The solicitor is a must but a mortgage broker is not, still you should use the services of a mortgage broker for the reasons outlined below.
The role of a solicitor
The solicitor plays a very important role in the process of real estate purchase:
• Checking the title for you and making sure that your interests are protected.
• Applying LIM on your behalf, studying it and liaising with vendor’s solicitor and city council if required.
• The lender will send the mortgage documents to your solicitor. Your solicitor will explain those to you and get those signed from you.
• The lender will pay the proceeds of loan amount to your solicitor’s trust account, and your solicitor then will pay those to solicitor’s trust account of vendor of the property. The money will not be released to vendor unless the mortgage has been registered in your name. Normally everything happens on settlement date.
• The solicitor can also advise you on ownership structure, like should the property be held in joint names or as tenants in common or should the property be held in the name of a trust?
Role of a Mortgage Broker
If you want to raise a mortgage from a lending institution, you can choose either of three common channels. These are bank branch network, mobile mortgage managers of banks and independent mortgage brokers.
The branch staff is normally on fixed salary. The mobile managers are on salary plus commission. Mortgage brokers are paid on commission basis only. So in case of branch staff and mobile managers, the bank needs to incur fixed costs, which is that their salary must be paid irrespective of volume of successful business they write. (Normally they are given targets to achieve).
But in case of mortgage broker, there are no fixed costs to bank. Though the bank is to pay commission to broker, it is only on settled business. In terms of pricing, all the channels are same for the customer. The customer is not disadvantaged using either of three channels in terms of interest rates, legal fee contribution, other bank fee etc.
So, why use a Mortgage Broker?
There are a few good reasons:
• A mortgage broker normally can secure you loan from different lenders resulting in greater choice among different products. It saves you time and hassles and the broker finds the right solution for you.
• There are certain lenders who have got excellent loan products which are available through brokers only who are accredited with them.
• If the broker is financial adviser also, he/she can suggest you right ownership structure for your property like Trust, LAQC etc.
• A broker can suggest you different ways to repay your mortgage faster savings you in terms of overall interest paid.
• Most of the brokers work during after hours and weekends, so you do not need to take time off to arrange for mortgage.
• Except in rare cases like development funding etc. where the mortgage broker is not paid by lender, you do not pay any fee to mortgage broker for arranging loans for you.
So, there are very good reasons to deal with a mortgage broker. Of course every broker has his/her own capabilities and it’s your choice whether you want to deal with a mortgage broker – and if yes, with whom.
Ravi Mehta is an Auckland based Financial Advisor and can be contacted on firstname.lastname@example.org
A disclosure statement under Securities Markets Act relating to his services is available on request and is free of charge.
For further information, please visit website www.professionalfinancial.co.nz