Happy New Year!
My house owner friends next recommended that I speak with a Mortgage Broker. They gave me the contact details for their own agent and a personal recommendation about his helpfulness for them and other family members.
You can choose to work directly with a particular Bank or Credit Union or other Commercial Home Loan lender when you apply for a loan and they do have their own lending specialists... However, I was a bit wary because ultimately a home loan lender is a salesman, so they are going to sell you the best product for their employer. They are also biased and are only going to talk about their products and not mention any of their competitors. The bank mortgage lenders also receive a payment or commission from the bank when they sign you up for a home loan.
I rang my friends broker in August 2012, I was curious to know if I was just kidding myself, or if we really were in a position to be able to buy a home.
He was very friendly and helpful, he asked about my current financial commitments and savings. He was quite positive that I was moving in the right direction and gave me tips on how to manage my finances in order to paint the best picture. He gave me an idea about how far along I was in saving my deposit and just gave me a realistic overview of my situation. This advice was all given obligation free. He was also able to explain some of what my credit report was actually saying and he talked about the tips I gave in my previous post regarding credit history.
He did not push me in any way and left it all up to me for how I wanted to proceed because I was not yet ready to try for a loan.
The best thing about the first call to the Mortgage Broker was that he let me know I was not daydreaming and I was getting closer to my goal of buying a home. This made it a bit more real for me and made it easier to meet my savings goals and tighten the belt a bit more. I actually believed for real that we could do it!
I took his advice and used some of it to understand where we were at and I changed some things around and just kept plodding forward with my savings plan. I was most surprised to learn that I did not need as big a deposit as I first feared... I was thinking $50K minimum.. he gave me some tips on how I could best capitalise on my current savings situation.
I also started to think about our upcoming house move. I knew that we were going to have to move, I had already decided this because I was not happy to pay such a high rent any more and I had already refused to accept our last $10 rental increase. Sideline: Something else we did not realise as rental market consumers but which helped us save some money. We do have the right to refuse to accept a rental increase, if it is not reasonable! I collected information about the rents being paid by several other people in our street/ neighbourhood and the suburb in general and then presented that to show that we were already paying a fair price for our rental, as it was already mid to high range for our area. I said that we would not renew our lease if they insisted on the increase and the landlord decided they would rather keep us as tenants than try to get new people in so, I also insisted on a 1 year lease instead of another 6 month lease. This guaranteed us 1 more year at our currently manageable rent of $330/ week.
So it was August and our current rental lease was due to finish in December 2012. I started by organising our home and sorting out the kids clothes and toys and baby items that we no longer needed and which were just taking up storage space. I knew I did not want to move those things to our next home so, I started to list them on free sites like: Gumtree and Traderoo and we held a couple of garage sales. Any money we randomly received from selling our used stuff was channelled back into our everyday life and it all helped to save even more for our deposit.
I was a bit unsure about the Mortgage Broker at first because I did not know how it works. Here is a basic summary list of what you get:
- You do not have to pay any upfront fees to a broker, in fact you do not personally pay them anything.
- They are paid when they get a commission (from the lender) if they are the agent that signs you up to a particular bank. This means they do have their own agenda, they want to get paid and earn a living like anyone else. It is similar to how the bank agent also gets paid, difference is they are self employed.
- The bank does not add that broker commission cost directly to your home loan.
- The benefit of a Mortgage Broker is that they usually have a portfolio of several banks and other commercial financial lenders that they prefer to work with and know their different home loan products in detail. A choice.
- You should ask about which companies your broker represents, mine was happy to tell me all his different places that he uses, no worries.
- The broker can listen to your financial summary and life situation and then sort through their list to see which product will most likely match you.
- The broker wants you to get a home loan because they want their commission. This means they will make sure you are well prepared in advance because it is best to get approval with your first application.
- You can get ongoing financial advice from a Mortgage Broker but you are the one who makes the final decision about whether you use them or not and once you are ready to apply for a loan, you can pick the way you want to go.
- The Mortgage broker handles all the financial issues with the bank, they get you to fill in the application (guiding you through it) and they submit it to the bank. They are listed as your agent and any time you wish to change your loan details in the future you contact your broker. You can also contact the bank directly but your broker does keep an ongoing relationship with you and can explain things as you go.
I rang the Mortgage broker several times over the next 6 months to update them on our situation and to gather more information about how to get myself financially prepared. He was always friendly and helpful and never put me under any pressure of any kind.
I would recommend that you choose a broker that is personally recommended to you. My broker does not advertise, he gets work through word of mouth. My friend was happy to recommend him to me because he did a great job and we are the same.
So, start saving.... check your credit history.... speak to a mortgage broker to get a handle on your current situation and to see if you are close to your goal...
Other tips to follow....... I will talk to you all next year, Manuia te Tausaga Fou!
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