How to choose a mortgage broker, and what to check before you commit

The short answer

Check that the broker is licensed, that they have experience with your kind of file, and that they will tell you plainly how they are paid. Those three are the floor, and a broker who fails any of them is not a candidate.

The rest of the decision is about fit and follow-through. A technically capable broker who hands your file to somebody you never speak to again is offering a different service from one who stays with it through to settlement and beyond.

Start with the credit licence

Arranging a home loan for somebody else is regulated work. Whoever does it must hold an Australian credit licence, or act as a credit representative of a business that holds one.

That is not a formality to skim past. It is what places the broker inside the complaints and compensation framework, and unlike most of what you will be told, it can be independently verified.

1. 1

   Ask for the number

   Ask for the Australian credit licence number, or the credit representative number together with the name of the licensee they operate under. It should appear on the website, in the email footer and in the credit guide.

2. 2

   Check it on the public register

   ASIC maintains public registers of credit licensees and credit representatives. Search the number or the business name and confirm the details match what you were given.

3. 3

   Read the credit guide

   A credit guide has to be provided to you. It names the licensee, sets out how the broker is paid and explains how to complain, which makes it the single most useful document nobody reads.

4. 4

   Note the dispute path

   Every credit licensee must be a member of the Australian Financial Complaints Authority. Ask which licensee your complaint would sit with, and write it down before you need it.

Industry association membership, whether the MFAA or the FBAA, sits on top of the licence rather than replacing it. It signals a code of practice and continuing professional development, and it is a fair thing to ask about. The licence is the part that is not optional.

The lender panel, and what it does not tell you

Panel size is the figure most brokers lead with, and on its own it means very little. What matters is whether the lenders likely to suit your circumstances are on it, and whether the broker in front of you is individually accredited with them.

Accreditation is held by the broker, not by the panel. A lender can sit on an aggregator's list while the person you are dealing with has never written a file with them.

• Whether the panel extends beyond the major banks to non-bank and specialist lenders
• Whether the broker is personally accredited with the lender they are recommending
• How they decide which lender to put in front of you, and whether they can explain the reasoning
• Whether they are willing to tell you when your own bank is the better answer
• What the plan is if the first lender declines, and whether a second option has been thought through
• Whether most of their files go to one lender, and what the reason for that is

A broker who cannot say why a particular lender was chosen for you is choosing out of habit. That is not always the wrong outcome, but you should know it is what is happening.

Experience with a file like yours

Broking is not one job. A salaried buyer, a self-employed applicant, an expat earning in another currency and an owner-builder drawing down progressively are four different exercises, and skill in one does not transfer neatly to the next.

So the useful question is not how long somebody has been in the industry. It is how many files like yours they have written, and what usually goes wrong on them.

• Self-employed or contractor income, where lenders read tax returns and add-backs very differently
• Overtime, bonus, commission or allowances making up a large share of your income
• Construction, where progress payments and the building contract drive the loan structure
• Expat or foreign-currency income, which some lenders will not consider at all
• Commercial or development finance, or borrowing through a trust or company structure
• A past credit issue, a default, or an application that has already been declined somewhere

If your situation appears on that list, ask directly and listen for specifics. A broker who has genuinely done it will describe the failure modes without being prompted, because those are the files that keep them up at night.

Local knowledge belongs on the same list. Lender policy is not applied uniformly across the country, valuers read some markets more conservatively than others, and grants and duty concessions are set state by state.

So it is worth asking whether the broker has written files in the area you are buying in. Somebody who works your market could tell you where a valuation is likely to land short, and which state concessions your purchase may fall within.

How they are paid, and what they disclose

On most residential home loans the lender pays the broker on settlement and there is no fee to you. Where a fee does apply, which is more common on commercial, development and specialist files, the amount should be given to you in writing before any work begins.

Commissions payable on a recommended loan have to be disclosed. Ask to see them, and ask whether the lender being recommended pays differently from the alternatives that were considered.

Be careful with anything payable up front for work that has not yet been done. Ask what happens to that money if the loan does not proceed, and get the answer in writing.

Service after settlement, and the signals worth walking away from

A home loan lasts a long time and the relationship should outlast the settlement. Rates move, fixed terms end and circumstances change, and a loan nobody reviews drifts away from the market quietly.

So ask who will handle your file day to day, whether that person is reachable, and what happens once the loan has settled. Ask what a review involves and what would trigger one.

One of these on its own does not make somebody bad at the job. Two or three together is a pattern, and there is no shortage of brokers to choose from.