How Do Mortgage Brokers Work?

‍‍Let's start with the basics; at The Newstead Group our job as mortgage brokers is to use our industry knowledge to present you with products tailored to your wants and needs in a home loan. Whether you are a first home buyer, looking to refinance and find a better borrowing option than the one you currently have, or looking to invest we will help you find the most competitive products amongst our panel of lenders that suits your unique position. Essentially, we want you to have more time to focus on the important things like finding your dream home, while we do the heavy lifting.

In Australia there are a multitude of banks and lenders offering a plethora of products that are constantly changing. It is our job to stay on the pulse of the industry and all of its complexities, so that you don't have to. With hundreds of home loans on offer, we draw on our industry connections and knowledge of policies, products and lending capabilities to present you with the most fitting options for you. With our connections, we can get things moving as quickly as possible to help you reach your goals sooner.

This speaks to the appeal of using a mortgage broker as opposed to going straight to the bank, or multiple banks if their policy doesn’t suit your scenario. Lenders rarely advertise their specific policies; you just have to know who does what well. This is where mortgage brokers come in; it is their job to have these memorised and have the ability to compare, clarify and do the hard yards behind the scenes to present you with the competitive lending options and products. 

How Do Mortgage Brokers Get Paid?

Mortgage brokers have a unique payment structure. Typically, brokers are paid by the bank based on the size of the loan they introduce. They commonly receive around 0.65% of the loan amount plus GST at the settlement. However, this payment can be affected by the borrower’s offset account balance, which may reduce the amount the broker receives. It’s important to note that if a client exits their loan within 24 months, the broker may face a “clawback,” meaning they lose the initial commission. Additionally, brokers can earn around 0.15% of the net loan balance plus GST each month. Mortgage brokers commission structure reflects both the upfront and ongoing support brokers provide to their clients throughout the life of the loan.

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Do Brokers Vary from Brokerage to Brokerage?

Mortgage brokers can vary significantly from one brokerage to another, particularly in terms of the products and services they offer. While all brokers work within certain limitations based on the lenders they represent, the specific offerings can differ depending on the aggregator or lending group they belong to. These aggregators provide access to various banks and lenders, each with its own set of products and terms. Additionally, each brokerage has its own internal policies that may or may not align with your needs. 

For example, if you’re in a time-sensitive situation, like needing a response after hours for a contract signed at 6pm with a short finance clause, some brokerages may not assist you until the next business day. This highlights the importance of going to a broker who aligns with your specific requirements so they are able to provide the level of service you need.

Alternatives of Going to a Brokerage

The alternative option to working with a brokerage is to go directly through a bank or lender. This choice can offer a streamlined process, as you will be dealing directly with the institution providing the loan. Banks have their own mortgage specialists who can guide you through the application process. However, it is hard to know if you are in safe hands. While dealing with a bank it can limit your options as banks only offer their own products, meaning you might miss out on the chance to secure a better rate or terms available from other lenders. Banks also don’t have the same flexibility or personalised service offering as a broker. Overall, selecting a bank or a broker depends on your individual circumstances, and it is important to consider the pros and cons to both.

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