgage brokers offer their services for free, but remember, brokers never work for free (unless they’re a family member or a close friend). Brokers are paid by the fee you are charged and/or a commission from the lender. This means a mortgage broker doesn’t just ‘work for you’, they also ‘work for the lender’. Don’t forget that.
For me, as an investor with multiple properties, it makes logical sense have an experienced broker as part of my property team. Use their expertise to fill your knowledge gap, as discussed in my previous post. (Please note, I have never worked in the mortgage industry so I am not trying to sell any brokerage services).
Thus far, I have worked with three brokers whom I’ve labelled as: the ‘free’ mortgage broker; the ‘cheaper’ mortgage broker; and the ‘expensive’ mortgage broker. Below are the lessons I’ve learnt from these experiences to help you make your own decision:
The ‘free’ mortgage broker
For my first property in Australia, I used a ‘free’ mortgage broker. She was a referral and unbeknownst to me, had won the state-wide ‘Best Mortgage Broker Awards’ numerous times.
Her service was excellent for the first few years. She was personally well connected to many banking professionals; thus, was able to get our loans approved and resolve any issue at lightning speed.
Eventually, she was promoted to national business development. As her managerial responsibilities increased, her responsiveness to my emails and calls decreased to the point where I had to chase her repeatedly – this is a major pet peeve of mine.
Lessons learnt: It’s crucial you maintain a face-to-face relationship with your broker if you’re serious about property investing; this is so they remember you and your property. Every time I’m in Sydney, I visit this broker even if I am not buying a property.
Though our relationship has been fantastic over the years, I may switch to another broker for our next property purchase. Remember, it’s OK to change your broker if the service you receive no longer matches your expectations.
The ‘cheaper’ mortgage broker
I came across this broker on Google because her company had many positive online reviews. Initially, her service was great and she was quick to respond.
But once my bank loan was approved, a new account manager – her administration assistant – was appointed to me. I was not impressed. I paid £250 expecting her to work through the entire mortgage process just as my ‘free mortgage broker’, mentioned above, had done.
Her company’s strategy became clear. Hire mortgage brokers with the best sales skills to sign up new clients, and thereafter, hire administration assistants to deal with the paperwork. The problem here is that the customer experience decreases because the assistants are not as knowledgeable and efficient as the brokers.
Lessons learnt: Don’t believe all the positive online reviews you read; personal recommendations by friends and family are more reliable. This company was highly rated online; how misleading.
If you use an online mortgage broker, it’s crucial they give you a detailed outline on the timeline of every step of the mortgage application process, as well as who is responsible for each step. Working with an online broker requires more attention to detail as you cannot resolve issues face-to-face if things go wrong.
This experience is also a reminder that though I paid £250 for the broker to help me, ultimately, the broker ‘works’ for the lender who pays a much higher commission than my fee.
The ‘expensive’ mortgage broker
A colleague of ours recommended this London broker who charged £650 for his service. I was flabbergasted; this fee was, at the time, the same amount as my monthly rent. Nonetheless, I arranged a face-to-face, no obligation meeting with him as I needed to replace my ‘cheaper’ broker, mentioned above.
Fortunately, this broker was honest, responsive and efficient. He provided repayment forecasts based on my deposit; he assessed my eligibility to get a mortgage approval from different lenders; he explained the interest rates; he clarified new regulatory changes. But more importantly, he was not afraid to admit if he could not deliver to my expectation.
To date, 15 of my friends and colleagues have now worked with this broker – all of whom have been satisfied thus far.
Lessons learnt: Don’t always opt for the cheapest broker first. Know what you want, and have an expectation of what you expect your broker to deliver. Paying a high fee for a broker who is on top of his or her game could save you from losing out on your property deal.
This broker was quick with processing my application, quick at getting a response from the bank, and quick at getting the job done. In fact, he was always one step ahead of me – I like that. In a highly competitive housing market like London and Sydney, your broker not only needs to be thorough but he or she needs to be efficient.
Overall, brokers shouldn’t be selected based on their price. The best and worst brokers can either be ‘free’, ‘cheaper’ or ‘expensive’.
Personally, I think the best brokers are the ones referred by your friends and family.
You need a broker who is legally qualified and is quick at getting the job done correctly. Remember, if your broker is late, this delays everyone else – your solicitor, the vendor’s solicitor and the lender. Then you’ll be the one wasting your time chasing everyone. Not fun.
Please note, though I own a few properties, I am not a legal, financial or professional property expert. I’ve written this post to share my personal experiences and would love to hear your opinions and views.
So, what are your thoughts on paying for a mortgage broker?
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