There should be no cost to the borrower to use mortgage brokers services as they are paid by the bank. We often state that the brokers time is not free, it is just that the clients does not have to pay for it. A good broker should always disclose the commission that they are going to be paid.

A broker can be paid an upfront commission which is a one off payment for the research and sourcing of the loan. The up front is a pre-determined percentage of the loan amount and each bank will pay very similar commission. The broker is also paid a trail commission. This is an ongoing percentage of the remaining balance of the loan (less any amount in an offset account).

A good broker should be able to detail all the fees that relate to the loan contract. These will range from the set up fees from the bank and the government, to ongoing fees and the then the discharge fees that the associated with leaving the loan.

A broker will have access to a number of different banks. They will be able to do all the research and leg work to obtain the best deal for the client and a home loan that adequately services the client’s needs. The broker will deal with the bank on behalf of the customer saving them both time and money.

Borrowing capacity is determined by a number of different aspects. The bank will take into consideration the amount of income that is coming into the borrowers household and then way that up against the financial commitments that the client has. Borrowing capacity will be affected by such things as number of dependents, the amount of existing debt or access to existing credit limits.

It can almost be impossible to pick the best interest rate as they can be a continually moving object. Depending on the state of the market will depend on how the banks position themselves and the interest rate decisions. Other determining factors include total loan amount/s, loan to value ratio (LVR) and type of loan.

This will depend on individual circumstances. If a client wants certainty of repayments then a fixed rate is a good option as they will be able to lock their repayments at a certain rate for a certain time frame. This can give comfort in knowing what the commitment will be and can be good in a rising interest rate market. Fixed rates are generally an inflexible product and will have restrictions on things like extra repayments on a home loan, ability to redraw or have an offset account against the fixed rate loan.
Variable rates will move with the fluctuations of the interest rate market, but you tend to have greater flexibility with these products, with the ability to have an offset account, make unlimited extra repayments and then redraw those extra repayments.