As the banks are making it harder to get mortgages approved some mortgage brokers are complaining while other mortgage brokers focus their efforts on being smarter.
We fall into the second group – we have focused on getting smarter.
What Do We Mean By Getting Smarter?
When you are getting a mortgage or a mortgage broker is getting a mortgage for you there are a number of rules that need to be considered. There are the rules that regulate the banking industry which are set by The Reserve Bank and then there are the rules that individual banks and lenders set.
The Reserve Bank Rules
The rules set by The Reserve Bank are blanket rules that apply to all of the New Zealand registered banks and those banks need to be very careful not to breach those rules.
Some of the more well publicised rules are around the loan to values (LVR rules) for both homes and rental property. In very simple terms you generally need 20% deposit for a home and 40% deposit for a rental property unless it is a new build or refinance of an existing mortgage which are exempt. CLICK HERE to see the rules at a glance, but you should always speak to a mortgage broker who can explain the rules in more detail and may be able to offer solutions if you feel the rules are not allowing you to do what you want.
Individual Bank Rules
As well as The Reserve Bank having rules, each individual bank and non-bank lender has their own set of rules.
A key role of a mortgage broker is to understand the rules of each bank and the non-bank lenders and therefore know which bank will or won’t approve a loan and why. Often there will be simple things that can be done to tweak an application before presenting it to the bank that will be the difference between having a loan approved or declined. A good mortgage broker will ensure that the application is prepared thoroughly so there is very little change for the bank to say NO.
Remember: Bank rules do not always seem logical, but the banks have the money and therefore are able to set the rules!
We recently had a couple that were borrowing just over 80% to build a new home. The application looked good and this would normally be approved; however the Westpac rules say that if you are borrowing over 80% with Westpac then the build contract must include window dressings (blinds and curtains) and even though this loan had been pre-approved it could not proceed as the build contract does not include window dressings. As mortgage brokers that specialise in new build finance we approached Westpac to see if they would review this policy as t’s quite crazy given that most build contracts do not include window dressings and therefore Westpac are excluding themselves from a huge part of the market and losing a lot of customers because of it. But Westpac created the rules and I assume there was a reason; albeit it still seems a crazy rule!
Too often we see people who have given up on their dreams because their bank has said that they cannot get the money when in fact another bank could have very well approved the loan.
So one way a mortgage broker can get smarter is to know the rules inside and out.
Plus Smarter Systems
The role of a mortgage broker is to get loans approved for people, help structure the loans to make it easy for people to pay them off faster and help review the loans over the years to ensure that people get a fair deal from the banks.
To get an application and loan approved there are a number of steps and simplistically they are;
- Discuss and assess the need
- Complete the application and collect the supporting information
- Put the application together to present to the bank
- Satisfy any questions and get the bank approval
- Present the loan offer to the client and structure to suit
- Help manage the completion and then manage and review as required
For mortgage brokers that are busy this means we need good systems and processes to ensure that we can manage these things in an efficient manner. To be honest it is hard as there are not really any suitable systems that you can purchase (and we’ve tried a few!) so in the end we have had to adapt systems and create parts to increase efficiency.
Most of the good mortgage brokers tend to like helping people to find solutions but are not so keen on the data entry (myself included) so this week we have finally completed an online application form which automatically pre-populates our application management system and therefore saves a huge amount of time.
This time saving allows us as mortgage brokers to focus our time better.
Why Should This Matter To You?
Most people use a mortgage broker because they want to know that they are getting the best loan offers. The difference between getting the typical bank deal and a well structured deal can mean a difference of thousands of dollars so it is well worth getting it right.
To ensure that you get the best deal you should be dealing with an experienced mortgage broker, but often these brokers are extremely popular and therefore busy. You could of course seek out another broker who can dedicate more time to you, but in many cases the results will not be as good so it’s not really a good option. Unfortunately there are too many mortgage brokers working by themselves from home offices that treat the business as a lifestyle, do small numbers of loans and therefore have limited options to offer you.
If it’s important to you to get the best advice, access to a range of options and your loan application dealt with efficiently then it really should matter that mortgage brokers are getting smarter in all aspects of the business.