Using a mortgage broker to refinance

What does a mortgage broker do when you refinance?

Four things you would otherwise do yourself. First, they review your current loan against their panel, usually 30 to 50 lenders, and shortlist the ones whose policy and pricing suit your situation. Second, they get your current bank's retention team to make a written repricing offer, because a lender will often match a competitor rather than lose the loan. Third, if you switch, they lodge the application, order the valuation, and coordinate the discharge of the old mortgage and settlement of the new one. Fourth, they calculate the things that decide whether the switch pays at all: fixed-rate break costs, whether you would pay LMI again, and how a cashback offer compares with a lower rate over the years you will hold the loan.

The broker cannot get you a rate the lender does not offer. What they can do is know which lender to ask, and ask in the form the lender says yes to.

Is it worth using a mortgage broker to refinance?

Yes, in most cases, for a simple reason: it costs you nothing and it widens the field. The broker is paid by the lender on settlement (an upfront commission and a trail), and since 2021 is bound by Best Interests Duty, so they cannot steer you to a lender because it pays more. A refinance is also the situation where lender policy matters most: two lenders will quote the same headline rate and value your property differently, treat your credit card limits differently, or waive the establishment fee for one borrower and not another.

The exception is the borrower whose bank will reprice. Repricing has no discharge fee, no registration fees, no valuation and no paperwork. If you have a competitor's written offer and your bank matches it, you are done. A good broker gets you that offer, presents it to your bank, and only switches if the bank will not move.

When should you go straight to your bank instead?

When you are a PAYG borrower with a clean file, more than 20% equity, and a bank that has already offered a rate within about 0.1% of the best you can find. In that case the switching cost of $500 to $1,500 outweighs the saving, and a phone call to the retention team is the whole job. A broker will tell you this; if one does not, that is a signal in itself.

What can a broker do that a comparison site cannot?

A comparison site shows rates. A broker knows policy: which lenders accept one year of self-employed financials, which value apartments conservatively, which will refinance an investment loan at 80% without LMI, which one will lend to a borrower with a paid default. They also see the retention offers, which are never published. And on a refinance the broker owns the process, so the discharge, the valuation and the settlement date are timed to land just after a fixed rate expires rather than before it.

What should you bring to a broker for a refinance?

Your current loan statement showing the balance, rate and any fixed-rate expiry date; a break cost quote from your lender if you are on a fixed rate (it is free to ask); recent payslips or, if self-employed, your last one to two years of tax returns; a rough idea of your property's value; and your goal, whether that is a lower rate, cash out for a renovation, consolidating debt or simply certainty. With those the broker can tell you within a day whether the switch pays.

How do you choose a broker for a refinance?

Ask three questions: how many lenders are on your panel, will you ask my current bank to reprice first, and how are you paid. A broker with fewer than 20 lenders, or one who will not approach your bank, is limiting your options. Membership of the MFAA or FBAA and a current credit licence or representative number are the minimum; you can check the licence on ASIC's register. Reviews that mention refinancing specifically, rather than first home purchases, tell you they have done this before.