A mortgage broker is the middle man of home loans. They’ll liaise with a lender on your behalf, help you negotiate a better deal and follow your application from start to finish. They’ll also simplify the home loan process and make it less overwhelming.
In most cases, the mortgage broker is paid a commission for arranging your home loan application. This commission is paid by the lender which you decide on. In most cases, the mortgage broker is not paid at the time of the application, only once your application is approved.
Commissions differ depending on the lender. Some lenders pay higher commissions, and in some cases this may encourage a broker to recommend a particular home loan product. For this reason, it’s important to ask a mortgage broker about their commissions when comparing home loan products.
It is also important to ask a mortgage broker about their service charges. In some cases, a broker will charge you an upfront fee for their service. This fee is in addition to the commission that they will receive from a lender.
Mortgage broker commissions are typically paid on a month–to–month basis over the term of your home loan. The fee paid is usually a percentage of the total home loan value you take out with the lender.
If you decide to use a mortgage broker’s service, make sure you ask them about the commissions they receive. If possible, ask the broker to include the commissions in the home loan product comparisons that they offer you.
This will ensure that the mortgage broker is offering you objective information based on what is best for your finances, not theirs.
Here’s what to know:
Are you ready to meet with a broker? Then contact eChoice and speak to lenders with access to hundreds of products. We have helped many Australians like you secure a mortgage.
The latest mortgage data released suggests that while investor and owner-occupier home loan commitments are dwindling, first home buyer mortgage demand is on the rise: here’s why.
The demand for housing is continuing to slow across Australia. According to data recently released by the Australian Bureau of Statistics (ABS), this slowdown is linked to a decline in investors seeking finance. Now, while investors are moving away from the market, it appears that first home buyers are moving towards it, with mortgage demand for this sector of the market increasing.
Data released by the ABS and CoreLogic reveals that the total value of housing finance commitments sat at $31.2 billion in June 2018 – a drop of 1.6% over the year – which is the lowest value since January 2016. Of this value, owner-occupier mortgage demand was worth $20.8 billion (a 1% decline), while the investor share was $10.4 billion (a 2.7% drop). In comparison, first home buyer mortgage demand increased to 18.1% – the highest level since late 2012.
Source: CoreLogic RPData
Investors now account for 41% of the mortgage market, the lowest in seven years. Overall, data estimates that investor lending declined by 16% for the year, which is great news for first home buyers wanting to break into the market.
Well, less demand means lower prices, enabling first home buyers to buy property while prices are lower so that the deposit they’ve saved stretches further.
The average mortgage for first home buyers sits at around $349,800, whereas average owner-occupier loans are higher, at around $396,600.
Investors accounted for 41% of new mortgage lending in June, its lowest share in 7 years. Meanwhile, first home buyers accounted for 13% of new lending and we haven’t seen that since November 2012 #ausproperty pic.twitter.com/sGWpkV6afp
— Callam Pickering (@CallamPickering) August 8, 2018
Looking at this graph, it becomes clear that when investor activity increases, first home buyer activity decreases, and vice-versa. Thus, the association between investor demand and timing when to buy property as a first home buyer is significant, especially if you’re looking to save more.
Nationally, home prices have dropped over the last year, with Sydney losing 4.5% in market value – its largest fall since the GFC – and Melbourne home values fell by 1.8% over the last quarter. However, the lower end of the market is attracting far more interest.
This activity suggests to economists that many first home buyers who have been waiting for the right time to buy are taking advantage of this opportunity. Economists indicate that the softening market is ripe for those first home buyers who have their finances sorted. Those who don’t need to consider ways to improve their financial situation, as economists suggest that the market is only going to get better for first home buyers looking to buy property with current incentives.
There are many first home buying incentives available in Australia – the first home owners grant, stamp duty exemptions and reductions and other discounts – are all adding fuel to the already smouldering mortgage demand fire.
In VIC, first home buyers buying a home for less than $600,000 won’t pay any stamp duty. NSW has a similar scheme, with first home buyers receiving an exemption for a property costing up to $650,000.
You can combine stamp duty exemptions with first home buyer grants, which in most states and territories Australia-wide range from $10,000 to $20,000, depending on whether the property is based in the city or regionally. The only catch, apart from it needing to be the first property you’ve purchased, is that you must buy a new home.
Then, there are low-interest rates, which make home buying even more affordable.
With record low-interest rates tipped to stick around for the next 12 to 18-months, financial experts indicate that making a move to buy now means lower loan costs. While most people assume this price reduction is due to lower property values, the other reason is that interest rates are lower, meaning some home buyers can afford to stretch their budgets and buy a home worth more.
Source: CoreLogic RPData
While first home buyer mortgage demand is increasing, so too is the average amount that first home buyers are borrowing. According to CoreLogic and the ABS, the average first loan, as of June 2018, was $349,800. This figure is a historic high, 10.1% higher when compared to last year’s data.
On a state-by-state level, first home buyer loan sizes have increased across the board:
Financial experts suggest that, even with rates as low as they are, some homeowners will find it difficult to repay their mortgages when rates rise. This situation occurs as some home buyers stretch their budgets far too tightly to buy property. So, when lenders make rate rises, they can no longer afford to make mortgage repayments.
It’s really important to consider not just today’s interest rates when looking to buy, but also to calculate what your mortgage repayment could be in five, 10 and 15-years before you commit to buying a property.
Alternatively, you may want to take advantage of the low fixed rate mortgages available and lock your loan rate for two, three or five years, so you’ll know exactly how much you’re paying monthly and potentially reduce your financial stress.
Are you looking to buy your very first home, but you’re not sure where to start? eChoice’s expert brokers can help you understand the market and simplify the process of applying for a mortgage. We have access to hundreds of products, so we’ll find you a competitive mortgage.