In this post, I will be briefly be covering the advantages of going with a mortgage broker
The benefit of a mortgage broker
If you’re like me, maybe your preconceptions of organising the financing of your home is to go to the bank and check for your borrowing capacity. I have been told that it’s just simple and easy to go to the bank, whereas going through a mortgage broker is only needed for those people had difficulty in getting a loan due to their credit score.
What I found throughout this journey is that there are thousands of options out there when looking for a loan, and some lenders can cater better than others for specific scenarios. For example, Mrs. Shift had a novated lease on her car and there would be some specialised lenders who would be able to service this scenario than others.
When I listened to the Bigger Pockets Podcast which interviews successful property investors, I noticed that a pillar to being successful for each and every one of these investors is being able to organise and structure their finances in an optimal way given their own unique situation. This means optimal for not only for minimising tax, but also for ensuring that you are able to keep using leverage to acquire more assets.
Therefore, a big part of the success for these investors was being able to find the right lender who would be able to service their own unique scenario/situation. This is where a (good) mortgage broker can help.
“The primary purpose of a mortgage broker is to match the borrower’s unique requirements to a specific lender and loan product”
Konrad Bobilak, Australia Property Finance
A mortgage broker would have access to a panel of lenders and would be able to choose the lender which best suits your needs. On the contrary, if you go to the bank, you will only have access to that one lender, which may not be the best one for you (unless of course you have done plenty of due diligence beforehand).
Your unique situation
You may be thinking: Can’t I just find out how much I’m able to borrow from each lender, and the interest rates of each, and then choose the one which ideally offers me the highest borrowing capacity and interest rate?
That may be one metric by which you can use to decide when choosing a lender, however as a property investor with a long term vision, there are a lot more factors which go into play. For instance as I may have alluded to in a previous blog post, your finances should be organised in a way which allows you to use it as a stepping stone to the next. This brings up some questions such as:
· How much down payment should I put down?
· Should I pay LMI?
· Do I go with principal + interest or interest only?
· Do I go with fixed, variable or split loan?
· Should I get an offset account?
Your end goal should play a large influence in your decision when addressing the questions above.
Your Mortgage Broker
Not all mortgage brokers are made equal, and may not be operating in your best interest. Or maybe they are, but they may not know what they are doing or may not offer you the most optimal solution, especially if they are not a property investor themselves. Going into the investing game with a bad loan structure can end up delaying your progress significantly and can cost you thousands in the long run.
Ideally as a property investor, it would be ideal to work with a mortgage broker who is also a property investor themselves. This is so, like you, they will have your end goal in mind when choosing a loan which best suits you.
It is important that your mortgage broker has your big picture in mind, and not just the transaction at hand. They should be aligned with your goal and help you develop your financial strategy. Ideally, they should be one step ahead in showing you what you could and should be doing.
Asking the right questions
I’d like to include a snapshot from the book: Australian property finance made simple by Konrad Bobilak
This really alludes back to the quote I mentioned in a previous blog about Alice in Wonderland:
“Would you tell me where I’d ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where-” said Alice
“Then it doesn’t matter which way you go,” said the Cat”
When I was wanting to action things out, I thought it would be good to immediately start speaking to plenty of mortgage brokers to see which was the right fit for me. However, I came to realise that I don’t even have any set potential plans written down yet… so how can they help me if they don’t know what to help me with? Now I’ve decided to go to the drawing board and come up with a plan and understand the types of loans, etc, and all options I have available to me so when the time comes to speak to a mortgage broker, I would have a better understanding of it all and be able to better discern which one is the right pick for me.
Your mortgage broker can’t carry you to success. They can hold your hand through some parts of the planning, but ultimately to be successful as a property investor, it’s you in the driver’s seat driving the vision forward. Your mortgage broker can only help you so much, it’s up to you to choose the high level plan you want to follow, and understand everything in the process.
