James PuahYou may be wondering what the difference is between banks versus mortgage brokers, or mortgage advisers as we now refer to them in New Zealand.
When looking for a good mortgage for your first home, or even the next home there are two main options: firstly going directly through a bank or secondly working with a mortgage adviser. People will argue that both can be a good options, depending on your financial situation.
So how do you decide which one to try?
Let’s look at the difference between banks versus mortgage brokers, their pros and cons, and how to figure out which is best for you.
Let’s Start With The BIG Difference
The big difference between a bank and a mortgage broker (adviser) is that a mortgage adviser can provide you with mortgage products from several different lenders, while a bank can only give you the mortgage option from their own company.
Mortgage advisers have access to a variety of banks and non-bank lenders, which means they can find options for you that may suit better than another option. There may be specific policy or terms that may be better suited to your circumstances. This is important if your application is going to be a bit difficult, but it’s also important if you have specific requirements or just want to pay your loans off faster.
Since they regularly do business with a variety of lenders, the advisers get to know what banks and lenders offer the best options.
Advantages of Dealing Directly With Banks
Of course there are benefits with dealing directly with a bank.
If you have had your bank accounts with a particular bank for a long time, you may already trust your bank and be more familiar with it. For many Kiwis this can be comforting and in a large and important transaction such as buying a home it’s nice to work with someone that you know.
When you are doing a mortgage application with the bank they will not have to ask for as much supporting information (ID, bank statements etc) as ythey can access these from what they have.
If you have a pre-existing relationship with your bank you may also think that it’s possible to leverage your relationship to get a better level of service and even a better interest rate or terms. This is probably a perception based on what used to happen rather than what happens within the banks these days.
Disadvantages of Dealing Directly With Banks
There are some key disadvantages too.
Banks can only offer their own products, so there is a limited selection that you can choose from and this can mean that there is no option that really suits your situation and can even mean that due to that banks criteria you may not be approved and of course they will not help you shop around or even suggest where you could be approved.
The banks can look back at your account conduct and review your history over a long timeframe. From this they may be able to see transactions or conduct that wasn’t ideal but which a new lender would not see.
Advantages Mortgage Advisers Have
There are some valid advantages in working with mortgage adviser.
Firstly, as already mentioned the big difference between a bank and a mortgage broker (adviser) is that a mortgage adviser can provide you with mortgage products from several different lenders – they have choice. If you are wanting to take advantage of specific options like the First Home Loans or First Home Partners than they are only available with specific banks, and some have better deals than others.
A choice that a mortgage adviser may have is access to options that you could not get through a bank or which are not offered directly to the public. These can include specific bank products and non-bank options too. One option is the Go Home Loan that is offered exclusively through selected mortgage advisers and while it’s funded by ASB Bank it has a few features that means most advisers will recommend it over the standard ASB mortgage.
If you question the trust of a mortgage adviser you can be assured that advisers are obligated (by regulation) to work in your favour, so there should never any question about whether they are doing the best for you.
Disadvantages of Mortgage Advisers
There are some disadvantages with going through a mortgage adviser too.
A mortgage application done through a mortgage adviser may take longer and may require more paperwork, since you don’t have an existing relationship with them like you may have with a bank where they already have access to this information of yours. This can be a concern if you have a tight deadline for buying your home.
Not every bank or lender works with every mortgage adviser, so you may still find shopping around with the banks is an option to consider.
Should I Go Through a Bank or a Mortgage Adviser?
This is of course a common question.
In the end, deciding where to get a mortgage is a decision only you can make.
Good mortgage advisers can give you several options that you may not find on your own and that can often either be the difference between being approved or not, or could make managing and paying off the mortgage easier.
In New Zealand we now call them mortgage advisers not brokers as their key role is to offer advice and for many people that is the real benefit as it’s something that banks are offering less and less these days.
You can always contact me and see if you would like umeto work for you.
