Finance Brokers must act for you

What is a Finance or Mortgage Broker?
A finance or mortgage broker is someone who operates as an intermediary between the lender and the borrower. They are agents or consultants who organise mortgages, sort out valuations, insurance and other requirements when you need to borrow money or take out a mortgage. Sometimes you have to pay the brokers’ commission, but most of the time they receive remuneration from the company whose insurance or loan product is eventually purchased for you or recommended to you.

Who do Brokers Work For
Most brokers are paid by the lender, which means they are not actually working for you. They are members of the NZ Mortgage Brokers Association and operate to a strict code of ethics, which requires them to work with your interests at heart. They have arrangements with a number of lenders and do not act for one lender alone. Even if they don’t cover the whole market, they do put together lenders they believe will best fulfil your requirements.

This means that the deal they offer you should be the best they can offer from their firm, but it may not always be the best available overall. Sometimes the arrangement can be less than the best, because the broker obviously has to act in such a way that will please their lender who pays their commission.

Members of the NZ Mortgage Brokers Association have to use a minimum of six different lenders. It might be a good idea to stay with brokers who are members of the NZ Mortgage Brokers Association because they carry professional indemnity insurance and have to abide by the code of ethics, which requires them to act on your behalf in a professional manner.

Do You Need a Broker?
A good financial or mortgage broker is not always needed, but where larger mortgages or funding is required their assistance can be an advantage. They can recommend products that benefit you and minimise your risk. They should work towards your long-term goals because you don’t want to lost money in the future with the company recommended to you, or with the strategy you have been shown.

It’s good to use the services of a broker because it does not cost you directly, and as long as you assess the recommendations made by the broker as to the company or the products, then everything should be fine.

How to Find a Good Finance Broker
Finding a good finance broker means you have to use the same tactics as finding any other professional. The first thing to do is make a list of potential candidates. Ask your business associates, relatives or neighbours, or anyone you respect in the business world. See if they can give you a name, a firm or a phone number and then follow through on that.

Fee Charging Brokers Recommended
Make sure you get the advice you are seeking from a broker so you can be confident and in control of your finances. Most people need general and honest advice, but they don’t get it. The reason is because many brokers receive nothing for their work and only get paid once they have sold a mortgage or arranged finance for their client.

Make Sure They Act In Your Interest
Be careful that the broker does not steer you towards the companies that give him/her the best commissions. Make sure that what they recommend is in your best interest. Even if they say they are not affected by promotions from various companies, and they will only supply companies that give you the best deal, take their advice with a “pinch of salt”. It’s human nature that the broker will have a slight leaning towards the company that has generous commissions. Also, they are not going to recommend repayment of any mortgages or other debts you have if they get no reward.

But how does the system really work? You may pay a lawyer or accountant fees based on the time they work for you, but it is different with brokers. Some brokers may charge fees because it is what their clients want. These brokers charge a fee based on the hours they work for a client, while others base their fees on the amount of money they handle for the client.

Paying fees by the hour is probably the best option if this method is acceptable to you. The problem here is that time can run up and the fees can be higher than those paid by commission to the broker.

In most cases it’s better for you to use a broker who is paid by the company they deal with because there will be no outlay on your part, and as long as you are happy that the broker is acting for you, with your best interests at heart, then proceed with them.

Finance & Mortgage Broker

  • Finance Brokers must act for you

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