When buying real estate property for investment, getting a mortgage broker is a no-brainer. Here are some tips on choosing the right broker
Updated August 29, 2024
Many people from Australia are interested in buying investment properties. Even foreign nationals are attracted to invest in Canberra’s real estate market due to its profitable returns. As such, property buyers are looking for ways to make their investment journey as smooth as possible.
The smart way to do it? Hire an investment property mortgage broker.
In this article, Mortgage Professional Australia will discuss some tips on how to choose the right investment mortgage broker and why it is important to get one. We will also tackle the role of these brokers in helping you with your real estate investment journey. This is another one of our client-education pieces for home buyers and property investors.
So, if you are one of these aspiring real estate investors, this article is for you. Do you know someone who is weighing the pros and cons of hiring a mortgage broker for their investment property ventures? Feel free to share this with them. To our usual mortgage professional readers, send this client education piece along to any prospective client!
Do you need a mortgage broker for investment property?
Short answer: yes. To make the most out of your property investment ventures, you need to hire a mortgage broker. There are some who think that doing it themselves is the best option but that might only work if you are an expert in the field.
If not, it is in your best interest to get a mortgage broker for your investment property needs.
Role of a mortgage broker in investment properties
The role of a mortgage broker in investment properties is the same as any other broker when an aspiring home buyer asks for their services. You can count on your mortgage broker to find several home loan products so that you can have a lot to choose from. They will also shoulder the heavier lifting when it comes to finding the right mortgage lender for you.
Curious to know about the best mortgage lenders in Australia? Check out our Best in Mortgage page.
Hiring a mortgage broker for investment property
Now that you understand a mortgage broker’s role in your investment property ventures, the next step is to hire one. Remember, the mortgage broker should be specialised in investment property.
This is because it can be challenging to navigate the application process and secure the right lender. A broker who specialises in investment property will have the experience and know-how it takes to find the right investment loan for you.
For investment properties, a mortgage broker will curate a list of products that make the most sense for your investment goals. They will do this by comparing different options for investment loans based on your personal goals and financial capacity.
Since property investment, at its core, is to some degree a financial game and a bit of a gamble, a mortgage broker will find you the most affordable rate and therefore further reduce the cost of your overall financing.
Aside from that, here are some of the things you should do prior to hiring a mortgage broker for investment property:
- ask if the broker is willing to disclose how much they get paid
- ask if there are fees for their services or they are paid solely by commission
- find out the broker’s level of experience with investment property
- ask about their recent experience helping a property investor
a. Ask if the broker is willing to disclose how much they get paid
The mortgage broker will be required to disclose how much they are getting paid for arranging a loan for the client. Also, the mortgage broker must provide you with a list of the selected bank’s commission rates. If the broker is unwilling to disclose these details, it might be best to move on and look for another.
b. Ask if there are fees for their services or they are paid solely by commission
For researching and sourcing of a property loan, a mortgage broker will receive payment in the form of an upfront commission by the bank or lender. Most of the time, this is a one-time payment. Since the upfront commission is a pre-determined percentage of the amount of the loan, the amount that every bank or lender pays will most likely differ.
c. Find out the broker’s level of experience with investment property
To figure out how much experience your broker has with property investors, you can ask them the following questions:
- Do you also invest in property, or would you like to invest in one? Why or why not?
- How long have you worked as a mortgage broker?
- What is the most difficult part of working with property investors? What about the easiest?
- How many mortgage lenders or banks have you already worked with?
- How much experience do you have with property investors as opposed to homeowners?
d. Ask about their recent experience helping a property investor
A mortgage broker with recent experience helping a property investor will be able to use that knowledge to your best advantage. For instance, the broker would be aware of the different banks that carry out the best policies for specific situations. They will also have a better understanding of the differing borrowing capacities with various lenders.
Is it good if the mortgage broker is also a property investor?
Definitely. Mortgage brokers will have clearer knowledge of your future goals or plans when investing if your broker is an investor themself. They can better analyse the home loan structure that might suit you best if they have direct experience with property investing.
Interested to learn more about how to structure investment property loans in Australia? Here is a video where Will Bell, an Australian mortgage broker, explains how it is done:
Importance of getting a mortgage broker for investment property
Why is it important to get a mortgage broker for your investment property? A mortgage broker with experience will be an expert on the sheer number of options out there for different lenders as well as different loans.
Prior to working with you, most mortgage brokers will already have wide-ranging experience working with homeowners. This can include everyone from experienced property investors to first-time homeowners. After all, a mortgage broker’s main aim is to find the best loan tailored to each person’s own specific situation.
In other words, a mortgage broker will usually take the following approach to find the loan most suitable to your specific situation:
- work with you to understand what you can afford to borrow
- protect your credit file report (CFR)
- ensure you meet the criteria for the loans you are applying for
- work with you to understand your goals and needs
- handle the entire loan application process, all the way to settlement
Another reason why it is important to get a mortgage broker for your investment property is that they will have access to multiple lenders and banks. This can save you time and money as opposed to doing it yourself.
To better understand why it is crucial to hire a mortgage broker, watch this video about comparing if it is better to use a bank or a mortgage broker in Australia:
Benefits of hiring a mortgage broker for investment properties
Now that you know why it is important to hire a mortgage broker for your real estate investment ventures, it is also helpful to know the benefits. We listed some of them below:
- access to a wider range of loan options
- expertise in investment lending
- time and cost savings
- access to specialist lenders
- tailored loan structures
Let’s take a closer at each benefit:
1. Access to a wider range of loan options
Mortgage brokers have relationships with multiple lenders and can shop the market to find the most suitable loan products for your investment needs. This can provide you with access to a wider selection of loan options.
You will also be introduced to more competitive rates and features as compared to going directly to one bank.
2. Expertise in investment lending
Mortgage brokers who specialise in investment properties have deep knowledge of the specific lending requirements, policies, and programs for investors. They can guide you through the complexities of investment financing and ensure you structure your property loans efficiently.
3. Time and cost savings
A good mortgage broker can save you time by handling the research, application, and documentation process on your behalf. Since they can also be able to negotiate better rates and terms with lenders, it saves you money as opposed to what you could obtain directly if you do it yourself.
4. Ongoing support and portfolio management
Mortgage brokers can provide advice and assistance as your investment portfolio grows, helping you refinance and access equity. They can also aid you with structuring additional loans. With their expertise and knowledge, they can assist you with managing your loans, repayments, and overall property financing strategy.
5. Access to specialist lenders
Mortgage brokers work with a wide network of lenders, including specialist investment property providers, that may not be accessible to individual borrowers.
6. Tailored loan structures
Finally, mortgage brokers can help you set up the most appropriate loan structures, features, and split-loan arrangements to suit your investment goals and cash flow needs.
Starting your investment property ventures with a mortgage broker
There might still be others who prefer to invest in real estate properties on their own. But if you prefer a hassle-free process with guarantees to better mortgage deals, get a mortgage broker. Entering Australia’s investment property market is hard enough. It is wise to take off some of the pressure by working with an expert in the field.
Start your investment property venture and get the right mortgage broker for you. Want to hire the best in the industry? Take a look at our special report on the best mortgage brokers in Australia.
Do you agree that those who want to purchase an investment property should hire a mortgage broker? Why or why not? Tell us what you think in the comments below.
