The Biking Broker Newsletter - 22nd January 2010

Why Use a Mortgage Broker?

I got talking to a friend of a friend of mine today who has just got conditional approval on finance for an investment property.

Old mate has walked into a local bank branch and the home lending officer has put them into a very large line of credit (LOC) for the purchase of the property. A LOC, depending on the lender has an interest rate between 0.1% and 0.15% above the standard variable rate (SVR).  The loans officer has structured the loan with the LOC covering about 83% of the purchase price. The balance of funds were to come from the client’s savings.

If the client had come to me first I would have recommended:

• a smaller line of credit secured against his existing property for deposit and fees, to bring the purchase loan down to 80% of the purchase price
• and the purchase loan as a discounted SVR at a lower rate than the LOC

This would have saved the client at least $8000 in mortgage insurance and about $600 a year in repayments and still maintained a bit of flexibility he was requiring by setting up a smaller LOC.

What would you do with $8,600 this year if you didn’t have to pay it to a bank?

Remember – if you walk in off the street every bank will tell you they can get you into a loan, but no bank will tell you that you might get a better deal elsewhere and no bank employee will ever admit that they may not be the best person to help you get the best that the lender has to offer (rather than the best deal for the bank).