When it comes time to purchase a house, whether you’re a seasoned investor or a first home buyer, it pays to get good advice.
Five Common Questions You Might Have About Mortgage Brokers
Mike Pero Mortgages is one of the largest mortgage brokers in the country, and has been helping Kiwis into homes for more than 20 years. With the current market changing regularly, we asked them to cover off five key questions many have when it comes to what mortgage broking is, and the role they can play when you apply for a home loan.
What is a mortgage broker?
A mortgage broker acts as an intermediary between you, the borrower, and the many different lenders in the market, when you apply for a home loan. Some mortgage brokers are also qualified financial advisers, so they can give advice on the best way to structure your finances and they may also offer guidance around other lending products like personal loans, as well as insurance.
What does a mortgage broker do?
Put simply, a mortgage broker is there to help guide you towards the right loan and then negotiate on your behalf to get a package that suits your individual needs.
Applying for a home loan can be really confusing. There are the big banks, then a handful of smaller lenders to choose from, and each will offer variations on interest rate, loan features and incentives such as cash back offers. Some lenders will even treat applicants differently depending on how they earn an income which makes it really hard for the average New Zealander to find the right loan.
This is where a mortgage broker comes in – they know the market better than anyone, so they can cut out the irrelevant products, filter lenders and steer you towards one that works for you.
A mortgage broker will also help with the application process, providing guidance on the types of documentation needed, plus they liaise with the lender on the progress of the application, meaning you spend less time on the phone chasing updates. Because mortgage brokers deal with the different lenders every day, they will be able to talk directly with the relevant business division – meaning they can get an answer faster.
Should I use a mortgage broker?
The benefit of using a mortgage broker rather than going direct to a bank is that a mortgage broker can access a wide selection of products from multiple lenders. They are also able to negotiate on your behalf to secure a better interest rate and can help guide you through the supporting documents that are required.
National research commissioned by Mike Pero in 2017 found that nearly half of mortgage holders have chosen to use a mortgage broker in the past, while nearly three quarters (72%) would consider using a mortgage broker to find their next mortgage. Of those that did use a mortgage broker, 58 per cent said it was because they got a better rate, and 45 per cent said it was because they helped navigate the finance maze.
How much is a mortgage broker’s fee?
Most mortgage brokers don’t make money by charging fees, instead they earn a commission that is paid to them directly by the lender. How much commission the mortgage broker gets will vary, the industry average is 0.6 per cent of the initial loan amount. The mortgage broker could also receive a trail commission for each year the loan remains with that lender. Before you engage with any mortgage broker, make sure you ask if they charge a fee and how much it will cost.
Do I need a mortgage broker to buy a house?
No, however there are many benefits, so do your research and work out what is right for you. If you’ve decided to use a mortgage broker – you can find your nearest Mike Pero Adviser here.