Most people speak to a mortgage broker when something is happening.
They’ve found a property they’d like to buy, they’re thinking about refinancing, they want to access equity for another purchase, their business is growing and they need finance, or an opportunity has come along and they need to know whether the numbers will work.
That makes perfect sense.
But after more than 25 years in finance, I’ve found that some of the most valuable lending conversations happen well before there’s a loan to arrange, because when there isn’t a contract to sign, a settlement date approaching or an opportunity that needs an immediate answer, we have something incredibly useful on our side.
Time.
When should you speak to a mortgage broker?
There isn’t one point when everyone should speak to a mortgage broker. You certainly don’t need to have found a property, and you don’t necessarily need to be ready to borrow. Sometimes the reason for having a conversation is simply that you’d like to understand where you’re at. Perhaps you think you’d like to buy another investment property in the next few years. Maybe the home you’re in now won’t suit you forever. You might have built considerable equity and wonder what opportunities that could create.
Perhaps your business is growing and you’re starting to think about purchasing commercial premises. Or maybe your financial life has simply become more complicated over the years. You’ve accumulated properties, loans and other commitments, and you’re not entirely sure how all the pieces fit together anymore.
There doesn’t have to be an immediate transaction for that to be a useful conversation.
What changes when there isn’t a deadline?
One of the advantages of thinking about lending before you need it is that there’s time to explore.
If you’ve already found the property you desperately want to buy, the question tends to become:
“Can we make this work?”
Without that pressure, we can start somewhere different:
“What are you hoping to make possible?”
That might sound like a small distinction, but I think it changes the conversation considerably.
We can look at where you are today, what you might like to do next and what else you may want to do afterwards.
There’s time to understand rather than simply react.
Borrowing capacity is only one part of the picture
Naturally, one of the questions people often want answered is, “How much can I borrow?”
Understanding your borrowing capacity or borrowing power can certainly be useful, but it isn’t the whole lending picture. Your existing loans and commitments can matter, so can the way those loans are structured. If you own property, there may be equity available, but total equity and usable equity aren’t necessarily the same thing. Your cash flow and the buffers you like to keep around you can also influence how comfortable you feel taking on another commitment, then there’s what you might want to do afterwards. A lending decision that works perfectly well for what you’re trying to achieve today may have implications for the options available to you later.
That’s why I’m interested in much more than one borrowing capacity number.
What are you actually trying to create?
This is one of my favourite questions to ask, because a loan is rarely the goal. The goal might be another investment property, a different home, greater flexibility, business growth or an opportunity you’d like to be ready for when it arrives. Finance is one of the tools that can help you get there. So before we start talking about lenders, rates and products, I want to understand what you’re trying to create. Once we know that, we can start considering the lending in context.
Today’s lending decision can influence tomorrow’s options
It’s easy to look at loans as individual transactions; you buy a property, arrange the loan and move on. Then another opportunity comes along and you arrange another loan. Over time, though, those decisions can begin to interact. The lender you choose, the way lending is structured, the securities involved, your existing commitments and the equity you’ve used can all potentially influence future lending decisions. That doesn’t mean there’s one perfect structure everyone should have. There isn’t. It simply means I think it’s worth asking another question alongside, “Does this work today?”
“What might I want to be able to do tomorrow?”
Understanding your lending position doesn’t mean you need to change it
This is important. Having an earlier lending conversation doesn’t mean there must be something wrong with your existing loans. And it certainly doesn’t mean you automatically need to refinance, restructure or borrow more. Sometimes we look at everything and discover there’s something worth investigating.
Sometimes there are things we can prepare for over time. And sometimes the conclusion is wonderfully uneventful:
Everything is working well. Leave it alone.
That’s still a valuable outcome. The purpose is understanding, not manufacturing a reason to change something.
When might it be useful to speak to a mortgage broker early?
An earlier conversation may be worth considering if you’re thinking about buying another property, upgrading your home, accessing equity, refinancing, purchasing commercial property or funding business growth.
It can also be useful when there’s no specific transaction at all. Perhaps you simply want to know whether the financial and lending position you’ve built still supports where you’d like to go over the next few years. That’s a perfectly good reason to start a conversation.
How far ahead should you speak to a mortgage broker?
There’s no magic number of months, your circumstances, existing lending and what you’re hoping to achieve will all make a difference. For me, the important part isn’t whether you start three months, six months or two years beforehand, it’s having the conversation while you still have the luxury of time. If there’s questions to explore or things worth preparing for, you have space to do that thoughtfully rather than because a deadline is forcing the decision.
You don’t have to wait until you need the loan
You don’t need to know exactly what your next move will be. Sometimes it’s enough to know there’s something you’d like to make possible. Understanding where your lending sits today can help you see what may be worth thinking about before that opportunity arrives.
And if there’s something you’d like to make possible over the next few years, even if you’re nowhere near ready to make a move, I’d love to have a conversation about where your lending sits today and what might be worth understanding before you get there.