Bank vs Adviser: Which Path to Your Home Loan is Right for You?

So, you have your eye on a new home. That is incredibly exciting, but now comes the part that can often feel a bit overwhelming - securing the finance. When it comes to getting a home loan, you have two main routes to choose from, going straight to a bank or using a mortgage adviser (also known as a mortgage broker).

It is a significant decision, especially considering that in New Zealand, around 60% of new home loans are now arranged through a mortgage adviser. But what is the real difference, and the crucial question, are you going to be charged a fee? Let’s break it down in plain language.

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What does a mortgage adviser do?

Think of a mortgage adviser as your personal financial guide. Our main job is to act as the link between you and the banks. Instead of you walking into every branch in town, we do the legwork on your behalf:

• More options to compare: We have relationships with a wide range of banks and lenders (over 30 to be exact). This means we can compare multiple options side by side to find a suitable loan that genuinely matches your specific situation, rather than just what one bank happens to offer.
• Negotiation on your behalf: We take on the job of talking to the banks for you, working hard to secure a competitive interest rate and potentially a strong cash contribution.
• Saving you time: When you find the perfect house, time is precious. We manage the paperwork and follow-ups to keep the complex application process moving forward as smoothly as possible.

If you choose to go directly to your bank, you might enjoy the familiarity of dealing with an institution you already know. However, it is worth keeping in mind that a bank can only ever offer you products from their own shelf. While their guidance can be great, you could be missing out on a much better deal somewhere else.

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Do you have to pay a fee to use a mortgage adviser?

Here is the good news - mortgage advisers generally do not charge you a fee for our advice and service.

Instead, we are paid a commission by the lender once your home loan successfully settles and the money is drawn down. This structure means our services can result in major savings for you. By securing a competitive interest rate or more favourable terms, we can save you serious money over the life of your mortgage, all at no upfront cost to you.

While our service is typically free to you, there are a few specific, less common scenarios where a fee might be involved. We always outline these clearly during our very first chat so you are never caught by surprise:

• Early mortgage repayment: Lenders pay us a commission, but they include a clawback clause. If you fully repay your mortgage by selling the property or refinancing with another bank within a short timeframe (usually the first 27 months), the bank takes back that commission. If this happens, an adviser may charge a fee to cover the professional time spent on the original application.
• Using non-bank lenders: If your unique circumstances mean a non-bank lender is the best fit, these providers sometimes charge an upfront fee as part of the loan instead of paying a standard commission.
• Choosing not to proceed: If we have completed the full process to secure a formal loan approval and you subsequently decide not to go ahead with any property purchase or finance, a capped hourly rate may apply to cover the work completed.

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Ultimately, the choice comes down to what works best for you. Are you happy to dedicate your own time to researching and negotiating with multiple banks, or would you prefer to leverage the daily expertise of a local mortgage adviser?

We are always here to lend a hand, so feel free to reach out to our team of mortgage advisers at Loan Market Central today for a chat.