Can you change your mortgage broker, and is it a good idea?

Many Aussies have used a mortgage broker to help guide them through the process of getting a home loan. Some have had great experiences, and continue to use the same broker for refinancing or purchasing an additional property. Others may not have had great experiences, which have made them ask if they can switch mortgage brokers.

If you’re not happy with your home loan, or with your broker’s service, it is possible to switch mortgage brokers. You could switch brokers when you refinance, or even before your home loan application has been approved, though doing so could risk putting both the broker and yourself in a challenging situation, and setting you back a few steps on your home loan journey.

Mortgage brokers are licensed professionals regulated by the Australian Securities and Investments Commission (ASIC) who act as a go-betweens for borrowers and lenders. They’re required to work in your best interest when helping you to choose a mortgage.

You aren’t required to use a mortgage broker to get a home loan, but there can be many advantages to using their services. If you’re a first-time buyer, you may find the home loan market quite overwhelming, making the purchase process feel stressful. A mortgage broker can help review your finances, discuss your goals, and guide you through the home loan process, all while helping you find a great deal.

If your circumstances are outside the norm, such as being self-employed or having bad credit, a mortgage broker may be able to help you avoid getting rejected by lenders by finding you lenders more likely to approve your application.

Nothing! Mortgage brokers usually offer their services for free to borrowers, which means you can benefit from their expertise without paying a cent. Typically, lenders pay mortgage brokers a commission for every mortgage application that is approved. Some lenders also pay mortgage brokers an ongoing trail commission over the period you keep the mortgage with the lender.

However, some brokers may charge fees for specific cases, such as small, complex, or commercial loans. Be sure to check the fine print before signing up with a broker and especially before deciding to switch brokers.

While it is possible, unless you feel that a mortgage broker is really not working in your best interests, you may want to think twice about changing brokers during the application process. Not only is it unfair to make them do all the hard work for you and then switch to another broker who will get the commission, but it’ll put you back at square one in your home loan journey. Consider chatting to your broker first if you have any concerns.

Since it doesn’t usually cost anything to use the services of a mortgage broker, you may think it’s super simple to switch brokers. However, some brokers may charge fees under specific circumstances, such as if you’re applying for a complex or a commercial mortgage. In cases like these, you could be obliged to pay a commitment fee or similar charge, which you may not be able to get back if you switch brokers before the loan is finalised. Be sure to check the fine print before signing up with a broker, and especially before deciding to switch brokers.

A good mortgage broker works in your best interests. Therefore, it’s worth making sure you select the right broker for you in the first place to make your home loan journey as seamless as possible. To help you in this process, you can have an initial chat with a few brokers, and seek recommendations from friends and family. You can also do some research to prepare a list of questions to ask a broker before deciding to work with them.

You may be able to put your confidence in a broker if:

• They’re part of one or more industry associations and have the requisite licences.
• They have a minimum of 20+ lenders on their panel.
• They have experience in the type of loan you’re looking for, especially if you’re applying for a niche loan, such as a commercial loan, SMSF loan or a reverse mortgage.
• They have an empathetic approach and good communication skills.

You can also search for qualified mortgage brokers in your area and compare reviews and ratings from their customers before making a choice. Finding the right mortgage broker before you begin could help you avoid needing to switch brokers before your application is finalised. But remember that the broker is there to help you through the process, so if you have any concerns, chat to them about it, and they should help you.

If your home loan application has been approved, there’s not much stopping you from using a new mortgage broker to refinance, though it could affect the broker.

• Your current broker may lose trail commission if you refinance through another broker.
• Lenders often charge brokers clawback fees if borrowers refinance within two years, but brokers cannot legally pass these fees onto clients since 2021.

Once your home loan application is approved, your broker receives a commission from the lender for bringing your business to them. Additionally, some brokers may also get paid a trail commission during the loan term, which gets suspended if you repay your home loan or refinance it through another broker. This trail commission incentivises your broker to ensure you have a suitable home loan. It also encourages them to provide ongoing services to ensure that your home loan continues to suit your needs over time.

Lenders often charge brokers clawback fees if a borrower pays off or refinances a home loan within two years of signing up. These fees are intended to “claw back” the commission the lender previously paid the broker. In the past, brokers would often pass these clawback fees on to the client that is refinancing. However, following the introduction of the Best Interest Duty in 2021, brokers can no longer legally pass clawback fees on to their clients.

Mortgage brokers are professionals who help you find the most suitable home loan for your financial situation. While they are legally required to act in your best interests, you may find yourself considering a change due to issues such as poor communication, lack of transparency, or dissatisfaction with the options they’ve provided. Whatever the reason, switching brokers is a personal decision that should be approached carefully.

Before making a decision to switch brokers, it may be worth discussing your concerns with your current broker. If after chatting to them you still don’t feel satisfied with the service they offer, you’re more than welcome to switch mortgage brokers. Just be aware of any possible risks that may come from switching brokers, especially if you’ve not yet received final approval for your home loan. If you’re searching for a mortgage broker, use RateCity to find qualified mortgage brokers in your area.