'My broker's big mistake'

Brokers pride themselves on dealing with borrowers day in, day out, knowing how to find the best deal and solving all kinds of financial dilemmas – but what do they really think of your service? What are you doing wrong and when might you have left them disappointed? The Adviser speaks to one borrower who claims his broker almost derailed his property investment plans.

At age 25, I was ready to buy my first property. I’d saved hard for my deposit and I was keen to find somewhere in Sydney in order to capitalise on the growing market.

I thought I was safe going with a mortgage broker, but it turns out that you need to be thorough even when it comes to selecting the professionals you use in your property search. My mortgage broker was young, and it really showed.

I was knocked back from two banks, on the basis of the mortgage insurer being suspicious of an inquiry relating to an online advance pay-style loan which was flagged on my file. After being knocked back by the first bank, we then approached another one almost immediately.

Little did I or my mortgage broker know, this second bank used the exact same mortgage insurer as the first.

My mortgage broker told me to give up and try again in six months’ time. I was devastated. I was so ready to buy an investment property and I suspected I wouldn’t have the will power to leave all of that deposit money untouched for the next six months. So I got talking to other mortgage brokers and did my own research online.

It turned out that, at the time, some banks offered more lenient policies than others. After some intense research, I discovered that not all banks defer to the mortgage insurer. In the case of the bank I ended up with, if I passed the bank’s credit check then I was approved by the mortgage insurer by default.

I also spoke to a mortgage broker who explained that because I had no defaults, the circumstances surrounding the online query to the bank should be enough to alleviate any concerns surrounding my application.

Two weeks after giving up on the dud mortgage broker and moving on, I’d secured my first investment property in Glenfield – 40 kilometres south-west of Sydney.

That was a couple of years ago. I bought at the time for $393,000. It’s now worth around $600,000. Since then, I’ve drawn equity that’s basically fuelled five additional property purchases.

The Glenfield property is a three-bedroom townhouse in an estate and it was purchased off-the-plan. Now that I’ve done a lot more research, I wouldn’t touch any new developments. I’d stick to more established homes. But there’s no denying that it has performed well. I decided to invest in the area because I knew that particular region was about to be subject to a lot of changes to infrastructure.

I knew that the M5 was going to be expanded and the travel distance from Sydney to Glenfield would be reduced. I also knew they were going to build a Costco about a five-minute walk away from where my investment was. When a large organisation like Costco comes into town, you know they’ve done prior research themselves and you know the area is going to see a lot of growth.

The moral of the story is, I never would have bought that property had I not done my research.

I understand how important mortgage brokers are and I still use a broker to this day. But it’s just like with any profession – there’s going to be good brokers and there’s going to be dud brokers.

Had I just listened to that first broker, I would never have bought that first property. I would have waited for my file to be cleared and I would have ended up buying at a much higher cost. Ultimately, I probably wouldn’t have the seven-figure portfolio that I have today.

 

 

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