Looking at buying your first-ever home? We know how daunting this can be. The information, the paperwork, and new terminology, some of which you may have never come across before, all seem excessive and overwhelming. Don’t worry, we’ve all been through this before!
One of the first steps you’ll go through, even before finding a house that you like that’s within your budget, is getting pre-approved for a home loan.
This is where we come in. You can find out how much you can borrow and at what interest rate you can borrow your home loan at by contacting either a mortgage broker or your bank.
What does a mortgage broker do?
A mortgage broker is essentially the intermediary between a borrower (you) and a lender. A mortgage broker collects all information from you regarding your life situation and financial situation and then takes this information to the appropriate lender/s to find the best home loan that’s right for you.
Why do I need pre-approval?
It’s important to know how much money you can borrow and know that you can actually get a mortgage.
How much you can borrow depends on:
The value range of the properties you are looking at purchasing
How much of a deposit you have
Your income
Your ability to repay your home loan
Your expenses including existing debt
How many dependents you have
Which is better, going through my bank or getting a mortgage broker?
Mortgage brokers ultimately allow you to shop around, getting you the deal by talking to different banks or lenders. They also may be able to get you approved for more money, due to having a more in-depth level of understanding regarding your current financial situation.
A mortgage broker, unlike a bank, is also on your team. The advice they give you should be impartial. They’ll be able to give you the details of the several different lenders and what each has offered to you and talk you through the pros and cons of each. If for some reason you don’t get approved, they’ll be able to tell you why and make recommendations to you to help you improve your application.
Your bank, on the other hand, will only be giving you the one option, why would they pass you onto their competitors who may be offering you more money at a lower interest rate.
A mortgage is likely to be the largest debt that you will ever have, so advice from a good mortgage broker around how to structure and pay your mortgage can potentially save you a six figure amount of interest.
Common myths about mortgage brokers:
Mortgage brokers don’t have good relationships with banks and lenders
When you initially start the process of buying your first home, you’re bound to get a lot of advice from friends and family members regarding how to go about pre-approval. Some may say, ‘use X mortgage broker, they came highly recommended to us and we loved them’ or ‘go through your bank, banks don’t like mortgage brokers, they’ll cut you a better deal if you go to them directly.”
The truth is that most mortgage brokers spend a lot of time building up great relationships with all types of lenders, and vice versa. At the end of the day, both brokers and lenders can generate a lot of business through one another so it’s in everyone’s best interest to be on good terms. This also makes it a lot easier when dealing with deadlines of a client’s applications, their paperwork, and so on.
Remember that everyone’s journey to their first home is different and to choose who you ultimately feel the most comfortable with.
Hidden costs:
Wait, you’re saying a mortgage brokers service is free? There must be hidden costs.
When mortgage brokers advertise their services as free, they mean free. There are NO hidden fees associated with using their services.
How do mortgage brokers make their money then? Mortgage Brokers are paid commissions by the lender once the loan has been accepted, approved and drawn down. The interest rates you pay remain the same and the commission is taken out of the existing cost of the loan.
Mortgage brokers recommend only the highest commission loan:
Some kiwis believe that as Mortgage Brokers are commission-based, they will always recommend the home loan that will give them the highest commission. This is completely untrue. Mortgage brokers have a duty of care to their clients to find them the best deal possible that is properly tailored to their unique financial situation.
What other services do mortgage brokers provide?
Here at Futurebound, we offer multiple services to not only get you into your first home, but to build wealth through investment property, help you pay down your mortgage faster, coach you into better financial habits, and also provide you with insurance options to protect you and your family from unexpected financial setbacks.
Keen to chat?
Book in a free, 15-minute mortgage chat with us today and we can help you take your first steps towards owning your first home.
