When you need a new home loan, or you want to refinance, who’s your go-to person? For households with a high income and considerable assets, the choice is usually a personal banker (through private banking) or a mortgage broker. If you have a personal banker (aka private banker), chances are your first reaction is to flick them an email about what you need. However, by staying true to your bank, you might be missing out on other, more beneficial home loan opportunities. If you skip over your personal banker and approach a mortgage broker about a home loan, you’re opening the door to a wider choice of lenders. But you might be worried about upsetting a friend (your personal banker) and being disloyal to your bank. To find the most appropriate answer to this dilemma, it’s best to put emotions aside and look at the rational benefits of each.
The pros and cons of working with a personal banker for your home loan needs
In New Zealand, a personal banker is a financial professional who works closely with individual clients to provide personalised banking services and advice. They serve as a primary point of contact for your banking needs. To qualify for a personal banker, you usually need a considerable sum of assets. This is because their services are attached to ‘private banking’, a bank division that specifically looks after the bank’s wealthiest clients. The threshold for qualifying usually involves a minimum household income (e.g. $250,000+), cash assets to invest (e.g. $1m or $2m) and other financial proof points. Personal bankers handle a portfolio of clients, ranging from a few dozen to a few hundred. If you want to know how many customers your personal banker serves, just ask. Their answer will give you a good idea of how much time they have available for you. A personal banker is a generalist. They cover the full spectrum of banking services, from helping you to select the best type of bank account to recommending insurance products, investments and home loans. While they’re trained to provide a high level of customer
service, it’s reasonable to say that the more you’re worth, the better the service. If you decide to get your personal banker to look after your home loan needs – to buy a new family home, a holiday home or an investment property – here’s what you might expect:
- Familiarity. You’ll be working with someone you already know, which can feel comfortable and reassuring. Personal bankers make a point of building a relationship with you, so that they can better understand your needs. However, another motivation for friendliness is to keep your business. It’s harder to break up with a friend.
- History. You’re with the private banking division, so they already know your worth and your financial track record.
- Problems can get fixed fast. If you have a hiccup with your home loan, or need to get something changed, your personal banker may be able to address issues quickly because they’re in-house.
- Mate’s rates. It’s possible your personal banker can appear to pull some strings to get you a more favourable interest rate or a cash contribution to cover house-buying expenses, like lawyer fees. It’s widely known that the interest rates banks advertise aren’t always the lowest rates they can offer.
- Narrow choice. Your personal banker can only offer you home loans from one lender, your bank. They can’t offer you access to loans from other banks and non-bank lenders.
- Meetings at the bank. You’ll probably have to meet with your personal banker on their turf, not yours. Most don’t have the time available to provide a mobile service.
- Homework. There will be paperwork that you’ll have to do on your own. For example, budget preparation and financial reporting. While your personal banker might provide some hand-holding, they have to spread their time around a portfolio of clients.
- They move around a lot. Personal bankers tend to move around. For instance, they can be promoted within the bank or move to a different lender. So it’s common to have a different personal banker assigned to you regularly, which can be frustrating to have to start the relationship all over again.
- Not all banks are created equal. Remember your personal banker is employed by the bank to provide a service and sell their products only. This can be quite restricting if your situation doesn’t suit the bank’s policy and products. A personal Banker won’t be able to suggest a better option if it doesn’t sit within their parameters. This is especially true if you want to borrow up to your maximum capability. All banks have different stress testing rates and risk appetites. By sticking with one bank for your lending, you could be missing out on that extra available borrowing amount, which could mean missed property opportunities.
- Having all your eggs in one basket. All lenders will have a cap on how many properties you’re allowed to use as security or how much lending you have with them. If you’re looking to grow your property portfolio, there will come a time when you’ll need to start looking at other borrowing options.
The pros and cons of working with a mortgage broker
Mortgage brokers, aka mortgage advisers, are financial specialists who focus on property
finance. They eat, sleep and breathe loans for buying property. As the home loan market in New Zealand evolves, the mortgage advice market is growing. Right now it’s estimated that around 66% of all New Zealand home loans are facilitated by brokers. In Australia, that figure is even higher, so it’s likely the share of home loans handled by brokers in New Zealand will continue to climb. With this groundswell of habit change going on, it’s possible you’re thinking about ignoring your private bank connections and using a mortgage adviser to find the best deal. Here are the pros and cons of choosing a broker over your personal banker:
- Input at the planning and preparation stage. You can start working with a mortgage adviser reasonably early in the property buying process. So if you want to kick some ideas around, to formulate a strategy for property investment for example, your adviser can be a sounding board.
- Access to a range of loans and lenders. A mortgage adviser works with a full suite of lenders – including non-bank lenders. If you’re looking for the sharpest deal or a type of loan that’s less common, working with an adviser can give you a shortcut to the relevant lenders.
- Help with the paperwork. Getting a mortgage can be a time-consuming process that involves a swag of paperwork and back-and-forth communication. When you use a mortgage broker, you can expect practical help and services that will save you precious time and reduce stress. They do all the leg work for you.
- Ability to look outside the square. If your history or ambitions put you in the ‘too hard’ basket for a standard bank home loan, a mortgage broker can help you find lenders who are more flexible and understanding of your situation.
- Liaison with lenders on your behalf. It’s quite probable you could do the legwork that brokers do for yourself. However, researching every relevant home loan possibility in the New Zealand market takes a massive amount of time and effort. It’s likely your time is precious, so a broker’s existing knowledge and ability to work on your behalf is hugely valuable.
- Ongoing help with loan reviews and refinancing. In the same way that you build a relationship with a personal banker, you can form a partnership with a mortgage adviser. If you often buy and sell property, your adviser can become a crucial member of your team for making deals happen.
- Mortgage brokers work for you, not the bank. A mortgage broker has your best interests at heart. They’re bound by the Code of Professional Conduct for Financial Advice Services, which requires them to comply with high standards of ethical behaviour, conduct and client care. The code also requires brokers to meet standards for knowledge and skills (including any continuing professional
- development requirements), so that they can competently give advice.
- The potential to change your relationship with private banking. When you step away from your bank for borrowing, your status as a private banking customer could be affected. If you’re fond of the prestige that comes with private banking, you might want to check the eligibility criteria before you switch to using a mortgage adviser.
- Some brokers are better than others. As with any profession, mortgage advisers are not created equal. To find a top adviser, mortgages.co.nz has done the research for you. They have team of expert mortgage advisers ready to help you achieve your property goals. Read more about choosing a mortgage adviser.
Listen to your head, not your heart
Deciding whether to work with your personal banker or a mortgage adviser should be a
logical decision. If the right answer isn’t clear to you, you could potentially pursue both
avenues and choose the one with the strongest case.