My Broker Suggested I take a Larger Mortgage!
Australian mortgage brokers arrange over 50% of all mortgages. Conducting mortgage research all by yourself may prove extremely difficult, which is why figures show that many find it best to seek the help of a mortgage broker.
Even for existing mortgage holders looking to refinance, without a broker you probably won’t be exposed to many alternatives banks and other lenders offer. You also won’t know if it’s possible to maintain a similar setup with the lender you’re planning to switch to – It’s the broker’s job to research all of this and provide you with their strongest recommendation that works in your best interest.
Mortgage brokers also have extensive knowledge of how each bank differentiates in terms of operations and processes.
You likely wouldn’t attend court without a lawyer, or attempt complicated car repairs yourself, so it’s imperative to have a mortgage professional on your team to assist your loan application.
Let’s take a look at what is seemingly an astounding advantage to investors, and discuss some recent findings from the Australian Securities and Investments Commission (ASIC).
What ASIC discovered
ASIC’s enquiry report found that mortgages organised by a broker were on average larger than when going direct to the lender.
Bigger home loans or interest-only loans were found to be a common thread among broker-managed loans where borrowers would often expect a beneficial deal.
Firstly, mortgage brokers are professionals. Brokers’ services are generally free to the borrower and they are employed to work in your best interest as a client, utilising their industry expertise to your advantage.
Is a smaller loan always the best option? Unlike conventional thinking, there are actual benefits to taking on a larger loan.
Oftentimes buyers will use all or most of their funds to purchase a property, then borrow a smaller amount from their lender.
“A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain” – Mark Twain
This is a common saying that argues reason for taking out a larger loan with an offset or a redraw option, rather than initially using most or all your savings, suggesting you should keep a percentage for a ‘rainy day’. This is an example of one of the benefits mortgage brokers bring to the table.
It’s recommendations like this, combined with creative thinking, a positive mindset and familiarity with a variety of (constantly changing!) policies from different lenders, that make a broker someone you want by your side.
In the likely instance of the average investor, a common 10-20% deposit is generally their starting point while planning to borrow the rest. Initially this might seem like a disadvantage, however mortgage brokers will educate their clients on how to more efficiently utilise their funds.
Brokers can set up a home loan that strategically works in conjunction with an offset account. This means they may encourage clients to take a larger loan amount and use their own funds within an offset account. By using this method, borrowers can more effectively enhance their liquidity options.
Don’t limit yourself in terms of accessing lenders’ deals and missing out on assistance which can help you maximise your borrowing power. While it’s still crucial to be undertaking your own research, it’s prudent to seek the advice and services of a great mortgage broker.
Contact Ethan today to discuss mortgage options that suit your financial situation.