Do I need a mortgage broker to buy my first home in NZ?

Do I need a mortgage broker?

No. Nothing in New Zealand says you must use one. You can apply to a bank directly. A broker is one way to get help, and some first-home buyers like the help because a first loan has a lot of moving parts. It is also fine to go direct. This site does not say which to choose.

Been declined by your bank? Here is what first home buyers can look at next.

What does a mortgage broker do?

A home loan specialist can:

• look at your income, debts and deposit;
• explain how different lenders treat things like student loans, gifts and self-employed income;
• help you pull together documents for a lender;
• apply on your behalf, and explain what the lender says back.

They do not approve the loan, pick your home or sign the sale agreement for you. Your lawyer does the legal side. The questions to ask a broker page lists what buyers often take along to a first chat.

Do mortgage brokers charge a fee?

Mortgage brokers are usually paid by the lender, and the borrower often pays nothing directly. The lender pays the broker a commission when a loan is drawn down. The usual upfront amount is about 0.5% to 0.9% of the loan, and it varies by lender. Some lenders have also stopped paying ongoing “trail” commission and pay everything upfront.

Most brokers work on commission, but some charge fees instead of, or as well as, commission. It is worth asking before starting: “How are you paid, and do I pay anything?”

How does lender-paid commission work?

Say your loan is $600,000 and the lender pays 0.5% upfront. That is $3,000 paid by the lender to the broker’s business, not added to the loan. This is a simple illustration, and every lender and broker differs.

If you repay or move the loan early, the lender may take that commission back. This is called a “clawback”, and the period is often about 12 to 24 months, though lenders vary. The broker may then charge you a fee for the clawed-back amount. Brokers are expected to disclose this upfront.

Is it worth using a mortgage broker?

The arguments for, in plain terms:

• One conversation can cover several lenders.
• A broker can explain the paperwork and what lenders look for.
• It may save time, especially when a situation is not simple.
• The lender usually pays the broker, and any fees should be disclosed upfront.

Whether it is worth it depends on how comfortable a buyer is going it alone, how complex the situation is, and what a conversation at their own bank gives them. Both routes are normal.

Is there a downside to using a mortgage broker?

These are fair things to know about:

• Commission can differ by lender. It is worth asking whether the broker’s pay differs between lenders, and why they suggested a particular loan.
• Clawbacks. If a borrower leaves a loan early, a charge may follow. The broker can say what applies.
• Panel limits. A broker can only suggest lenders they work with.
• Extra step. You add another person to the process. Some people prefer to deal with one bank.

Questions worth asking: do you offer loans from multiple lenders, how are you paid, what fees apply if I switch early, and can you show me the lowest-cost option as well?

How is Online Mortgages different?

Online Mortgages is not a broker. We introduce first-home buyers to a home loan specialist if you ask us to, and the how we are paid page explains our fee in full. Our referral fee is paid by the specialist’s business, not added to your loan. Your specialist gives you their own disclosure of how they are paid before you decide anything.

Summit Mortgages can match you with a broker for other loan types.

Common questions