Mortgage broker increases the end cost of loan says Amac
Mortgage brokers provide a valuable service for some borrowers but not all, according to specialised home lender Amac (Australian Mortgage Acceptance Corporation).
Brokers can be helpful for a whole range of borrowers, from those with complex loan needs to those with a poor credit history or limited English for instance.
Or perhaps people want the reassurance, of dealing with a broker face-to-face.
But mortgage brokers cost the end borrower money, possibly many thousands of dollars over the life of a loan.
Brokers normally receive a commission from the lender, which is then added on to the base, or wholesale, interest rate to give the retail rate paid by the borrower.
It is not true that the lender pays. If a broker adds 0.45% per annum to the retail rate, then on a $250,000 loan, this can cost over $5,000 just in the first five years of the loan. In the first 15 years its can cost over $16,000 and over 30 years, in excess of $26,000.
The question borrowers should ask themselves is whether they actually need to spend that sort of money to get the best mortgage deal.
Normal, credit worthy borrowers could save this money by spending a few hours and doing the research themselves, which was much easier to do than many people might imagine.
Although there seem to be hundreds of different mortgage products being offered, the truth is there are only a few basic types of homes loans with similar key features and benefits.
And there are now plenty of online resources, including material at Amac’s own web page that make it easy for borrowers to do their own comparisons and make their own decisions about just exactly what they need.
There are a number of specialist home loan lenders, including Amac that do not use brokers, but rather offer their products direct to potential borrowers at a wholesale rate.
The little known truth is that home loan lenders predominately obtain money from the same source, the mortgage securities marketplace.
Amac, like other mortgage lenders raise its money in this market place, but then they cut out the middle man by offering its products direct to borrowers at a wholesale, rather than a retail rate.
Using a broker to sell a mortgage simply increases the end cost of the loan to the borrower.
21-Jun-2007