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My boyfriend and I going to build a house, so we went to a mortgage broker that was recommended to us by some friends. I was a bit hesitant about using one at first as I'd heard some bad things about them, but this guy is fully accredited and came highly recommended and when we met him we found him to be very nice and extremely professional.

 

The past week, however, has been really stressful. He told us that because we only had 5% deposit, we'd need to pay mortgage insurance, however, he assured us that this could be built into the loan.

 

The next day he rang me and said he'd made a mistake, and that this wasn't actually possible. He told us we'd have to borrow $10,000 off our parents to pay for the mortgage insurance, conveyancing, taxes, etc. This was a bit of a shock but fortunately our parents had already volunteered to lend us money, so it wasn't too much of a drama.

 

All seemed to be going okay until this afternoon. The broker rang me and told me that he'd made another error - he'd miscalculated our land tax and we now needed to come up with an extra $3000.

 

I'm really shitty with him and I'm seriously considering 'sacking' him.

 

Has anyone here used a mortgage broker before? If so, I would be interested to hear your experiences, whether they're good or bad.

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Nicole - this is not an answer to your question, and unlikely what you want to hear right now. Here goes.

 

As I was gaining tertiary and post grad education I needed cash and so held a job for a few months at one of Australia's big mortgage banks (ANZ, NAB, CBA). My job was to chase down people who missed more than 3 monthly mortgage repayments. I had a massive list of borrowers to chase. Because I was an educated and thinking young guy with intellectual curiosity (unlike my mindless colleagues at the time) I was interested in the business drivers rather than the dull process. So I would compile data from the computer system and also from my telephone interaction with defaulting clients. I had 100's of names to chase and got to know each case reasonably well. My job was to make sure these people didn't miss their next payment and so end up on a much more serious follow up list that was close to repossession. I was a pretty good telephone negotiator and would make about 25 calls every day. So what is my point?

 

Nearly all the 3 month defaulters who I was unable to help avoid another default were young recently married or 'boyfriend - girlfriend' couples that had home loan insurance (HLIC was a popular insurer at the time). They entered the mortgage with only 5% capital and in a borrower-friendly macroeconomic phase that quickly turned nasty. It was statistically significant: if you were young and had mortgage insurance you would most likely be overstretched and default within the first year. I used to have young adult men crying on the phone. They had no idea how quickly their cash would evaporate after they unexpectedly lost their job and interest rates went up 'only' 100 basis points. Bang! In the space of a few months they were financially ruined. And personally/emotionally dented as well.

 

I promised myself: never take a mortgage if I need to insure it. It is a big red warning sign that if you hit a rough patch, you are probably not going to make it out the other side. Buy something you can afford. Don't get a false sense of security: just because a bank gives you a mortgage it doesn't mean they think you are sound credit... that is why they employed 100 people like me: to keep a huge portfolio of high risk loans on track.

 

Keep in mind that home lending is big and easy money for banks and that the previous boom in lending had starting to slow down, so banks have become increasingly desperate to find new loans: they need new loans to make more money and they will lend too much to people that they simply should not. It is irresponsible of them. Don't get caught up in it.

 

Did you know that last year had the highest level of home loan defaults in Australia since the early 1990's (when I was making grown men cry)

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Spud, I hear what you're saying. Rest assured that we will have no problems making our repayments (we aren't borrowing nearly as much as the bank would like us to) or paying back the money we've borrowed. We've done the math and all the 'worst case scenario' planning.

The mortgage insurance isn't what's bothering me. Or the land tax, really. See, I'm a control freak when it comes to stuff like this. I like to know everything up front and have it spelled out on paper.

 

What's worrying me is that we're trusting this guy to do all this stuff for us, and my confidence in him has plummeted.

 

011: Thanks for the pre-emptive advice, but I've got it covered mate. \:\)

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I hope it all works out well for you, Nicole.

 

regarding finance brokers - I would tend to do all that myself, perhaps like you. Remember, they are trying to make money and someone has to pay them. Secondly, home borrowing (and ownership) has been a massive boom in recent years. When something booms it attracts attention and draws to it people with lesser skill sets and worse. I do not know if your guy is any good, but it is correct to be over wary of their ability as I bet there are sub-par operators in the game trying to make their bit from the now defunct boom. You owe it to yourself to at least engage his competitors.

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 Quote:
Originally posted by _spud:
Did you know that last year had the highest level of home loan defaults in Australia since the early 1990's (when I was making grown men cry)
Here's another pointer to (a large number of) folk in Oz being strapped.

http://www.economist.com/markets/indicat...tory_id=5469840
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eek.gif Cooor. Good chart, Mr W. Australian consumers have had this bit of ouch coming for a while now. Not nearly the wealthy healthy nation/economy that it appears on the surface.

 

The simple mantra is going to become quite meaningful sooner or later: Pay your credit card off each month, only buy a home that you can afford, don't waste any money on expensive cars.

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Nicole, 5% aint a big deposit. Housing isn't going anywhere fast at the mo so whats the rush?

I know a few excellent MB's, so if you sack this guy, give me a PM.

Being a control freak I don't understand why you wouldn't have been able to calculate the land tax etc by yourselves saving such "suprises"

Where R U building anyway?

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