When starting out, our clients can become overwhelmed with information that’s complex and sometimes conflicting. Taking out a mortgage - or any loan for that matter - is a big decision and it’s often hard for our customers to figure out what’s right for them.
Here are five things that are commonly misunderstood by our clients that could help them on their home buying journey.
1. The Reserve Bank of Australia (RBA) controls interest rates
The RBA controls Australia’s official cash rate (OCR) and whilst movements in the OCR influences lenders and the interest rates they offer, ultimately each lender can change its interest rates as they see fit - whenever they like. And is not solely determined by the changes in the official cash rate.
2. It’s easier to borrow from the big four banks
There is a lot of choice out there when it comes to finding the right lender, including smaller banks and non-bank lenders. Often these smaller lenders have extremely competitive and flexible home loan products available. There are literally thousands of home loan products out there and researching the options can be daunting. It might seem easier for a borrower to go with a major bank, but mortgage brokers are constantly up to date with the latest products across a whole range of lenders, which can often lead to finding a more suitable deal outside the big four.
3. Working with a mortgage broker is more expensive than going direct to a bank
Usually working with a broker is no different than dealing directly with a bank. Mortgage brokers are paid by the lender, not by the borrower, so it doesn’t cost any more for our clients to have a broker doing the legwork for them
4. If you’re self employed, you pay more interest
Self employed borrowers who can provide the relevant financial documents and tax returns will be assessed in the same way as any other borrower. When tax returns and financials can’t be provided, borrowers will likely be put on a low-doc loan, meaning they’ve provided a minimal level of official documentation. These loans do generally come with a higher interest rate.
5. Borrowers should go with the lowest interest rate
Our clients need to consider more than just the rate of interest attached to a home loan product. It’s important for a borrower to consider the features of a loan such as redraw facilities, limitations on the loan and break costs on fixed rate loans. The right loan is the one that suits each individual's personal circumstances and financial goals.
By arming our customers with the right knowledge, we’re helping them make a more informed decision on what is likely the biggest investment of their life. If you’re working with clients who could benefit from speaking with a broker, please don’t hesitate to get in touch.