Clouded by Commissions: How to Find an Unbiased Broker

It may come as a surprise to learn that 70% of mortgage broker recommendations in Australia go to one of the Big4 banks. Consumer watchdog Choice has found that some mortgage brokers are driven by sales incentives which can lead to bad advice for home loan customers. So how can you tell if a broker has your interests at heart?

Find an experienced educator.

A good broker is more an educator or adviser than a sales person. Look for a broker with significant experience, knowledge and qualifications. As an educator, your broker should be able to explain the available loan options, match products to your needs, and help with the paperwork and loan application process.

Brokers who are members of the Mortgage & Finance Association of Australia (MFAA) and Finance Brokers Association of Australia (FBAA) have to adhere to higher education and ethical standards aligned to government requirements. At a minimum, check that your preferred broker is an MFAA or FBAA member.

Do your homework.

Whether you already have confidence in your broker’s abilities or you’re engaging a mortgage broker for the first time, it helps to do your homework.

Research. Have a look at what’s available online first. This will help you to get a feel for the types of loans and interest rates on offer. It will also help you later when you need to interpret and assess your broker’s advice and loan recommendations.

Shop around. A home loan is a big commitment. It makes sense to talk to more than one broker to compare what they offer. Your research may have left you with questions about loans or the lending process. Call at least three brokers to compare their responses and get a feel for who is best suited to your needs.

Steer clear of sales pressure. You shouldn’t feel pressured to sign anything before you have taken time to consider all your options in detail.

Get personal. A good broker will understand your financial situation and borrowing needs. There should be a detailed discussion of your financial needs and objectives. Ask why the recommended loan is preferred. How does it match your needs?  

Ask about the gritty details. Find out which lenders are on the broker’s lender panel. Ask if any of the lenders are preferred—and why. You can also ask how much commission your broker will be paid for organising your loan and for how long: most brokers won’t offer this information unless they are asked.

Get it in writing. Ask for written reasons for the broker’s recommendations, and details of his or her commissions, fees and products.