Frequently Asked Questions

• How much does it cost to use a broker?

  There should be no cost to the borrower to use mortgage brokers services as they are paid by the bank. We often state that the brokers time is not free, it is just that the client does not have to pay for it. A good broker should always disclose the commission they are going to be paid.

• How does a broker get paid?

  A broker can be paid an upfront commission, which is a one off payment for the research and sourcing of the loan. The up front is a pre-determined percentage of the loan amount and each bank will pay slightly differently. The broker is also paid a trail commission. This is an ongoing percentage of the remaining balance of the loan (less any amount in an offset account).

• What are the hidden fees and charges?

  A good broker should be able to detail all the fees that relate to the loan contract. These will range from the set up fees from the bank and the government, to ongoing fees and the discharge fees that are associated with leaving the loan.

• Why would I use a broker over the bank?

  A broker will have access to a number of different banks. They will be able to do all the research and leg work to obtain the best deal for the client and a home loan that adequately services the client’s needs. The broker will deal with the bank on behalf of the customer, saving them both time and money.

• How much can I borrow?

  Borrowing capacity is determined by a number of different aspects. The bank will take into consideration the amount of income that is coming into the borrower’s household and then weigh this up against the financial commitments the client has. Borrowing capacity will be affected by things, such as number of dependents, the amount of existing debt or access to existing credit limits.

• What is the best interest rate?

  Loans come in all shapes and sizes with different costs and different features. Choosing a Loan on the basis of Interest Rate alone means passing up the opportunity to consider all other aspects of a Loan product, which may be important to your ability to use the loan; not just for the immediate purchase, but also as a tool to assist with your long term wealth building strategy.

  When looked at from the broader perspective, Interest Rate becomes far less important when compared to other features and benefits, and how they contribute to helping you to manage your money and achieve your goal.

• Should I choose variable of fixed interest rates?

  This will depend on individual circumstances. If a client wants certainty of repayment, then a fixed rate is a good option as they will be able to lock their repayments at a certain rate for a certain time frame. This can give comfort in knowing what the commitment will be and can be good in a rising interest rate market. Fixed rates are generally an inflexible product and will have restrictions on things like extra repayments on a home loan, ability to redraw or have an offset account against the fixed rate loan.

  Variable rates will move with the fluctuations of the interest rate market, but you tend to have greater flexibility with these products, such as the ability to have an offset account, make unlimited extra repayments and then redraw those extra repayments.

• How can I afford to keep my current property and purchase another?

  This all comes down to cash flows and having an understanding of the events that will have an effect on cash flow into the future.

• Why are my rates different from the ones that are written on my loan documents?

  The rates listed on your loan documents are current at the time of the documents being issued and will not always be the same as the final rates you receive at settlement.

  If you have a variable rate loan, then your rate will fluctuate with the market. If market rates rise, your rate rises. If market rates fall, then so too, do your rates.

  If you have a fixed rate loan, then there are two possible outcomes:

  1. If you choose to lock-in your rate, then the agreed rate at the time of lock-in is the rate you will get at settlement. There are large fees associated with locking-in rates, often between $750 and 0.15% of the total loan amount.
  2. If you do not choose to lock-in your rate, then you will get the fixed rate that the bank is offering for your chosen loan product at the time of settlement. For example, if the bank is offering 2.74% for a 2-year fixed rate loan when your loan documents are issued but have increased the rate to 3.74% by the time the loan settles, then you will get 3.74%.

• In which states do mortgage documents need to be signed and posted physically?

  Many lenders now offer digital signing for loan documents. Some states, however, still require that mortgage documents are wet signed. These are: Queensland, Tasmania, Australian Capital Territory, Western Australia, and Northern Territory.

  Here are the rules of thumb for mortgage documents:

  1. If your loan documents are posted to you or emailed to print, then you will need to sign and post them physically back to the bank.
  2. If your documents are issued digitally, then you will only need to print, wet sign, and post them back to the bank if your property being purchased or refinanced is in one of the above states.

  For properties located in Queensland, your mortgage documents must be witnessed by a Justice of the Peace, Commissioner for Declarations or Registered Solicitor. We recommend using a Justice of the Peace, as they are free in Australia!

• Why must we wait to hear from the Customer Relationship Team before signing?

  We ask you to hold off signing the loan documents for two main reasons:

  1. We will review the loan documents to ensure everything has been prepared correctly.
  2. We will prepare an email with full instructions on how to sign ranging from building insurance, which offsets to use, to shortfall information.

• What is shortfall? Why do I need it and why are your calculations overestimated?

  Shortfall is the difference between what the bank is going to provide towards a purchase and what you will need to provide from your own funds. In some cases, you may be using funds from an Equity Release on another property to cover this shortfall.

  We always attempt to overestimate the shortfall so that you are prepared with sufficient funds on the day of settlement. Many of the fees involved with a purchase are not known to us at the time of loan documents being issued, and it is the responsibility of your solicitor to provide you with exact figures in the lead up to settlement.

• Why must the bank be listed as ‘interested party’ or ‘credit provider’ on the building insurance?

  Your lender is the mortgagor of your loan – lending you money in return for the title. As such, they need to know that their risk is covered and that you hold insurance stating they have a registered interest in the property.

  When you are refinancing, you may need to change the interested party from your current lender to your new lender prior to the loans being moved across. It is safe to do so, as your insurance is not invalidated by removing the interested party and replacing it with another. Additionally, the incoming lender, although not yet settled, still has an insurable interest in the property given that they are unconditional on the approved loan.

• Why do I need to send a scanned copy of my signed loan documents to you before posting them to the bank?

  This is only applicable for documents that are wet-signed and posted to the bank.

  Similar to how we will check the loan documents for accuracy before you sign, we will also check them to ensure you have signed them correctly before posting them to the bank. This both allows us to hold a copy for future reference and also ensures that the documents are right the first time. Delays of up to 2 weeks are not uncommon if new documents need to be issued for you to sign again.

• Will the bank or you open offsets for me?

  Many lenders give us – the broker – the ability to open offset accounts and link repayment accounts either during the application stage or when signing the loan documents. If this is not the case, we will always inform you of what needs to be done to set up your accounts in line with the Money SMARTS system.

  After the loan documents have been returned to the bank, we will not be able to change repayment accounts or open offset accounts on your behalf. Whilst we can check on certain details regarding your loan accounts, we do not hold authority to effect changes to your personal transactional accounts.