How to choose a mortgage broker when building a property portfolio

The short answer: If you plan to own more than one property, choose a mortgage broker who asks about your second purchase before you sign for the first. A broker who only writes a good loan for today's deal can leave you with a structure that blocks the next one. My first loan cost about $13,000 in break and restructure fees to undo before I could buy again.

A broker for the deal or a broker for the plan

There was nothing wrong with the first property I bought. The suburb was fine and so was the price.

It still cost me about $13,000 to undo how I financed it.

If you plan to build a portfolio, you want a broker in your corner who thinks past the deal in front of you and prompts you to do the same. I didn’t have one.

As a buyers agent, I see this gap in first purchases a lot. Buyers put real effort into choosing the property and almost none into choosing who arranges the finance.

I’m not a mortgage broker and nothing here is credit advice. How a loan should be set up for you is a conversation for a licensed broker. My point is about who you choose to have that conversation with.

The broker I didn’t have

On my first property, the loan got arranged and settled, and the person arranging it did the job in front of them. Nobody asked whether I wanted to buy again, or what the loan would need to allow if I did.

I didn’t raise it either, because I wasn’t thinking like someone building a portfolio and nobody around me was prompting me to.

Where the cost showed up

For a long time there was nothing to notice. The repayments went out and the loan did its job.

Then a second purchase became a real option and the structure left me no room to move. It cost me about $13,000 in break and restructure fees to undo it before I could buy again.

Two different jobs

A broker who writes a good loan for today’s transaction is doing nothing wrong. That’s what most people hire them for.

Helping you build is a different job. That broker asks what you want to own a few years from now, and tells you when the easy option today works against it.

What you gain and what you give up

That kind of broker asks more of you. The conversations run longer and you need to bring a plan, even a rough one. So you give up the quick, simple transaction, and in return you get someone who catches what you don’t know to ask.

Go without that person and nothing looks wrong until you try to buy again. That’s the risk.

Who this matters for

If one property is all you plan to own, a good loan for that deal is all you need and a transaction broker suits you fine.

It matters when you intend to build and nobody is thinking past the first deal with you.

So before you sign for purchase one, make sure someone has asked about purchase two.

If you’re weighing a first or next purchase, reply and I’ll send you the questions I’d take to a broker before signing.

If your broker can’t answer them, or nobody asked them last time, let me know. I can introduce you to someone who can. I don’t take a referral fee for it.

Who in your corner is thinking past the first deal?

Frequently asked questions

What is the difference between a transaction broker and a portfolio broker?

A transaction broker arranges a good loan for the deal in front of you. A broker who helps you build asks what you want to own in a few years and flags when today's easy option works against that plan.

When is a transaction-focused broker enough?

If one property is all you plan to own, a good loan for that single deal is all you need.

What should I ask before signing for my first investment loan?

Make sure someone has asked about purchase two: whether you plan to buy again, and what the loan structure would need to allow if you do. Loan structure itself is a conversation for a licensed broker.

Disclaimer: The information in this article is general in nature and does not take into account your personal objectives, financial situation, or needs. It is not financial, legal, or tax advice. The Nelis Group accepts no liability for actions taken based on this content. You should seek independent advice from a relevant licensed professional before making any decisions and always confirm the latest rules and thresholds with your state revenue office or relevant authority.