The best mortgage broker is usually a straight talker
The word ‘mortgage’ comes from the combination of old French words mort “death” and gage “contract”. Sounds grim right? Well, that’s not always the case. Although getting a poor deal on your loan can have significant financial consequences in your life, this can be avoided by choosing a professional that truly focuses on your financial goals and needs. Enter Josh Beck, straight talker, and co-founder of Beck McLean Finance, to answer the juicy questions in the world of mortgage brokerage.
Josh, can you please explain why a bank is not the best option for a borrower?
From experience, one of the worst things you could do is go to a bank and speak to a loan ‘specialist’. Why? Because, in general, this specialist is not a specialist at all, simply an employee on a salary. They are the kind of people that have white boards in their sales rooms and primarily focus on getting a deal done to meet their targets. Their expertise is limited to the requirements and loan policies of the bank they are working for. In addition, there’s an extraordinarily high turnover of staff in these roles, which means that borrowers may be talking to multiple ‘specialists,’ or a new employee that has generally only been there for as little as six months.
Banks always have borrowers knocking at their door, so letting one walk out is a small loss for the business. They also have insane sales protocols, which can cause borrowers to accept a loan product or loan change in under 120 minutes!
An example of this is a phone call from or to a bank, where they interview the customer to collect relevant information, and discuss the ins and outs of a loan including: rate, repayments, settlement dates, etc. This means the customer needs to absorb a huge amount of information within a small time span - which simply isn’t fair!
Another downside to opting for a bank is being declined for a loan. You may get the perception that you are not in a position to get a loan, however, this is just the decision of one particular bank.
What issues might you come across when dealing with a large mortgage broking firm?
For larger mortgage broking firms, similar to banks, they are driven by generating as many loan drawdowns as possible. Generally, at these firms a mortgage broker's pay check is heavily based on commissions. This means, it’s in the favour of the broker to spend 1 hour, rather than 5 hours, understanding your goals and needs as time is money.
These are unfortunate attitudes, but one way to mitigate the risk of this happening to you, is to opt for a small brokerage, or family run business that operates privately. These types of businesses generally have a smaller client base that allows them to focus on the individual at a deeper level. Small businesses can’t risk reputational damage, so they will strive to offer the best and most tailored service possible.
Another potential issue with larger mortgage broking firms is their pickiness with clients. If you’ve got a credit rating below a particular level, these firms might not be willing to take you on due to potential complexities. In contrast, smaller brokerage firms can’t afford to be picky and thrive on complex clients situations that may have multiple debts, bad credit history, or simply a complex loan structure.
Small brokerage firms also understand the power of word of mouth. If they provide exceptional services, the client is more likely to share their experience with friends and family. This helps them generate a consistent spinning wheel of word of mouth leads that they can assist in making their dreams a reality, without spending a single cent on advertising!
Could brokerage firms be biased towards a particular lender?
Over time the public’s perception of how mortgage brokers are compensated for their work has become distorted. All too often, I’ve heard stories of mortgage brokers getting additionally compensated by lenders at no cost to their client. A quid pro quo situation.
Although this is not always the case, many firms or mortgage brokers become accustomed to directing loans to certain lenders that they are more familiar with. Think of it as the path of least resistance. Occasionally, they may seek lenders that they know will approve an application with ease, which can be to the detriment of the client.
At Beck McLean Finance we don’t take the easy path, and nor should anyone else! A good broker will recommend the best deal in the market that is tailored towards their clients goals and needs. This is a finely tuned, and often overlooked, skill on the brokers part!
Can a mortgage broker lie to a client or manipulate them to lie on a mortgage application?
Yes, it is possible.
All mortgage brokers rely on commissions and other sales incentives to generate income, so they may be more motivated than bankers to push clients into credit products. This is something borrowers will need to keep this fact in mind when they are selecting a broker.
Mortgage brokers might suggest that their client lowers their living expenses on paper, just to fit within the ‘sustainable’ bracket of living to seal the deal, or even ‘increase’ their wages. But let’s think about what’s all over the news and papers right now — financial stress. This is a surefire way to head right there, and a very important reason why you should always be honest with yourself on how much you can actually repay, full stop.
Examples like this are why it’s so important to find a broker with integrity, and that says it to you straight. An honest broker will raise any problems, and although you might not want to hear them, this is what will show to you that you’ve found an authentic mortgage broker.
Can you please give readers advice on how to choose the right broker?
I don’t recommend anyone speaking to a bank directly as you will receive a blatantly biased response on your options. Instead, I would recommend the borrower to speak to multiple mortgage brokers and get a feel for who they’re dealing with.
A mortgage broker will guide you towards the most suitable product to finance your loan; however, you must do your due diligence beforehand and clarify what matters most to you in a home loan. Do you simply want to pay the smallest amount of interest? Or do you want specific features, such as being able to make extra repayments? Thinking about conditions such as these beforehand will make the initial conversation with your broker easier.
Despite coming equipped with your loan conditions, a mortgage broker should always present you with more than one option. Get them to explain to you how each loan option works, what it costs and why it’s in your best interests. Keeping in mind, you don’t have to take the first loan you’re offered. If you are not happy with your options, ask your broker to seek alternatives. A home loan is a long-term debt, so it’s always a good idea to check in with your broker throughout the lifespan of the loan to ensure you’re getting the best deal for you.
Even if you are not in the position to apply for a loan just yet, a good mortgage broker should be able to guide you through ways on getting there. At Beck McLean Finance, we like to keep in touch every 1-2 months until you are in a position to buy a home, to ensure you’re on track towards your goals. This is what sets us apart, being purely client focused. We’re a needle in a haystack.
