Mortgage advice

Before you see an adviser, think about what matters most to you in a home loan. Do you simply want the lowest cost loan? Do you want specific features, such as being able to make extra repayments?

Thinking about this beforehand will make the conversation with your adviser easier.

Ask questions. Lots of them. Ask them to explain how each loan option works, what it costs and why it's recommended to you. If you are not happy with any option, ask them to find an alternative.

You don't have to take the first loan you're offered. You may prefer a particular lender, such as your current bank. Ask to see loans from other lenders as well, so you can compare.

A home loan is a long-term debt, so even a small difference in interest adds up over time. If you can get a lower interest rate from another lender, you could save thousands of dollars.

Be wary of short-term incentives such as cashback payments from banks – make sure the long-term fundamentals of the mortgage stack up. Incentives like these should be “icing on the cake”, not the main reason to sign.

Some mortgage advisers might also talk to you about KiwiSaver. While they can share basic information about how KiwiSaver works, they can only provide advice on KiwiSaver if they have the necessary knowledge, skills and competence. Advisers must tell you upfront what they specialise in.

Most mortgage advisers work on commission. They usually receive a payment from the lender as a percentage of the amount loaned and may also receive an ongoing commission.

Commissions are paid by the mortgage provider annually for the period of your loan. Some advisers may also charge a fee, so it’s best to check this when you meet.

Some advisers are paid a standard fee regardless of what loan they recommend, while others receive a higher fee for offering certain loans. This could influence the loans they recommend to you.

Sometimes, a mortgage adviser will charge you a fee directly — instead of, or as well as, the lender's commission.

If your loan ends (or is moved to another lender) within a certain period, the lender may recoup some or all of the commission they paid to your mortgage adviser. Your mortgage adviser must tell you about this up front, as part of their obligations to explain any fees and commissions that could apply if you decide to work with them.

If you're not sure whether you're getting a good deal, ask around or look online to see what other mortgage advisers charge.

• 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?
• What features (options) come with this loan? Can you show me how they work?
• Can you show me a couple more options, including one with the lowest cost?
• What information do I need to provide for the loan application?

A written quote from a mortgage adviser should tell you about:

• the type of loan
• the loan amount
• the loan term (duration)
• the current interest rate
• fees you must pay (for example, broker's fee, loan-application fee, ongoing fees)

Make sure you're comfortable with what you're agreeing to. Ask more questions if there's anything you're not sure about.

Never sign blank forms or leave details for the adviser to fill in later. If you feel you're being pressured into signing, ask for more time to think about the loan. Or go to another adviser.