DO YOU PAY TO USE A MORTGAGE ADVISER?

When it comes to securing a home loan, many borrowers are faced with the decision of whether to approach a bank directly or enlist the services of a Mortgage Adviser.

Both options have their advantages and understanding the role of a Mortgage Adviser and the potential costs involved is essential in making an informed decision.

In New Zealand, nearly 60% of home loans originate through a Mortgage Adviser while the rest deal directly with their bank.

So what’s the difference between going to the bank vs going through a Mortgage Adviser, and do you pay to use a Mortgage Adviser’s services? 

Mortgage Adviser vs Bank

A Mortgage Adviser (AKA Mortgage Broker), acts as an intermediary between you and the bank, helping you find suitable home loan products that match your specific needs and financial circumstances.

We have access to a wide range of loan options from various banks and lenders, allowing us to compare and recommend the most suitable options to our clients.

Mortgage Advisers also have in-depth knowledge of the home loan market and can guide borrowers through the complex and often overwhelming process of securing a home loan.

In short, a Mortgage Adviser takes care of all the legwork for you when it comes to researching the best bank, loan options and ultimately applying for the loan. We also take care of the negotiations when it comes to interest rates and cash contributions from the bank.

If you opt to take your time to do your own research into a bank's home loan offerings, then alternatively you could go around and talk to each bank yourself.  You may also like the familiarity of dealing with your own bank.

However, when it comes to getting a home loan approved, time is of the essence especially if you have your eye on a particular property. Sometimes it's hard to get an appointment with your bank or your local branch may have permanently closed.

Your personal banker can also give you good guidance and recommendations but remember, they can only offer advice on their own products so you may be missing out on a better deal  elsewhere.

Deciding between a Mortgage Adviser and approaching a bank directly ultimately comes down to personal preference.

While Mortgage Advisers offer convenience and expertise, some borrowers may prefer the direct interaction and familiarity of working with a bank. So tossing up whether to take the time to do the research yourself or use the expertise and experience of a Mortgage Adviser that deals with all the banks on a daily basis is something to consider.

How Do Mortgage Advisers Get Paid? 

Contrary to popular belief, Mortgage Advisers generally don’t charge a fee for their advice and service. Instead, we earn a commission from the banks and lenders upon the successful referral of a new mortgage customer and subsequent draw down of a home loan. In the event we work with a lender who doesn’t pay a commission, a fee will be charged and this will be discussed with you up-front. Generally this can be added to the loan if required, so doesn’t need to be paid for in cash up-front.

Savings for the Borrower

The ultimate cost of the home loan will depend on the specific loan product and the terms negotiated.

A Mortgage Adviser's ability to secure a better interest rate or negotiate more favourable loan terms can potentially result in long-term savings for borrowers.

The ongoing service provided by a Mortgage Adviser after you have settled on a property can also save you time and hassle - like when it's time to refix your interest rate, or if you need a top up on your home loan.

Will you be charged to use a Mortgage Adviser?

While the expert advice and services of a Mortgage Adviser are typically free for borrowers, there are some times where you might have to pay. This will all be outlined in the first meeting with your Adviser.

Here are the three most common situations where a fee may apply:

1. If you pay your mortgage off early

If you repay your mortgage within a certain timeframe (usually 27 months), a fee may be charged by the Mortgage Adviser. This is due to the fact that the bank will typically “clawback” some or all of the commission that was originally paid to the Adviser, so the Adviser has ended up doing a lot of work for no pay.

An Adviser will make you aware of this in your initial discussions and let you know how they charge in the event of a clawback so you can make an informed decision.

If you are refinancing or selling your house, the best thing to do is immediately talk to your Adviser and discuss if any clawback fees will be charged so you can factor in the costs.

2. When the lender doesn’t pay commissions

If you are in a situation where you need to get a home loan through a non-bank lender, then in most cases the non-bank lender will require a fee to be added to the loan, rather than paying the Mortgage Adviser a commission. You’ll always be made aware of any fees upfront before signing and locking anything in.

So there you have it. Choosing whether to work with a Mortgage Adviser or approach a bank directly is a decision that should be based on individual preferences and circumstances.

Mortgage Advisers offer convenience, expertise and access to a wide range of loan options, potentially saving you time, effort and even money in the long run.

Banks on the other hand, can offer advice on their own loan products but may not offer the same level of personalised support and guidance.

Ultimately, the goal is to secure a home loan that aligns with your personal financial goals and needs, so be sure to ask around and see what experience your friends, family or work colleagues have had with both, and feel free to reach out if you need a hand.