How a broker can save you $250 per month in mortgage interest

With interest rates at recent highs, Aussies are spending a record chunk of their pay on mortgage repayments, however there’s a way to save big.

With interest rates at recent highs, Aussies are spending a record chunk of their pay check covering mortgage repayments.

This can be a real struggle, but the reality is that for many people there are big opportunities to save with their existing mortgage.

The challenge is that the mortgage market is complicated and constantly changing, and figuring out what’s actually best for you can be tricky.

The good news is that there are people that can help you figure this out – and do the work for you.

Where a mortgage broker can add value

A mortgage broker is someone who helps you set up a mortgage, but they can do so much more. A good mortgage broker can help you understand your borrowing power way before you buy a property, so you can position yourself to execute on a property purchase at the amount you really want in the time frame you really want.

But the another huge opportunity for savings comes once you own property, where a good mortgage broker will be able to help make sure you’ve got the best deal on your mortgage today and into the years ahead.

In Australia, there’s a clear bank “loyalty tax” that can be seriously costly.

This loyalty tax comes about because the banks are often competing for new business customers, so they offer deals and better pricing to entice people to move their mortgage.

You could save big on your mortgage with this advice. Picture: iStock

But once you’re a customer, you don’t get the same love, and as a result typically your mortgage interest rate will become less competitive over time.

Basically the short version is that if you set up a mortgage and then don’t change it for a number of years, you’re probably paying more than you have to.

The statistics show that the difference between the interest rate offered for new customers versus existing in Australia ranges between 0.5 per cent and 1 per cent.

Given that the average mortgage size in Australia is more than $600,000, paying even a slightly higher interest rate will be seriously costly.

Paying 0.5 per cent – 1 per cent more in interest costs on a $600,000 mortgage means paying between $3000 and $6000 more in interest every single year.

If you want to maximise the money you have available for investing and wealth building, or just keep up with the cost of living, you need to keep your mortgage interest rates competitive.

A good broker will check in on your existing mortgages periodically, ensuring you’ve got the best rate. They can negotiate with your existing bank to get you a sharper deal without having to switch your mortgage, or they can help you switch if that’s going to be more beneficial.

How mortgage brokers get paid

Mortgage brokers are paid by the bank in the way of a commission payment when they help you set up a new mortgage. This means you can get the help of a mortgage broker without paying anything out of your pocket.

It’s worth noting the interest rate and cost of your mortgage whether you go directly to a bank or through a broker is exactly the same.

In fact, it’s often cheaper going through a mortgage broker because they’re able to negotiate a better deal with the bank on your behalf.

Mortgage brokers are able to negotiate a better deal with the bank on your behalf. Picture: iStock.

What to look for in a mortgage broker

Not all mortgage brokers are made equally, so you’ll want to choose yours carefully.

A good broker will add a lot of value, but an average or not so good broker can take a serious amount away. When choosing a mortgage broker, there are a few things you should look for to position yourself to get the best results.

First and one of the most important things to look for is a broker that can set up mortgages with a wide range of lenders.

It gets a bit technical here, but basically every mortgage broker needs to get registered with a bank before they can help their customers set up new loans with that particular bank.

If your mortgage broker is only registered with a small number of banks it can mean the options they have available to them (and you) are limited. On the flip side, if your broker is registered with most (or all) banks, it means they can use any mortgage available in the country that might be right for you.

You’ll also want to look for a mortgage broker who is part of a company that’s big enough to be able to look after you well.

This is important when you’re buying property and once you have one (or more) mortgages.

If your mortgage broker is a solo hero doing all the work themselves, or with a limited support team it can impact your results.

If your broker has low or no support, it can be hard for them to be able to stay on top of your mortgages and keep your interest rates competitive. Limited support also means they may not have the capacity to be as focused on you because they’re wearing so many hats. This can become a problem when you need something done quickly. And time is of the essence every time you buy property.

The wrap

In Australia today, mortgage payments make up a big portion of household spending – and this comes with a huge financial opportunity.

A good mortgage broker can help you create some serious savings, both today and into the future.

They can help you save on interest costs, keep your mortgage competitive, and do the heavy lifting on your mortgage admin work. Take the time to do some research and see how this could help you, and you can benefit and save big.

Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth, and Author of soon-to-be-released book, Virgin Millionaire.

Ben runs regular money education events to help you save more and invest smarter. You can check out all the details and book your place here.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs.

Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.