We hear this debated on social media all the time – people saying go directly to the bank for a home loan while others say you should use a mortgage adviser.
To help answer this we decided to do a short article and to focus on just the one main reason why going directly to the bank is not a great idea.
The #1 Reason NOT To Go Direct
Do you want one good reason not to go directly to the bank?
A lot of people think that by going directly to the bank for a home loan they’re cutting out the middleman (the mortgage adviser) and therefore may end up getting a better deal.
The reality is, that rarely will happen, and let me explain why.
When you go directly to the bank for a home loan, you are going to one bank, without knowing whether that would be the best bank for you. Normally that one bank will be the bank that you do your transactional banking with, and you may have done that for a number of years.
You may be quite happy with the app, and you may even still go into the branches and like the staff, but when it comes to a mortgage you’re talking about a serious amount of money and you want to make sure you get the best home loan that you possibly can.
Consider this …
Let’s say you go to ANZ which are New Zealand’s largest bank and so therefore we would expect that this would be the most popular option. Now we know like a lot of things, large does not make it good, it just makes it large. Of course their marketing budget is also large, and that means they don’t necessarily have to be the best to attract clients.
But would a bank like ANZ be the best option for a first home buyer? Of course if you went to ANZ directly, they would say yes, of course we are very good with first home buyers. But we know they are not going to talk about the Kainga Ora First Home Loans or offset mortgages, as they just don’t offer them. We also expect they are not going to talk about the flexibility of paying the mortgage off more quickly, or if they do it will be limited to 5% which is what the ANZ policy allows with any fixed home loan. Plus they’re not going to compare what they can offer versus what other banks can offer.
NOTE: this is not picking on ANZ … it’s going to be the same with any bank, but we’ve just used this bank to illustrate the point.
What Colour Is The Money?
Now one thing we would like to make really clear (and we do to all of our clients) is that the money from all the banks is all the same colour. It doesn’t matter which bank you get the money from – if you need a mortgage then forget what bank it comes from.
You need to look beyond which bank might approve you, and look instead at what bank is going to be the best for you. That includes a range of things including interest rates which is generally considered the most important or only consideration, but it’s not.
Instead and most importantly, you need to consider what that mortgage is going to cost you over the lifetime of the mortgage.
In a nutshell what we mean by this is how flexible is the mortgage going to be to allow you to pay it off faster.
That’s what will save thousands of dollars – it’s the flexibility of a home loan that is truly what is most important. It’s even more important than the initial interest rate that you’re offered, because a flexible mortgage means that you can pay extra on the mortgage when it suits you.
You’re not constrained by the bank rules to the same degree that most mortgages will constrain you.
Another point to remember is banks are there to make profits for their shareholders, and if you watch the news you will see them announcing huge profits year after year.
The reason that banks can make these profits is they have customers that follow what the bank says, and with mortgages that often means not paying the mortgage off very fast at all.
So in summary, you can go directly to the bank, and you might quite likely get your mortgage approved from that bank. You even might find that the bank staff are reasonably friendly and make you feel like a welcome customer. But what the bank won’t do is look at what options are best for you.
Are Mortgage Adviser Different?
Yes, mortgage advisers are not constrained by the limitations that the banks have. Every bank is only going to talk about that bank’s products and the options that that bank has, where a mortgage adviser can talk about the same bank plus compare to the other banks so you can be assured that you have the best option.
As mortgage advisors for over 25 years, we know that one bank is never going to be the best for all situations, and even what might be the better bank for you today may not be the best for you in 6-months or 6-years.
That’s why today over 50% of people now go to a mortgage adviser to ensure that they are getting good service and the best home loan.
We could rattle on about other reasons to use a mortgage advisor, but the key one is what we’ve explained here – choice and the best home loan.
That’s a good reason not to go directly to the bank for a home loan.
