Buying guide

Using a bank vs a mortgage broker

The pros and cons of working with a mortgage broker vs a bank

Last updated: 4 August 2023

In New Zealand, around 60% of home loan borrowers use mortgage brokers while the other 40% negotiate directly with their bank, as estimated by CoreLogic. So why do some people go to a bank rather than to a recommended mortgage broker? We look at the pros and cons.

What we’ll cover:

Getting a mortgage through your bank
Is it worth getting a mortgage broker?
Tips for getting the most out of a mortgage broker

Getting a mortgage through your bank

Pros:

You may have an existing relationship with your bank.
You don’t need to shift bank accounts.
Banks may offer a mobile mortgage manager or home loan coach who will help you with your home loan application.
Your bank knows you, they have all your information, it can be a smoother, quicker process.
Banks can offer customers deals on insurance, and valuations, and may waive fees as well as give you good cash-back deals and first home buyer extras.
Competition is hot between banks so they may well give you a better deal if you come direct as a known customer.
If you’re a business customer with the bank, they’ll be very keen for you to keep your home loan bank accounts with them too as business customers are very valuable.

Cons:

Banks tend to be more cautious and if the bank says no, then you’ll need to go around all the other lenders yourself which a mortgage broker will do for free.

If you have an established relationship with a bank and you still feel like you’re getting a deal that works for you, approaching your bank for a home loan may be the way to go. If you like your bank’s customer service, the bank’s app - it’s understandable.

Bonus tip: Not all banks work with mortgage advisers

It’s worth knowing that some banks don’t work with mortgage advisers, so if you have your heart set on working with a certain bank, it’s best to check before you decide to work with a mortgage broker. On the other hand it’s not always possible to go direct to second-tier lenders so going to them yourself may not be an option.

Is it worth getting a mortgage broker?

The majority of Kiwi work with mortgage brokers as a go-between who deals with banks or other lenders to arrange their home loans.

Pros:

Mortgage brokers generally offer a free service.
They’ll help you with pre-approval by going through your bank accounts, examining your spending habits, your savings, debt and assets.
They work with multiple lenders and will help you shop around for the best deal.
The amount you can borrow varies quite significantly between lenders, brokers can help you get the most.
They will help you structure the loan and re-fix when the time comes.
They will help with any first home loan grants, and give recommendations for other advisers, lawyers, financial advisers and accountants.
They will know which lenders will work with certain kinds of borrowers, such as borrowers who are self-employed.

Cons:

Lenders often pay brokers a commission, so they might be biased toward particular lenders.
They don’t cover all lenders, there are some banks who don’t work with mortgage brokers.
Not all brokers are the same. Make sure you find the best one for your needs - ideally one that has been recommended by friends or family or a reputable source.

Tips for getting the most out of your mortgage broker

The Financial Market Authority which oversees mortgage advisers suggests asking the following questions before working with one:

Do you offer loans from a range of different lenders?
How do you get paid for the advice you’re giving me?
Does this differ between lenders?
Why did you recommend this loan to me?
What fees will I have to pay when taking out this loan?

If you’d really like to stay with your bank, you can always tell your mortgage broker who your bank is, and they’ll compare a number of lenders for you. If your existing bank is competitive and happy to lend to you, you may end up staying with them but at least you know that your institution is as good a choice as any.

Further reading

→ Working with a mortgage broker in New Zealand

Written with insights from:

Nick Goodall, Head of Research, CoreLogic
John Bolton, Founder of Squirrel
Cam Muggeridge, Mortgage Advisor, Loan Market

*We hope this article has provided some helpful information. It's based on our experience and is not intended as a complete guide. Of course, it doesn’t consider your individual needs or situation. If you're thinking about buying or selling a property, you should always get specific advice.

Author

Karina Reardon

Head of Strategic Partnerships - mortgages.co.nz

Karina has worked in the mortgage sector for the last two decades, and is considered an industry expert. As a content author she has a database of financial advisers who share her weekly commentary through their social and digital channels. A well-respected and popular member of the industry, Karina was recently recognised as one of the ‘Elite women in mortgages 2023’.