Well let’s start this article off with getting the terminology straight. These days mortgage brokers are more often called mortgage advisers and we’ll stick with that for the remainder of the article. The change really came about after a couple of rounds of regulatory change in the advice industry and it does more accurately reflect what we do.
Yes we do broker the deal and get the lending that a client needs, but it’s about getting it in the right way, from the right provider in the right time frame.
For some time, the promise to consumers was about price, brokering the deal with a lender and getting a better rate than might be obtained direct. These days banks in particular try and maintain channel parity, that the offer to a consumer is the same whether its through its adviser channel or direct channel.
So, if it’s not about price, what is it about?
The mortgage process can be complex, the options available are many and borrowing needs can also be so varied that it’s hard to know where to start. In essence, in choosing a mortgage adviser, the customer is making a considered decision to use an expert to help them make the right decisions and end up with the mortgage product that fits their circumstances.
Most of the time, we get introduced to a new client by referral from an existing one and if you’re looking for a mortgage adviser it’s a great way to find one, ask around for recommendations.
Like any financial adviser, your new mortgage adviser should be either hold or operate under a licence provided by the Financial Markets Authority and registered on the Financial Services Provider Register.
They should provide you with evidence of these details when you engage with them and provide you with a document that details all of this. You may be asked to sign this document to engage with the adviser so make sure you read it thoroughly and understand it before you sign.
They should clearly explain their process and how they work so that you understand what’s ahead of you. They should,
1. Establish your requirements
2. Gather all the relevant information
3. Analyse your situation and research your options
4. Complete the application
5. Develop and present recommendations
6. Monitor and review as your situation changes
How do mortgage advisers get paid?
Most mortgage providers, particularly the banks pay the adviser a commission at settlement of the loan. Some of them will also pay an ongoing smaller commission called trail whilst the loan is in place with that provider. The adviser’s disclosure document (which they will give to you) will detail the commissions and all the lenders they are accredited with.
If the loan you take is repaid within a certain timeframe (which differs from lender to lender), then the adviser can have their commission clawed back and some will have in their terms of engagement the ability to charge you a fee under these circumstances.
Some lenders don’t pay a commission but facilitate an adviser fee which generally is added to your loan. This is typical in the non-bank sector.
All in all, expect a professional and thorough experience from your adviser. They have plenty of obligations to adhere to, but they are all geared towards looking after you and making sure you get the right advice for your situation. So if you’re unsure of your first or next mortgage move, reach out to a mortgage adviser and get some help to make it the right move.
The article was written by:
David Windler
Financial Adviser and Mortgage Broker
The Mortgage Supply Company