Becoming a mortgage broker

Gidday Greg,

Conflict of interest caused by commission is a major driver in shafting stories like yours. If you want to get around that, you probably need to look into becoming a borrowers agent rather than a broker, but doing your cert iv is a starting point either way.

Now is not a good time to start out as a broker. Low and reducing commissions and clawback backs. Also new legislation will mean residential brokers will need to be licenced with ASIC from Dec – which is good, but may mean more courses etc adding to the start up cost.

I agree Greg cant believe any client could expect to deal with a Broker who is not qualified or licensed.

Certainly no slowdown here in Qld either.

Yes, it can be painful have to give back all your upfront – but it doesn't really happen that often.

Hi PropertyPaul

Commission rates are from .5% and range to the rare .8 and trail commissions can be as low as .17% and range to .28%.  The non conforming pay higher commissions than the majors however they tend to be priced less competitively, although not always the case.  However the thing to consider with these commissions and trail commissions is firstly, many lenders do not pay the trail until year 2 and these percentages are what goes to the aggregator, then depending how you are set up, after the aggregator takes their cut, our is 10%, then my company takes 25% of that 90% that is sent from the aggregator and we are left with 75%.  Here is an example

I do a loan a homeloan of $500k for Johnny, the loan process takes a minimum of six weeks.  The loan settles after six weeks and then approximately a month after the loan has settled the upfront commission is paid to me.  Within that month the lender sends through (this is based on a 0,5 upfront commission) $2500 to my aggregator, the aggregator then sends $2250 through to my company, then deposits $1687 to my account.  Remember the timeframe is approximately 10 weeks (2 1/2 months), therefore for that period I earned $1687 on that loan. 

Then the trail commission, which is what traditionally grown to be your base income (your stable if you like), comes through, if you are lucky and your clients have chosen a lender that pays trail in the first year.  The trail is worked out the same way and for this example I have used .2% (although many pay under this).  Therefore on a $500k loan a $1k per annum trail is paid, this is distributed monthly and therefore once the aggregator has taken their cut, my company taken it's cut I am left with approximately $56 per month.

Therefore going into this business you need to have something behind you as the first two years are building years and what you are trying to build is that trail to at least cover monthly costs.  I love being a broker and possibly started at a really bad time, as I am coming up to two years in this industry and it has been tough, but so rewarding when you get the deals over the line for your clients!  The lenders have been very frustrating, with a can't do attitude of just putting up road blocks at every turn but there is still the business out there, but the key to this whole thing is REFERRAL PARTNERS!  If you can build good referral partnerships, you will be in a good position to make this business work for you.

As far as aggregators go, I have only had dealings with the one I am through and I am impartial, happy enough with their software they provide but I guess I see them as a necessary evil (hey they are taking my hard earned cash )  But I guess they have their function.

Love working in a situation where we all get together and brainstorm, although ultimately in my case, I am running my own business and responsible for my own pipeline and not provided with any leads.  I guess sometimes we feel there should be more company support for the cut they are taking but I love what I do and as tough as it has been I want to make my business succeed so I keep doing what I need to do to keep my business running ( including driving from one end of perth to the other 3 or 4 times a week, but my stereo and gps are my key to sanity! 

In terms of clients and commissions, I always disclose the commissions we get paid both at the beginning of the process and at contracts, they also get to see the commissions everyone else pays (to compare) and I guess the key to remember is, give your clients all the information they need to allow them to make the right choice for themselves. 

Anyway good luck with your endeavours.

Cheers
Janine

Or the client failed to tell you the finance you arranged on his land and construction was actually for residential development and he sells the property post construction cleans up on the sale and you loose 100% of the upfront.

Then has the nerve to ring you and tell you he has more business for him.

At which time you politely tell him you dont need his business thank you.