Does a mortgage broker send your application to all the banks, sit back and watch them fight it out for your business? Sadly, and as much as we would all love to feel this special to a bank, this is simply not how brokers or the banks operate. Lance explains.

So, if a mortgage broker is not bringing the banks to fisty cuffs on your behalf, what are we doing? How do we help? And what should you expect of us as a broker?

1. Advice. Firstly, it may be helpful to use the term mortgage adviser, rather than broker, as this better represents what we offer to our customers. Our job is to know what the banks are up to and make sure we get you to the best bank for your needs, not only for today’s plans, but also for what you are hoping to achieve in your future.

During in-depth conversations on what you’re trying to achieve we’ll explore whether you are after multiple properties, building a new home, wanting to pay off your loan fast, renovating, buying your first home, or your forever home. We will then advise you on the best course of action and which bank or banks (see the “Mood of the Banks” article in this addition of the Spin that talks about spreading the love across multiple banks) would be the best for you.

2. Knowing what the banks are up to. Banks change their minds … a lot! One day a bank will give pre approvals to people purchasing their first home with 10% deposit, the next week the ‘tap’ has been turned off and that bank might stop giving pre-approvals altogether, no matter how much deposit you have. Furthermore, they could also change their assessment tools, meaning you can now borrow more money than a week ago, so you can actually purchase the property you want, or vice versa. So, you can see how choosing a bank can be so much more than just who’s got the lowest rates.

3. Hunting for the “yes” responses. Unfortunately, we come across a number of people that are told “no” by their banks so they miss out on purchasing properties, not because they do not have the ability to purchase, but simply that their bank is not lending that way right now. Our role is to make sure that if there is a possibility for a “yes” out there, we will find it.

4. Long term strategy. I have heard it said that surely the best way to choose a bank is by going to the one that gives us the best interest rate. We see this from time to time where people try to use us like they have turned up to Harvey Norman with a discount on an item at JB Hi-Fi asking us if we can do better. This is one way of doing business, but only when ‘price’ is all that is on the table, and if this transaction only occurs once.

The thing with home loans is that you have them for a long time, so there will be multiple times when your rates expire and you need to lock them in again and again. So, you may choose a bank solely on the best rate today, but next year when it is time to lock in new rates they could have the worst rates out there. Unless you want to change bank every other year, with all the legal fees and other costs, you may want to come up with a better strategy that will actually save you serious money.

Rates at banks are pretty similar and the cash they give back to customers to go with them will chop and change depending on whether they are wanting to crank up business or not. Yes, we do get great rates, and banks like us because we are not one client, we are a source of connecting multiple clients for each bank, however, choosing a bank based on getting the best rates today could end up costing you tens of thousands in the long run. We can help you come up with a manageable debt reduction strategy, saving you tens of thousands of dollars over the life of your loan, set up a facility so you have access to money for something planned like a wedding or holiday (within NZ), or set up a rainy day fund in case something major outside of your control occurred, you know, like a worldwide pandemic for instance (I know I almost made it all the way through without dropping the ‘C’ bomb).

So, in short, yes, we get you great rates, and, yes, we know how the banks are lending and how they will view your situation at any given time. But there is so much more we can advise you on for reaching your goals so you don’t miss out on any opportunities.

Lance Shearman is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

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