Trying to find your dream property at a realistic price and get finance sorted in a hot market can be a long and complicated affair. This is where mortgage brokers come in handy, but how do you ensure that they are working in your best interests?
Concerns have long been raised about the vested interests of brokers, and the commissions that some are paid on various home loan products.
While this is something that’s still under review, here’s what you should expect from the finance process, and at the very least what you should get from a broker.
Once you’ve decided on which loan and lender is best for your financial situation, you will need to prepare your application. If all the forms seem intimidating, the best tip is to get help from someone with experience.
Once you’ve signed on the relevant dotted lines, your broker should send your application to the relevant lender.
They will then check your credit history and, if you pass, you will receive conditional approval.
This means that you can start house hunting safe in the knowledge that you have a pre-approved loan in your back pocket, enabling you to move quickly to make an offer and secure a property.
Though be mindful that a pre-approval typically only lasts between three and six months, after which time your application has to be resubmitted.
At this point, you need to engage the services of a conveyancer or property solicitor. Their job is to check the legalities of a sales contract, and to oversee the transfer of the ownership of the land and property.
This involves checking drainage and any heritage orders, organising the transfer of council rate payments, the settlement payment and any stamp duty – a process that usually lasts between a month and six weeks.
As soon as you see a house that you are interested in buying, get your contract checked by your chosen legal representative. They can also try to negotiate a cooling-off period in a contract, so you have time to organise pest and building inspections.
Once you purchase a house, you sign a contract and, at this point, your agreement with the vendor becomes legally binding.
At the same time, you will need to pay a deposit. This isn’t part of your home loan, so you will need to provide this money from savings or from a deposit bond.
A deposit bond or deposit guarantee is a bond purchased from an insurance company that is used to replace a cash deposit.
It ensures the vendor payment of the initial deposit on purchase of the property, and can cost from around 1.5 per cent of the initial deposit. However, the vendor must agree to its use.
Once the valuation has been approved by your lender and they are satisfied that your chosen property is adequate security, your home loan will become unconditional.
When your final loan documents arrive, you need to review them and this is a job your broker should also be across. Once you have organised insurance for your new property, you can sign and return the documents to your lender.
This is the big day. The conveyancer will organise payment for your property directly with your lender – swapping your money for the title of ownership – so you can pick up the keys to your new property and move straight in.
Since a typical mortgage runs between 25 and 30 years, your relationship with your mortgage broker doesn’t have to end on settlement day.
If you want them to keep an eye on your interest rates, then ask for them to renegotiate those rates intermittently to your advantage.