And find your fairy godbroker.
When you’re shopping around for a mortgage, do you know who wants to find you the best deal? Mortgage brokers. They want to find you the most affordable mortgage with the best terms for your lifestyle.
Whether it’s your first or third, buying a new home is a massive financial commitment, one that comes with a lot of banking jargon and paperwork.
Working with a mortgage broker can help make all that easy, but how do you know you’ve chosen the right one to partner with? A great mortgage broker will be like your fairy godmother. A not-so-good one, more like an evil stepsister.
A broker is there to hunt the mortgage market for the best deals, while saving time on forms. They advise on everything there is to know about taking out a mortgage and the house-buying process, as well as KiwiSaver withdrawals and grants. They should also be knowledgeable about each lender, their criteria, and give great advice on which one will suit different financial situations. So that’s what they should be doing.
We’ve put together a list of the top five things mortgage brokers shouldn’t be doing if they know their stuff. This means you can make an informed decision about which broker is right for you.
They give commission back to the bank
To get a deal across the line, some mortgage brokers will hand some of their hard-earned commission back to the bank. While this may seem awesome in the short-term, it’s a sign your mortgage broker isn’t offering sound advice and is potentially compromising your long-term position. A great mortgage broker shouldn’t need to do it – their skill in brokering deals should be enough.
They pay for referrals
Interest rates change, and the housing market in NZ is uncertain at the moment. Do you lock in five-year fixed term, or go for a floating rate? A mortgage broker has one job: to find you the best deal. Brokers know who offers what deals right now, and can predict interest rate changes, OCR increases and what the housing market is going to do.
This one’s really a no-brainer. Good relationships are built on trust and rapport from hard work and great communication skills.
Great mortgage brokers shouldn’t have to pay for referrals. If they’re good at what they do, there should never be any need for money to exchange hands.
They always want you to move banks
If you’ve recently made the shift to self-employment – less than 12 months – consider approaching a non-bank lender. Several non-bank lenders offer more flexibility in the way they assess income. A low-doc (low-documentation) home loan might only need six months’ worth of bank statements rather than a bank’s two-year policy. These lenders may require less documentation, but the trade-off is that you’ll pay slightly higher interest rates and fees. They’re a good way to get into a home, until you have enough financial history to approach the banks. A mortgage broker will be able to advise you on which non-lenders will suit you best.
Great mortgage brokers think and play the long-term game. When it comes to re-fixing a mortgage, one big red flag is a broker who always wants to move banks.
If a broker suggests moving banks, double check how much money they’re due to make from the shift – usually it’s between $4-$5,000 – because it’s a pretty good sign they’re chasing commission rather than the right deal for you. Whereas to re-fix your mortgage with your current bank, the commission for a broker is $150.
That’s not to say shifting banks might not be a smart move. But any move should benefit you and your financial situation in the long run, not your broker.
They’re cagey about commission
Another good sign a mortgage broker is advising you based on what’s right for you is how transparent they are with how much commission they’re entitled too from each lender.
Different lenders have different commission rates. When a broker advises you on your home loan options, they should also tell you how much commission they are expecting to get with each deal. This helps you judge whether your broker is steering you towards one bank over another because it’ll win them more money.
Our advisors and brokers don’t earn commission. They get paid a salary, which is an unusual way of working. It means our brokers are never chasing commissions – instead their priority is always finding you the best deal.
They hand you over to team members with no financial experience
With experience comes connections, expertise and information, so it’s important that everyone involved in your deal has experience in the banking and financial industry. After all, their job is to help you with one of the biggest financial decisions you’ll ever make. Many brokers will hand you over to support staff to process paperwork – while that may seem efficient, it can lead to things being missed. They simply won’t have the experience to spot opportunities or issues on your behalf.
Your wish, granted
Whether you’re self-employed or not, having a decent deposit will always make applying for a mortgage less challenging. The more deposit you can save, the less risky the banks will consider you, and the less weight they’ll put on your income. A deposit of at least 20% is good, but having more is ideal.
Our focus is and will always be on finding you the best home loan deal.
Alongside our extensive financial experience, we’re transparent about how our team is paid, we work hard for our referrals and we take no shortcuts.
If you’re considering working with a mortgage broker, give us a call today. We’re happy to answer any questions and help you navigate the sometimes (ok, most of the time) confusing world of property.