The 7 Sins of Mortgage Brokers

Choosing a Trustworthy Mortgage Broker: Avoiding Common Pitfalls

Honesty is crucial when working with mortgage brokers. While many brokers are reputable, it’s essential to be aware of potential pitfalls and biases that can affect their recommendations. Here’s a guide to help you navigate the mortgage process and choose a trustworthy broker:

Sin 1: Favouring Their Own Loan Products

Issue: Some brokers may promote their own loan products if they also act as lenders.
Solution: Ensure the broker provides a clear, understandable reason why their product is the best choice for you. If they are also a lender, ask for a detailed comparison of their product with others available on the market.

Sin 2: Being Influenced by Commission

Issue: Brokers receive commissions from lenders, which may create a conflict of interest. Some lenders offer higher commissions, potentially influencing brokers to recommend those lenders regardless of suitability.
Solution: Ask if the broker has any incentives for recommending specific lenders. Ensure the broker provides a transparent explanation of why a particular lender is the best option for you. Also, check how many lenders they work with to ensure a broad range of choices.

Sin 3: Hiding the Real Cost of the Mortgage

Issue: Brokers might not fully disclose all fees and charges associated with a mortgage.
Solution: Request the comparison interest rate, which includes all foreseeable fees and charges. This rate helps you understand the true cost of the loan and compare different products effectively.

Sin 4: Withholding Information

Issue: Brokers may not fully disclose the scope of their services, ongoing support, or fees involved.
Solution: Clarify the services the broker will provide after securing your loan and understand all associated fees. Ensure that you have a clear understanding of both the broker’s and lender’s fees before signing any agreements.

Sin 5: Allowing Client Ignorance

Issue: Brokers may take advantage of clients who don’t fully understand the terms and implications of refinancing.
Solution: Make sure you understand the benefits and drawbacks of any refinancing deal. Brokers should explain these in clear, simple terms. Be aware of practices like churning, where refinancing is done solely for commission without real benefit to you.

Sin 6: Being Uninsured

Issue: Brokers should have professional indemnity insurance to cover liability claims from negligent work.
Solution: Verify that the broker has their own professional indemnity insurance and is not relying on the coverage of an umbrella organization. This ensures that you are protected if something goes wrong.

Sin 7: Being Unqualified

Issue: Not all brokers are properly qualified or accredited.
Solution: Check if the broker has relevant credentials from reputable authority organizations. Ensure they are a member of or accredited by recognized institutions in the mortgage industry.

By being aware of these common issues and asking the right questions, you can make more informed decisions and avoid potential pitfalls when working with a mortgage broker.