With rising interest rates negatively affecting borrowing power, partnering with a finance broker is becoming crucial to help you secure finance on the best possible terms when purchasing a home or investment property.
What does the finance broker do?
Finance brokers act on your (the client's) behalf to find and organise loans, arrange insurance and offer advice on financial market transactions. They aim to find a loan that suits your needs with a competitive interest rate, saving time and effort in shopping around. A finance broker can also help secure a pre-approved loan, giving you extra bargaining power in the purchase process. Their fee can be paid by you (the client) or the lender, or both.
Finance brokers are also called mortgage brokers, as they might specialise in arranging home loans or investment property loans. Both have the same qualification requirements, but finance brokers can also arrange commercial loans, corporate loans and leasing as a minimum service.
To shed some light on what to consider when partnering with a finance broker, we have called in an expert Stephen Fenton, Director of Evolution Financial Services. Here are his hot tips.
1. Start with the end in mind
Before you begin, you need to think about your desired outcome. If you are aiming for an investment acquisition, a lending strategy should support that outcome. If you require asset protection, then there are specific strategies that can achieve that. For example, if you want to build a property portfolio, some lenders support that much better than conservative lenders. Or, if you have a particular trust set up for asset protection or tax reasons, some lenders can specifically assist with this. And if you want both, then you need a more comprehensive strategy. A finance broker can advise on the best possible solution for your circumstance and assist you in the process.
2. Rely on qualified advice
Having qualified advisors surrounding you will improve the quality of your decisions and minimise risk. Partnering with a finance broker can give you confidence that you have signed the best deal as they have the connections to collate the best interest rates and terms, knowing the lender is giving them the best deal, first round. The same goes for an accountant, financial planner, property investment advisor or insurance broker; they all help to take the guesswork out of the process so you don’t miss the finer details. Advisors should know a lot about the other disciplines as well, as they work together to reach the same outcome for you as the client.
3. Build a long-term relationship
There is more to a loan than the rate advertised on any day. Having someone to assist you in refinancing, negotiating the best deal or spotting the hidden fees can make a huge difference to your bottom line. Most people’s loans cover decades and you want to build a long-term relationship with a broker who acts in your best interest throughout the life of your loan.
4. Be prepared for the unforeseen
The insurance element of a relationship is as important as the service provided during the application process. In the event of something going wrong during transactions, as they sometimes do, it is best to have a finance broker who can help in any given situation. It is like flood insurance.
5. Treat your broker the way you want to be treated
If you treat the lending process like a transaction, you can expect the same in return. Post-settlement service is a great way to evaluate the relationship with your finance broker and their standard of service. Often a broker will need to engage with an accountant or solicitor to ensure the lending strategy has satisfied tax and other lawful outcomes, which is an advice piece. If a broker sees you on nights, weekends, or beyond regular banking hours, this is going the extra yard. The additional advice and service are not linked to the movements in the variable rate of any one bank from time to time.
Be transparent - if you are looking for a cheap rate and planning to move lenders regularly, you should disclose this to the broker upfront, as this might affect your partnership. Avoid commoditising a broker to a rate on any day, but look for a quality relationship over time. If there is a compelling reason for moving lenders for rate, approach your broker, and they will be happy to help.
Evolution Finance Group is a mortgage broking firm that helps people with all their mortgage lending and home loan needs, debt reduction strategies, lending advice, first-home-owner grants and more. Stephen Fenton is the force behind the strategic direction of the company, and as a practitioner, has written over $300 million in mortgage loans. He has a passion for the symbiosis of lending policy, the investment and tax worlds, and asset protection. You can contact Stephen via 1300 980 147 or firstname.lastname@example.org
EKR Property is a Brisbane-based qualified Property Investment Advisory, and Buyer's Agency focused on building investors' wealth and financial independence through purchasing properties Australia-wide.
The Founder and Director, Edward Kinloch Reavy, has successfully assisted hundreds of clients across Australia to buy land, build on that land, and secure existing homes, townhouses, dual occupancy properties, apartments and small-scale development sites.