IF wannabe homeowners were nervous about getting a mortgage before, now they are as worried as ever.
And it’s no wonder, with the banking royal commission exposing cases of people being approved mortgages they could never afford to repay, and allegations of bribes to push through dodgy loans.
But experts say Australians simply need to get smarter when it comes to getting financial advice and figuring out the best option for them.
Tricks and deceptive conduct used by mortgage brokers, banks and lenders are being exposed and experts are making sure buyers and borrowers know what to look out for.
HeroBroker founder Clint Howen said some of those tactics included convincing you to over borrow, recommending the longest possible loan, recommending lenders in their own interest and adding fees.
Mr Howen said some people were being encouraged to refinance and get credit for something they might need to do down the track, such as renovate their current home.
“It’s like having a $100,000 credit card but the broker still gets the commission now,” he said.
“It’s a common tactic to get you approved for more and they’re coming up with reasons to have lines of credit available.
“It’s like the old days when you get a credit card sent out to you that’s pre-approved. It’s basically like an open credit card.”
Mr Howen said people needed to watch out for cross promotions and referral commissions their broker could be getting without them even realising.
“I don’t think people understand if there’s something getting pushed in front of you there’s a good reason why,” he said.
“You have to do your own diligence. The name of the game is to get the money that you need with the features that you want at the lowest rates.
“You shouldn’t be trying to get the most. You need to know what you can afford because they’re not going to do that for you. That’s how people get stuck in debt traps.”
More than a million households are experiencing mortgage stress and personal bankruptcies have hit an eight year high, with more than 32,000 Australians declaring bankruptcy in the last financial year.
The royal commission, established late last year, has revealed malpractice that in some cases has ruined lives.
HeroBroker was criticised on social media when it launched in August for taking business away from brokers who are still responsible and trusted for the majority of loans.
The company cuts out the need for a mortgage broker and allows consumers to pocket a commission themselves.
REA group executive manager for financial services Andrew Russell warned people should not be too sceptical of brokers because most of them were good.
“The recent ASIC review concluded that mortgage broking and brokers deliver good customer outcomes, provide great service and drive competition in the lending industry,” Mr Russell said.
“Clearly Aussies agree. Broking is the channel of choice for over 57 per cent of Australian home loans and growing.
“Mortgage broking is a highly professional and regulated industry and the service proposition for customers is strong.
“As with any service provider, it is important consumers do their research, compare different brokers and lenders to establish what is right for their individual circumstances.”
DG Institute founder Dominique Grubisa said knowledge was power and the more people were informed on the local and international financial situation, the better placed they were to protect their current assets and grow their wealth.
“Whether you’re a big investors or just a homeowner, give some thought to asset protection,” Ms Grubisa said.
“Speak to an expert about strategies to bulletproof your assets so that they can’t be stripped away from you in unforeseen circumstances.”