Following our earlier interviews with mortgage brokers on this page, Good Returnsprovides some questions and answers on their service.
What does a mortgage broker actually do for you? They look at your borrowing requirements, talk through a range of mortgage options with you, recommend the best deal and apply to lenders on your behalf.
__Which lenders do they use?__Brokers will have a list of mortgage lenders that they deal with and they're very familiar with those lenders' mortgage products. They usually have access to the rates and conditions for other lenders as well.
They will have contractual arrangements with the lenders on their list and, because they deal with large volumes of business, they can sometimes get better pricing than you could by going direct.
__What does it cost?__For residential loans, it won't usually cost you anything. For commercial loans, you will probably be charged as there's a lot more work involved.
__How do mortgage brokers make their money?__Banks or other lenders will pay them directly, usually between 0.5 per cent and 0.7 per cent of the value of the loan. This isn't added on to the cost of your loan in any way: it's worth it to the banks to get your business, and it can be a lot cheaper for them than using their own staff.
What are some of the pros and cons?
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It's easier for you to make an informed choice, as good brokers should be familiar with a range of mortgage products.
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You might get a better deal from a particular lender than you could otherwise: they may sharpen their pencil if they know a broker is involved, or they may give the broker a better price as they deal with them regularly.
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It can save you a lot of time and hassle if you were planning to shop around.
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On the other hand, they may not deal with the lender you're interested in. Not all lenders deal through brokers and anyway, you may prefer to sort it out yourself.
What should I look for when choosing a mortgage broker?
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Make sure you're comfortable that they're working on your behalf rather than pushing a range of other products that you don't need, and that they have sufficient experience to be giving you financial advice.
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Look for a broker that deals with a comprehensive range of reputable lenders, preferably both banks and non-banks (to be a member of the Mortgage Brokers Association, they need six or more lenders on their list, and many brokers have a lot more).
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Ask whether they have a preferred lender and, if so, why.
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Check whether they belong to the Mortgage Brokers Association (see our earlier article) or what other standards they comply with (for example, their company may be a member of the New Zealand Stock Exchange and bound by its code of practice), so that you have a clear idea of what safeguards are in place should anything go wrong.
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