4 critical reasons why using a mortgage broker is more important than ever
Australia’s lending market has once again found itself at the centre of conversation in recent months, with the release of the final report from the Banking Royal Commission raising new uncertainties as to what the future of the lending environment might look like. Amongst other things, the report brought into question the role of the broking industry – an event which has since sparked overwhelming support for brokers on the part of both consumers and industry professionals, in turn triggering a revision of the report’s initial recommendations. In light of these events, we reflect on the fundamental role of mortgage brokers and why they are more important than ever in today’s lending environment.
Access to more products in a challenging environment
In a lending environment characterised by change and uncertainty, understanding the different options available has become critical for investors. Whilst lenders are typically limited to their own range of loan solutions, established brokers will generally have access to products from multiple different lenders (in some cases, as much as fifty), and will be able to compare these different products to identify the rates and features best suited to an investor’s unique situation and investment strategy. At a time when loan choice has been somewhat limited due to changing lending criteria and tighter serviceability metrics, this tailored approach can be crucial not only in ensuring investors have access to different options and are receiving the best lending solution for their current situation, but equally importantly in ensuring they have the flexibility they need to progress with their investment goals.
Loan structuring that supports your long-term needs
Whilst using a broker can impact the number of products available to you, who you choose to secure a loan can also hold key implications on the way in which your lending portfolio is structured. Whilst lenders will typically look to structure loans in a manner that mitigates risk for them, a good broker will look towards structures that minimise risk for the borrower. This can be crucial in helping investors avoid potentially restrictive and high-risk loan structuring models such as cross-collateralisation, ensuring they have maximum borrowing capacity to support the expansion of their portfolio in future.
With many buyers already facing reduced borrowing capacity due to tighter serviceability metrics, having the right loan structures in place and being able to access credit has become critical in helping investors progress with their investment goals. However, it’s important to note that even brokers can structure loans unfavourably if they don’t have the right knowledge and expertise to understand and support their clients’ needs. Engaging a specialist broker with a strong knowledge in investment finance can therefore be crucial in helping investors establish the right foundation to build a successful property portfolio.
Important advice when it helps
As an investor, how you interpret your financial capacity (i.e. your ability to afford repayments) won’t always align with the lender’s assessment of your financial situation. Lenders take into account a multitude of different factors when assessing a borrower’s eligibility for a loan, with income and living expenses really only scratching the surface. With banks undertaking significant reviews of their lending criteria in the aftermath of APRA changes and in the run-up to the Banking Royal commission, keeping up with market fluctuations and understanding how these changes impact borrowing capacity has become increasingly difficult for investors.
However, brokers work with specialist software on a daily basis that provides them with access to the latest information from lenders. These market insights enable them to provide support not just during the lending process, but also in the lead up to submitting a loan application. Whilst these insights themselves can prove invaluable in helping borrowers prepare for a loan, most brokers will also be able to carry out a pre-approval process to assess the likelihood of a loan submission being accepted, in turn preventing multiple loan rejections which could leave a bad mark on an investor’s credit record.
Ongoing support to navigate the changing lending market
Whilst the support brokers provide prior to loan applications has become incredibly important to many investors in today’s changing lending environment, it’s the ongoing guidance and advice provided by brokers during and after the lending process that has become pivotal in helping borrowers navigate the complexities of the modern lending market. From researching the market for the appropriate lending solution to following up with lenders and addressing issues throughout the submission process, brokers have come to play an incredibly important role in guiding borrowers through what has become an increasingly complex and hands-on process.
This support will often extend far beyond the transaction itself, with brokers in many cases playing a fundamental part in the ongoing optimisation of an investor’s property portfolio through regular loan reviews, cash flow strategies and proactive advice on market changes. This guidance can prove crucial not only in helping investors navigate the market, but in putting them in a better position to achieve their property wider investment goals in future
As specialists in property finance, Momentum Wealth’s finance division are dedicated to providing our clients with the advice, support and knowledge they need to progress with their investment goals. If you would like to discuss your property needs with one of our consultants or want further advice on the changes impacting the lending environment, our mortgage brokers would be happy to discuss your needs in an obligation-free consultation.