Where to get a mortgage

There are dozens of companies providing home loans. Choose a lender on the key areas of interest rates, fees and services. Don't be swayed by prize draws or the like. However low fees and a contribution to your legal costs are well worth taking advantage of.

You can go to the lender's office or get a mobile manager to come to you. Some let you apply online. You could approach:

• Banks
• Non-bank lenders
• Mortgage brokers

Banks

The banks still provide most loans by far.

For:

• Banks offer a wide range of mortgage options.
• Competition between banks can sometimes lead to great deals, such as a bank paying your legal bills, a discount on your insurance or lending at a low fixed interest rate.
• Banks can offer discounts on your day-to-day banking costs or even wipe your transaction fees altogether if you have your mortgage with them.
• Their loan application fees are usually negotiable.
• If you have a dispute, you can go to the Banking Ombudsman. It should be noted that the Banking Ombudsman will not consider complaints about a bank's judgement about lending and/or security, but can review complaints about the administration of lending matters.

Against:

• Banks tend to be more cautious and are more likely to turn you down if you don't have a good credit record.

Non-bank lenders

These include building societies, finance and insurance companies, trustee companies and credit unions.

For:

• Among non-bank lenders there is a very wide variety of mortgage types and services on offer.
• Some offer loans to people who have a blot on their credit record or who are temporarily in financial difficulties.
• Lenders with lower cost structures can sometimes offer lower interest rates.

Against:

• You can't take complaints to the Banking Ombudsman (although some companies are members of the Financial Services Federation, which has a complaints scheme).
• Some of these lenders are very small and don't have a long track record.

Mortgage brokers

Brokers deal with a number of lenders, so they can save you time shopping around. You don't pay directly for their home loan services. They are paid a commission by the lenders they use.

For:

• It is no more expensive for you than approaching the lenders direct.
• Brokers know the interest rates and application criteria for different lenders, and can negotiate on your behalf.
• They can help you put your loan application together.
• They may be able to help you find a loan if a bank has turned you down.

Against:

• They don't cover all mortgages available. Some banks don't deal with brokers, for example.
• A broker may not negotiate as hard as you do.
• Different lenders pay different commission rates. This may be an incentive for brokers to favour certain lenders.

There are no specific regulations covering mortgage brokers in New Zealand. Brokers who belong to the New Zealand Mortgage Brokers Association must operate according to the Association's code of ethics, must hold indemnity insurance and they must use a minimum of six different lenders. It is common for brokers to deal with far more than six lenders, however.

For ordinary loans, brokers are usually paid a commission of around 0.6 to 0.8 percent of the loan value by the lender. For more complicated loans if you have a bad credit record, for example brokers may earn up to 1 or even 2 percent of the loan value. Some lenders also pay brokers a very small ongoing 'trail' commission on the loan.

Because brokers earn more the higher the amount of the loan, there is an incentive for them to recommend bigger loans. Make sure you don't borrow any more than you really need.