Advitorial guest blog by Owen Waters, FNQ Finance Guy
#1 : Use a specialist, but use a good one
We all use specialists, whether it be to fix our car, sell our house, invest our money, cook our dinner, book our overseas holiday… its accepted as the norm. But if you’ve ever come across a dodgy mechanic, dealt with a dodgy real estate agent, had a crook meal served up or ended up in a flea-bitten hotel in Hanoi (just me?), then you’d realise that it is just as important to use a specialist who not only knows what they are doing but also has your interest at heart.
Unless you know exactly what you are doing a good specialist will save you time and money. And not just now but also in the future.
#2 : Use a broker not a bank
So now that we’ve established the importance of using a specialist, I want to tell you about the importance of using a broker rather than the dealing directly with the bank when obtaining loan finance. To understand why, I’ll highlight the main differences between the two.
The banking industry has changed quite a bit over the past decade. Where once you went in and spoke to a specialist lender, usually the bank manager, who understood the credit process from start to finish, top to bottom, you now deal with essentially a salesperson. Don’t get me wrong there are still some really good lending specialists left but in the main, because of centralised credit area’s and the banks loan software, most bank lenders are only involved on a superficial level. That means they simply don’t get exposed to the whole loan process and as a consequence they aren’t a specialist who understands the why and that can be crucial when things don’t go smoothly. And believe me from 30 years of experience in banking and finance it’s rare for things to go smoothly. Now that doesn’t mean that by using a broker you are going to get that level of understanding either, but save that thought for tip #3.
Another, and probably more important, difference is that a bank lender is only going to talk to you about their loans, but what if you would be better off with a product, feature, rate, fee or service they don’t have? As a broker I have access to over 40 different banks and lenders and hundreds of different loan solutions. There are special rates and packages available with most banks and they constantly change. Banks are also constantly reviewing and changing policies, products and features of their loans. As a broker it is my job keep up to date with the market and to find and match you to the loan solution that best suits your needs.
Finally, a bank lender works for the bank. They are paid by the bank to sell the banks products and services. They are unlikely to suggest that you go to another bank who has a better loan solution for you. A broker works for you not the bank and is only paid when they provide a solution for you.
#3 : Make sure your broker has a background in lending and finance
So we’ve now established that you’re better off with a broker. But are all brokers the same? Absolutely not. Like any profession, there are people involved with varying levels of experience, skill and knowledge. The difference between a good broker and one not so good is the level of knowledge and understanding of credit
including how to structure a loan. A good broker knows the pitfalls from experience and can steer you through the loan process and they know how to negotiate with a bank’s credit department to get the right outcome for you. A good broker has years of experience to draw on from helping out clients just like you, whether you be a small business owner, salaried employee, government employee, tradie, farmer, corporation, self-managed super fund trustee, developer or property investor.
So make sure you check out the background of the broker. Do they have experience as a lender and for how long? Are they just another salesperson? Do they have experience in assisting people like you. You wouldn’t trust your health to a doctor who has no experience and a background as a physician, so don’t trust your financial health to the wrong broker.
#4 : Easy isn’t always best, don’t try to do it all yourself
Just because it seems easier to use your current bank that doesn’t mean it is the right thing for you to do. You might be costing yourself money and you won’t necessarily save time. And it’s not just about the cost and time, there are often quite different policy, product and procedure differences between banks. An example could be that one might not accept certain types of income and that could markedly affect the amount of the loan you qualify for. At the very least you should look around at what else is out there and make sure your bank is the right one to help you out.
So can you do it all yourself? Of course you can. You can do the research and compare the rates, fees, policies and procedures and products of all the banks in the market. You can compare the features of the loans across all the banks to make sure the loan you choose is the right one for you, and not just for now. Then you can choose the right lender who will be able to help you in the future as your financial needs change. You can do all this and make an informed decision, and that might be the right one.
But do you really know what you’re looking for? Do you really have the time to research all this properly and understand the impact on your situation not only now but in 1, 3, 5, 10 years time? Do you have the experience to negotiate the right solution for you with the bank? If the answer is yes to all these then awesome. But if it’s no then there is another option. Use a professional, experienced mortgage and finance broker and let them do the hard work for you, at no extra cost to you.