If you are in the process of buying a home and need to find a mortgage, your first question might be: Should I use a mortgage broker or talk to banks myself? There are many factors that go into this decision. First, consider what type of loan you want. Do you have great credit and just want to get an approval through one bank? Or do you want to compare all rates from different lenders? Next, take into account how much time and effort it will take for each option. Finally, think about which option will cost less money. The answer is not always clear cut but there is no harm in doing some research!
Why use a mortgage broker: the pros & cons
There are many reasons why people choose to use a mortgage broker instead of applying with banks themselves. A mortgage broker brings you no direct costs with the lenders paying the commission.
Here are some benefits:
- Brokers can also open your options to lenders you might not think of approaching, for example second tier building societies, banks and credit unions.
- A broker or adviser can often get the lastest, non advertised rates and know what is competitive on a week to week basis so can get you a good deal.
- A mortgage specialist can help you get prequalified for your loan. This is the most important thing! Lenders won't report back to credit agencies if they don't know how much money you want, so they will not be able to run your credit.
- A broker can find you the best rate possible, even if it means going through a dozen lenders.
- Many brokers have good working relationships with banks and might get better terms for their clients because of this.
The cons of using a mortgage broker include:
- A mortgage specialist might not be able to get you pre approved for loans through banks that they don't work with often or at all, so this could potentially waste your time. This is why many people choose to just work with banks themselves.
- A broker may have specific relationships with certain banks, so they might not approach all banks to get the absolute best rates.
- If you want to work with just one bank, then going through them directly might be your best option. Lenders have different procedures and some will make it easier for first time homebuyers than others. Many people like working with just one bank because they feel comfortable with the people at the branch.
- It's possible you will see faster loan processing time since there is no middleman involved.
- It is easy to get stressed out or overwhelmed when you are working with so many different people and deadlines! Finding the right mortgage broker might help ease these concerns, but it's important to do your research first.
- If you want the most control and aren't afraid of talking on the phone or emailing back and forth, then this is your best option. Some advantages include:
- You might be able to negotiate better terms by talking directly with the lender; this is especially true for those who do not have excellent credit scores and/or are borrowing at a high LTV (loan to value).
When should I see a mortgage broker and how long does the process take?
When you know what kind of loan and terms that you want, then it's time to see a mortgage specialist. Mortgage brokers can help with: exploring different options for your home purchase; choosing the right loan and putting together an application package (which includes getting documents like pay stubs ready); taking care of all communication with lenders on your behalf; and helping to make sure you meet all the deadlines.
With excessive demand on the hosing market in general, some lenders are taking longer than expected to process applications. You might need a broker who is good at staying on top of the situation and following up with lenders so you don't miss out on your dream home because one lender takes too long to get back!
What should I think about before applying for a home loan or using mortgage brokers?
Become familiar with the process of applying for a loan. Try to talk to as many experts as you can. Your real estate agent, financial adviser or friends who have recently been through the home loan process can give you useful tips You can search for mortgage rates aggregator sites like mortgagerates.co.nz to give you a starting point and join online communities for advice. You should go into these discussions knowing what rates borrowers have been getting recently, which can be considerably lower than the advertised interest rates. Also other incentives that lender may offer such as cash back contributions.
What should I look for in a mortgage broker?
You should look for a mortgage professional who is licensed and has extensive experience in the mortgage lending industry. A good place to start looking would be online as there are many broker directories, such as those on NZ property directory.
A good idea is also asking friends and family if they have worked with any brokers before! You can then check their profiles on these directories, looking for good reviews and their experience. Home loans can be quite a stressful process, so having good mortgage broker is essential.
Once you have found a few brokers to interview, make sure that they are registered with the broker authority! You can ask them about this or check online by searching "mortgage broking complaints" in Google .
Sometimes brokers specailise in different property types such as investment properties or apartments. Most brokers within the mortgage industry can cover all bases, but its worth checking they can look after your needs to get you a home loan. If you want to work with a specialist, they might be able to help you find better rates faster.
Some important questions to think about before approaching a mortgage broker are;
- If you are a first home buyer, are they comfortable with any extra requirements you have.
- Check that the broker doesn't charge an administration fee
- Check that they have a complaints process in place and belong to a dispute resolution scheme as par of the financial advisers act.
- Do they offer any other financial services or work with any financial advisers?
- Do they look at non bank lenders as part of their process?
- Can they get a revolving credit for you from the bank? Depending on your financial situation, some banks offer a revolving credit.
- Often brokers work with insurance companies to help you with home and life insurance once your home loan is approved, as your broker if they offer this as a service.
- Do they understand the kiwisaver process for first home buyers and kiwisaver exemptions
What should I expect from the application process?
Knowing how the mortgage broker works within mortgage market is one part of being comfortable with the process, next being comfortable with the home loan process is important. You will need to provide your broker with information such as salary and expenses in order for them give an accurate picture of how much you can borrow.
They will also ask for details about your property, such as the purchase price and if it's a new build. This is to find out what LTV you have so they can estimate how much help you might need from them in order to get a loan.
You will then be asked about your goals with buying a house or refinancing - some brokers specialise more in first time buyers, while others are more experienced.
You should also ask about what to expect from the application process itself! Some brokers have a lot of experience in this area and can help you with loan applications or give tips on how to apply for finance yourself. Others might not know much about the different types of loans available so be sure that they will be able to help you with the type of financial product that you are interested in.
How much does a mortgage broker cost and when do they get paid?
In New Zealand , mortgage brokers do not charge fees to borrowers. They are paid by the bank instead, and it's their job to get you a better deal than if you applied yourself!
It can be difficult for new buyers or those with poor credit scores (or even people who just want more control over their application) as banks might only give them pre-approvals for higher LTV loans.
You might find that your broker can get you a better deal on an unsecured personal loan, or they may recommend another type of finance which will be more suitable to your situation (like KiwiSaver). This is why it's important to work with someone who has the experience and knowledge in order to make your application more successful.
How can I approach a bank myself to apply for a mortgage?
There are many different types of mortgages available in the banking industry, so you will need to know which one is right for your needs. You can find some example rates on any banks website.
If you choose to apply for a mortgage directly, bring in your identification and other documents, such as details about the property you are buying.
It should not take long to get an initial pre-approval so you can start looking for a house. The only downside is that you might be limited by how much money they will let you borrow based on your income or savings!
You should also look around online as there might be a lot of lenders advertising low interest rates even though they aren't offering any loans at that rate.
When you are looking for the best deal, speak to banks directly and see what LTVs they can offer you on your property value .
Choosing whether to use a mortgage broker or talk to banks yourself can be an overwhelming decision. Ultimately, it comes down to how much time and effort you want the process of getting a home loan to take. If you don't have any experience with mortgages or if your credit score is less than stellar, then talking with a professional could help ensure that your application is successful. On the other hand, if you're happy doing research on different types of loans available in New Zealand and applying for them online while navigating all of the documentation requirements by yourself without assistance from someone else, then this might work better for you! No matter which option sounds like something that would suit your needs best, we encourage new buyers and those who are looking into refinancing their