Why Interest Rates are Irrelevant

When it comes to choosing which bank to apply with most assume pricing is the first consideration however, it is rather only 3rd on the list.

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When applying for new lending, most clients are understandably focused on achieving a competitive interest rate. While this is still a very important factor to consider when selecting which bank to apply with it’s not the first factor your financial adviser considers when assessing your application.

Here are the 3 factors your financial adviser will initially consider:

Bank Credit Policy

Will the bank actually approve your loan?

It might sound like an obvious question but the first factor your financial adviser will assess is which banks have a credit policy that suits your application and overall funding goals.

For example, let’s say Bank A offers a 1 year fixed rate of 4.89% while Bank B’s 1 year fixed rate is 4.95%. If Bank A do not have a suitable credit policy and won’t approve your application, it doesn't matter that they have a more competitive pricing offer.

Our team are accredited with over 20+ banks & lenders across main bank, non-bank and private lending options. This allows our financial advisers access to a range of lenders each with a unique credit policy to explore which are most suitable for your application.

Home Loan Product Offering

It often surprises clients to hear that not all banks have the same home loan products. Your financial adviser when reviewing which bank to submit to will need to consider whether they have suitable products for your personal goals and preferences.

For example only a few banks offer options such as redraw facilities, offset home loans or a 10-year interest only facility for investment properties.

When deciding on a home loan structure this can involve utilising a combination of different home loan products each with a specific role in managing your home loan.

Our clients recently refinanced as their existing home loan provider did not offer a suitable home loan product to help them repay their home loan faster.

Read their story here 👉 https://www.thelendingteam.co.nz/post/case-study-refix-turned-refinance-different-banks-have-different-products

Pricing - Interest Rates and Cash Contribution

Then after your financial adviser has determined the bank have both a suitable credit criteria and home loan products, then they will review their pricing offers which includes interest rates and cash contribution.

Before documenting your new loan your financial adviser will review updated pricing from the banks you’ve secured an approval with. They’ll then help you compare your options between banks before deciding which to proceed with and finalise the overall loan structure.

Working with a financial adviser is not only about ensuring you’re getting a competitive interest rate offer. Their access to more than 20+ lenders means you’re able to explore your options across a greater range of providers while getting tailored advice around your loan structure. Additionally, access to a financial advice after you’ve secured your home loan is important in managing your home loan long-term, adapting your structure as life and the market change.  

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