As editor of Momentum Media’s mortgage titles (covering both this brand and our sister brand The Adviser), I’m probably more financially literate than most when it comes to getting a mortgage.
I’ve sunk my teeth into reams of lending data, analysed how the mortgage market operates, broken news about new regulations, products and offerings in this space, and had the honour and privilege of talking to hundreds (if not thousands!) of brokers, lenders, fintechs, BDMs and loan administrators about the process.
But, despite having a solid base of understanding around how the mortgage process works, when it came to getting my own mortgage for the first time this year, there were still some lessons learned along the way.
For example, the fascinating process of valuations and trying to wrap our heads around how the lender values the land and the building without being given access to the mortgage lender’s own valuation (other than just the dollar amount). It seemed, from outward appearances, that they just come up with exactly what we needed it to be, based on what our offer was. Why are lender vals so mysterious? The cynic in me bridles at this lack of transparency.
Another aspect of the mortgage process that I’d never really given much thought to previously was rate locking. While I knew of its existence, I’d never really considered the importance of being able to rate lock until trying to secure a Sydney-sized mortgage in a rapidly changing rate environment. With 42 days to wait before settlement (or up to 60 days for some people), a lot can change. Our rate lock ended up saving us around 35 bps; nothing to sneeze at.
Another issue that surprised me was the rationale behind why we needed to sign section 64 and waive our cooling-off period. It seems like a massive risk that only really favours the vendor – but not doing so would apparently give buyers a competitive disadvantage (at least, according to the real estate agent). With house prices so high and the ability for people to save a deposit taking longer and longer, it seems ridiculous that the Sydney market is so prepared to cast aside cooling-off periods in the favour of a quick sale. The fear of missing out and the buyer’s own risk appetite come into play here, but I was surprised that this was stated to us on multiple occasions as if it was the norm, not the exception.
Last but not least, my biggest takeaway was this: how on earth does anyone do this without a broker?
Our broker was impeccable. Professional, responsive, and able to explain things to my husband and me clearly, with patience and good humour. After I had tried and failed miserably to explain how offsets work (and the balancing act between putting money in offsets or making extra repayments), I had a new-found appreciation for those able to summarise this – and most mortgage processes – succinctly and in a less mathematically questionable manner.
Moreover, while I already had a fairly firm idea of how I thought I would like to structure the loan and which lenders I’d prefer, after having deeper conversations about our end goals and how the lenders would view us as borrowers (turns out not having any debt is not good), we arrived at a more informed decision.
I’m so grateful to have had our broker’s insights, experience and guidance through the process – and am certain that our best interests was all our broker ever had in mind.
The final takeaway that I have from my mortgage experience is this: this process needs to be digitised.
Admittedly, this could be just an issue with the particular lender we went with, but the volume of paperwork required to be signed, the amount of duplication in the paperwork itself, even the way things are communicated, could do with some technological disruption. Plus, with all the rain we’ve been having here in Sydney, getting documents to their end destination in one piece (without the paperwork turning to mulch) is an ongoing challenge and an issue that is easy to fix: make the loan docs digital.
If we’re ever going to make people more empowered in their mortgage-making decisions, an obvious place to start is to make the actual process less cumbersome, more accessible and in plain English. While brokers are able to take out a lot of the pain in the process (and thank goodness for that!), I think all players involved in the mortgage process – vendors, buyers, brokers, lenders, real estate agents and conveyancers – would all appreciate being able to do the whole process online, from start to finish.
Now we just need regulation to catch up.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.