The best deal

All about mortgage brokers. By VICKI HOLDER

Organising finance to buy a property takes time hunting for the best deal from the various lending institutions.

There's a lot of choice out there, which can be confusing. It's not simply a matter of comparing interest rates. There's the type of mortgage, the term and repayment options to consider. Even interest rates come in fixed, floating or capped variations. More and more people seek help from a mortgage broker.

In the past 12 months, Kim Lyons of the broking firm New Zealand Mortgage Finance says the number of people taking out mortgages through a broker has lifted beyond 29 percent.

WHAT IS A MORTGAGE BROKER?

A mortgage broker negotiates between borrowers and lenders. They help borrowers choose an appropriate loan from a range of mortgages and assist with the application process.

"It's important to get a broker who has a sound knowledge of the lenders and their products. Our prime role is to take away the stress for a client to make it easier for them to arrange finance," says Lyons.

THE SERVICE THEY PROVIDE

Mortgage brokers can advise on the lender's requirements and whether the borrower can satisfy the criteria. They can arrange finance and help with the loan structure. If the loan offer comes with conditions, the broker helps satisfy those conditions.

The best mortgage brokers have access to the latest products and can compare different loans to suit the borrower's circumstances. They can also assist with dealings with valuers, solicitors, accountants and real estate agents or forming a Loss Attributed Qualifying Company (LACQ).

WHAT THEY REQUIRE?

A mortgage broker will ask the client to fill out an application form to provide information on the person's work history and income details. Clients need to provide a list of assets and liabilities, income and outgoings and bank statements for at least the past six months for the broker to consider how they manage their financial affairs.

ADVANTAGES

Mortgage brokers save time by providing a fast turnaround and ongoing service for borrowers. They deal with a range of lenders and often have access to some that clients can't deal with directly. For example, the lender may not have branch representation.

Mortgage brokers understand financial jargon and can interpret what lenders require.

Lyons adds that brokers have generally been in the financial industry for a long time and they build long-term relationships with clients, whereas bank personnel can change frequently with staff being promoted, transferred or on extended leave. Lyons' clients appreciate the direct access they have to a broker, rather than going through the computerised telephone system that banks tend to have.

If a client has been to a bank and found them not as helpful as they'd hoped, good mortgage brokers will work hard to find a lender that can help.

"We have a selection of lenders and use our skills to help a client achieve what they want to do. We deal with a lot of non-conforming lenders who do deals where they haven't got a genuine sales deposit.

"Someone may require 100 percent finance, but they haven't got an up-to-date balance sheet. People may have credit issues due to a recent marriage split. There's an increasing need to help clients when they have a problem rather than giving just the easy 'no'. We have access to many lenders who take higher risks. But not all brokers deal with that segment of the market."

DISADVANTAGES

People may not have any knowledge about the mortgage broking company they are dealing with, and, therefore, they are reliant on the skills and the honesty of the broker. That's why it's important to deal with a broker who is registered with the New Zealand Mortgage Brokers Association (NZMBA).

However, mortgage brokers are not directly regulated by any government agency, unlike banks and other financial advisors.

Few brokers hold information on all the mortgage products in the market.

When you meet a broker, you should ask them to divulge which lending institutions they work with. Make sure you don't use a broker who has an obvious lender bias, although inevitably brokers have their preferred lenders.

Just as you need to relate well to your solicitor or dentist, it's important to find a broker that you can build a rapport with.

DEAL WITH AN ACCREDITED NZMBA MEMBER

To become a member of the NZMBA brokers must have passed an approved training and accreditation programme, which ensures they are competent and aware of their responsibilities and ethics of the industry. Vigorous checks are done to prove a history of relevant experience and credit worthiness. They must have a full range of product types and options on offer and approval from at least six major financial institutions. All registered brokers carry at least $1 million in professional indemnity insurance cover.

THE COST

In a deal with a mainstream lending institution, the lender will pay a commission to the broker, so the service is free to the borrower. Sometimes the bank might include a low equity fee on a lender mortgage as risk insurance. This generally applies to loans that are beyond 80 percent of the property valuation.

New Zealand Mortgage Brokers Association website