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Why Should People Pay For Something They Could Get Free?

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Contributor:
Brian Dalley
Brian Dalley

For years now mortgage brokers have debated the subject surrounding charging a fee as opposed to being paid a commission from the lender.

Naturally such a radical change is fraught with resistance, but it may be something that in time will be imposed on the industry as main stream lenders opt for managing in-house sales people rather than working with brokers.

Three of the main stream lenders HSBC , BNZ and Kiwibank don’t deal with mortgage brokers. (Yes, Kiwibank, even though small in structure, must now be recognised as one of the big boys if not just for the amount of growth they have achieved in such a short period of time.)

Therefore, if we humour ANZ & National Bank and treat them as two banks trading independently, we have seven main-stream lenders. Three of whom at this stage don’t work with mortgage brokers.

Are these three break-away lenders really achieving anything?

Well Kiwibank haven’t worked with mortgage brokers from day one, so maybe it does have some merit however in saying that, the general reason given to exclude mortgage brokers was cost saving.

Ironically it was recently reported that huge bonuses, (as high as $10,000 a month) are being paid to mobile mortgage managers that exceed sales targets. On top of that, schemes are in place with some lenders that reward people for referring clients to them with bonus draws of up to $2,000 a month. So is it really about savings?

Naturally with such temptation comes greed, which has seen a number of bank personal imprisoned for a variety of offences.

Am I back slamming mortgage brokers and mobile mortgage managers? Not at all, I work with both on a day to day basis and freely promote the NZMBA on my website.

My aim is not to take anyone to task, but to simply make you aware that although they may be handing out roses.

One should not forget the thorns.

Some perspective - AA do over 20,000 car inspections a year at a cost of $165 per inspection. People are paying $165 ($140 if you are a member) to get someone’s opinion on a car valued at say $25,000.

However, when we come to a home loan of $250,000 or more, most are content to go with the flow.

Sure in many cases people pay a valuer to make sure they are not paying too much for the property but many don’t give a second thought to questioning whether they are about to commit to a mortgage structured in their best interests, or biased to favour the lender or broker.

Most do not ask for a second option.

Think about it for a moment. A mortgage broker is unlikely to refer you to someone that is not going to pay him or her. (And there’s nothing wrong with that as they may very well be able to offer something equally as good.)

Likewise, any lender you contact directly is unlikely to send you to their competition. (But in fairness to them, like the mortgage brokers, they may well be able to match the lender next door.)

Here is my point, how are you going to know for sure unless you ask for a second opinion from someone that has no financial interest in the situation?

Look for someone who can honestly make a statement such as; “I do not benefit from the advice given, only from the services rendered”. Such a statement is made on our home page. But also remember, what works for others may not work for you so, be careful who you ask.

Why do people pay for something they could get free?

If you take 25 years to repay even a small home loan of $250,000 with a very modest interest rate of 5% you will still pay a total of $438,441.

Nothing is free, everything comes at a cost – my advice; make sure you know where that cost is.

Brian Dalley is a former NZMBA Mortgage Broker, Property Investor, and Real Estate Agent with over 15 years experience in the industry. You can read more of his and other professional’s views and opinions on his website www.propertyprofit.co.nz.
 

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