Risks in switching mortgage broker, or shopping around, after a home loan is approved

[dothers]

Hi all,

I am in the process of buying my first house in Auckland. After many property viewings and negotiations, I have finally got my offer accepted. The vendor suggested a mortgage broker, MB1 (fictitious name) who is a from a well known financial services company in south Auckland. I approached her and she got my loan approved from AMZ in less than 2 days. However when I asked her if she approached or checked with other banks too, I didn't get a convincing answer. I looked up their company website, and it seems they only deal with AMZ. The conditions in loan approved from AMZ, are quite standard ones and even includes a loan application fee of $500 apart from a low equity premium of almost $3000. I calculated the floating interest from the indicated repayment amount in their letter, and it is about 6.7%. I am really doubtful that MB1 processed my loan application with any other bank.

I have now approached another mortgage broker, say MB2 (recommended by a colleague). MB2 has assured me that she will approach all the major lenders for my loan, including the ones who don't deal with brokers. She will later present me with the bank offers and I can chose to go with one or not. I will have to pay her a fee only if I go with a bank which doesn't pay her a commission. I will have to sign a letter to authorize her, to negotiate/discuss a home loan with lenders on my behalf. The problem is that she told me she will approach AMZ bank too (apart from other banks) to renegotiate the loan. I called up the bank's customer care, and I was advised that if they are approached regarding to my loan application again, it will be considered as fresh application and will be processed as per the bank's current policies/terms. My approve loan will become invalid, my other broker will be informed about the change of broker and the loan. According to them, it is unlikely that I will get a better loan deal as result of re-negotiation.

My offer is already unconditional now, with the settlement date about 5 weeks later. I am not sure how much risk it is to approach another mortgage broker at this moment. I also think that AMZ or MB1 has definitely given me a very standard home loan, with all kind of conditions (they didn't even bother to waive off the loan application fee).

Has anybody had any experience of shopping around for home loan, or switching mortgage broker after a home loan is approved and/or offer is unconditional? Please advise. Any thought/tip is welcome. Thanks a ton!!

[72andsunny]

Hi all,

I am in the process of buying my first house in Auckland. After many property viewings and negotiations, I have finally got my offer accepted. The vendor suggested a mortgage broker, MB1 (fictitious name) who is a from a well known financial services company in south Auckland. I approached her and she got my loan approved from AMZ in less than 2 days. However when I asked her if she approached or checked with other banks too, I didn't get a convincing answer. I looked up their company website, and it seems they only deal with AMZ. The conditions in loan approved from AMZ, are quite standard ones and even includes a loan application fee of $500 apart from a low equity premium of almost $3000. I calculated the floating interest from the indicated repayment amount in their letter, and it is about 6.7%. I am really doubtful that MB1 processed my loan application with any other bank.

I have now approached another mortgage broker, say MB2 (recommended by a colleague). MB2 has assured me that she will approach all the major lenders for my loan, including the ones who don't deal with brokers. She will later present me with the bank offers and I can chose to go with one or not. I will have to pay her a fee only if I go with a bank which doesn't pay her a commission. I will have to sign a letter to authorize her, to negotiate/discuss a home loan with lenders on my behalf. The problem is that she told me she will approach AMZ bank too (apart from other banks) to renegotiate the loan. I called up the bank's customer care, and I was advised that if they are approached regarding to my loan application again, it will be considered as fresh application and will be processed as per the bank's current policies/terms. My approve loan will become invalid, my other broker will be informed about the change of broker and the loan. According to them, it is unlikely that I will get a better loan deal as result of re-negotiation.

My offer is already unconditional now, with the settlement date about 5 weeks later. I am not sure how much risk it is to approach another mortgage broker at this moment. I also think that AMZ or MB1 has definitely given me a very standard home loan, with all kind of conditions (they didn't even bother to waive off the loan application fee).

Has anybody had any experience of shopping around for home loan, or switching mortgage broker after a home loan is approved and/or offer is unconditional? Please advise. Any thought/tip is welcome. Thanks a ton!!

Is that supposed to say ANZ? Why not just have MB2 avoid that bank. They are not exactly leading the market right now anyway.

http://www.interest.co.nz/borrowing/mortgages

Note: Based on all the floating rates being higher than the fixed rates, it looks like the banks are preparing for an interest rate drop in the near future.

[batgirl1001]

You have some wiggle room since it is 5 weeks for settlement whereas the conventional timeline is 3 weeks. I would suggest shopping for the best rates you can get (not the best rates out there) because not all banks are willing to offer you a home loan.

That's the reality.

Banks like a relationship with their client even if the client gets a mortgage broker. If you have a relationship with a particular bank - sit down with them and discuss the rates. They may have discounts for their customers which are below the official fixed rates.

Mortgage brokers are really working for their clients - which are the banks since their commissions are paid by them. Usually the big banks are the ones who are their clients so it is no surprise if they only checked with these banks. If the mortgage broker is not giving you the best options out there, you certainly get another as long as you have not signed on to a home loan.

The current fixed rates are attractive by NZ standards so I would suggest you consider a fixed home loan. A floating rate is not the indicator of the bank loan rates, they are more a reflection of the current economic situation - which is rather uncertain right now, despite being an attractive stable, low-rate environment.

[dothers]

Thank you 72andsunny and batgirl1001, for your valuable inputs.

I spoke with MB2 and told her that she can approach all the lenders except AMZ. She understood my point and agreed to it. I have sent all the relevant documents and loan application to her. Should come to know the outcome in a few days. She asked me if I can push the settlement date to April, so that banks can consider my loan application in April quota for which they have not yet reached their lending goal/level (and hence could offer me better rates & conditions). According to her, banks have already reached their lending level for March and hence may not be able to offer the best possible deal. Anybody got any idea about this theory??

In the mean time, I checked with MB1 too, about the loan application fee and other conditions by AMZ. She is confident that she will be able to get the loan application waived off, and get me a good interest rate on the day I decide to lock the loan and enter into an agreement with the bank. The fixed/floating conditions and ratio will be decided on the same day. According to her, other conditions like early closure penalties, pre-payment limits, lock tenure etc are standard and almost same with all the lenders.

I was just wondering that since banks pay commission to the mortgage broker, won't they try to convince the borrower to go with the bank offering best commission and not the one offering best loan deal?

Cheers

[batgirl1001]

To answer your question, yes. Loans are based on a computation of risk assessment and banks try as much as possible to limit their risk exposure to the global market. Because the LVR is set, banks will minimize their risk by rejecting or limiting their low-deposit loans generally which is less than 10% of their lending. In Auckland this can be extremely difficult due to the high housing prices, scrapping for at least 20% deposit may be hard.

Most mostgage brokers generally have 2 options for you to consider. But the decision is yours to make so they can only get the commissions they get from the bank you finally choose. This is if you are shopping for the best rates when you go to a broker.

The other kind of people who engage mortgage brokers are those who have difficulty securing a loan through normal channels, so they turn to brokers. They may if they are lucky, end up with only a single option.

[wanderingkiwi]

A good mortgage broker will get to know your situation, finances and goals in paying off your mortgage and then approach the banks that they believe will provide the best solution for you. They should also help you with support around subsidies and grants you might be eligible for. We found Scott at Advanced mortgages really helpful with clear simple explanations https://www.advancedmortgagesolution...rtgage-broker/