When buying property in New Zealand, many borrowers turn to mortgage brokers to help navigate the home loan process. While brokers offer valuable services, one of the most common questions is how much they actually cost. This guide explains the typical costs, how brokers are paid, and when fees may apply.
Are Mortgage Brokers Free to Use in New Zealand?
In most cases, mortgage brokers in New Zealand do not charge borrowers directly. Brokers are paid a commission by the lender when a mortgage is successfully settled. This is part of the lender’s marketing and distribution strategy and does not increase the borrower’s interest rate or loan fees. For standard home loans, using a broker usually involves no out-of-pocket costs for the client.
When Do Mortgage Brokers Charge Fees?
Paying fees for a mortgage broker for a residential property is very rare and would only happen in situations where the broker does not get a commission from the bank. These situations include:
- Second-tier lenders that do not pay commissions to brokers
- Commercial loans
- When a borrower pays off a loan early (normally within 3 years), the bank claws back the broker’s commission.
Mortgage brokers are legally required to disclose any fees before you proceed. Always request written confirmation of any potential charges before you engage their services.
How Do Mortgage Brokers Earn Money?
Mortgage brokers typically earn income through commissions paid by the lender. These commissions come in two main types.
| Commission Type | Description |
|---|---|
| Upfront Commission | Paid when a loan is settled, typically between 0.55% and 0.88% of the loan amount |
| Trail Commission | Ongoing payment based on the loan balance, generally 0.15% to 0.20% annually |
These payments are made by the lender and do not impact your mortgage repayments directly.
Learn more about how much mortgage brokers are paid here.
Benefits of Using a Mortgage Broker
Mortgage brokers offer significant value even though they are usually free to borrowers. Their benefits include access to a wider range of lenders, potential for better rates, expert guidance on loan structures, and assistance with paperwork and approvals. They can also help borrowers find options that are not easily accessible through mainstream banks.
What to Look for When Choosing a Mortgage Broker
Selecting the right mortgage broker is important to ensure they act in your best interests. Look for brokers who are licensed under the Financial Markets Conduct Act (FMC Act), are transparent about commissions and fees, have positive client reviews, work with a variety of lenders, and demonstrate experience with your type of loan requirements.
Get in contact with us here for help with this.
Conclusion
Using a mortgage broker in New Zealand is often a free and smart choice for home buyers and investors. In most cases, brokers do not charge clients directly, as they earn commissions from lenders once your loan settles. While rare situations may involve fees, such as dealing with second-tier lenders or commercial loans. Brokers are legally required to disclose these upfront, ensuring transparency from the start.
The true value of a mortgage broker lies not only in potential savings but also in their ability to simplify the home loan process, provide expert insights, and connect borrowers with a wide range of lenders and products.
By choosing a reputable, licensed broker, you can access tailored advice, competitive rates, and support through every step of your property journey, all while avoiding hidden costs. Ultimately, working with a mortgage broker offers peace of mind and increases your chances of securing the right loan solution for your needs.
Frequently Asked Questions
Do I have to pay a mortgage broker upfront in New Zealand?
In most standard cases, no. Brokers are paid by lenders when the loan settles.
Can mortgage brokers charge fees directly?
Yes, but only in complex scenarios. All fees must be disclosed upfront.
Does using a broker increase the cost of my loan?
No. Broker commissions are paid by lenders and do not affect your mortgage rates.
Should I go directly to a bank instead of using a broker?
While banks offer good deals, brokers provide access to a broader range of lenders and may find better or more suitable loan options.
How can I ensure my broker works in my best interest?
Choose a licensed broker with transparent fees, strong reviews, and a wide lender panel.
