hey again,
Im going through a broker at the moment to organise finance for my 1st IP purchase
Reading through the paperwork from the broker, I found a couple of clauses which i find a little worrying, I am after feed back as to whether these clauses are the norm or maybe just with this particular company, I know there are some decent brokers on here that can shed some light on the matter..thanks
clause 1. if you proceed with the loan then no fee is payable by you. If approval is obtained and you do not borrow that loan within 40 days of approval, you must pay us $880 within 50 days of the approval date.
clause 2. if you repay or refinance the loan within 2 years of the loan settlement date,the lender may require us to repay some or all of the commission paid to to us by the lender. If that occurs you must pay us the amount we have to refund to the lender within 7 days of us you to do so. the maximum amount payable by you is $2099
I do not recall any of these clauses when I used a different broker 2 years ago for my PPOR?
Many brokers have similar arrangements these days.
Claw back of commissions exist for up to 3 years on some products – this means if you sell or refinance within the claw back period then the broker may have to repay all or part of the commission they received. And that means they could not get paid – or even lose money on the deal.
Many brokers also charge an upfront fee to clients of between $500 and $2000 for residential deals.Some don't but charge you a fee if you don't go ahead with the loan after they go to the trouble of getting an approval,
You have to decide if your broker is worth paying a fee to.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
The advent of the NCPP legislation has caused many Brokers to take this course of action as Terry has said due largely to increased compliance costs and reduced income.
Personally we dont charge any upfront brokerage fee but believe we are a dying breed.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Im guessing clause 1 would mean as soon as the loan is conditionally approved, I only have 40 days to sign a finance contract? thats the way i read it anyway?
thanks
Yes sounds like it.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
If unsure ask the clause to be amended to ‘fully aproved’
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
“borrow that loan” is not good English either
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Sounds like if you refinance within the next two years or don't go ahead with the loan after formal approval is granted than you'll have to pay the brokers comission. I don't think it's unreasonable.
Most people don't realise that brokers have their comissions clawed back when the loan facility is closed down within a certain period (generally up to 2 years).
Ask them if they'll waive the fee if you do need to refinance within the next two years but use their company to do so (that way, the new upfront comission will make up for the claw-back but they'll be doing the twice the work).
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
waydo77 wrote:clause 1. if you proceed with the loan then no fee is payable by you. If approval is obtained and you do not borrow that loan within 40 days of approval, you must pay us $880 within 50 days of the approval date.Um… why would you bother applying for a loan if you didn't want it? you know the terms up front so what is the issue?
waydo77 wrote:clause 2. if you repay or refinance the loan within 2 years of the loan settlement date,the lender may require us to repay some or all of the commission paid to to us by the lender. If that occurs you must pay us the amount we have to refund to the lender within 7 days of us you to do so. the maximum amount payable by you is $2099 I do not recall any of these clauses when I used a different broker 2 years ago for my PPOR?Alright then. If you repay your loan then it is possibly because you have come into a giant pile of money, in which case the broker fee is irrelevant. Otherwise, why would you pay off a loan? Interest only loans with offset accounts. That is the way forward. Heaps of threads on this. Read up on it.
If you refinance the loan within 2 years it will be for one of two reasons. One: because you have found a better deal, in which case part of the savings in the refinance deal will pay for the broker fee anyway. Or two: because the property has gone up in value (that is known as free money by the way) and you are pulling out the free money. You can use a small portion of this free money to pay the broker.
You are engaging the use of the broker for a reason. They know which lender to approach for people with your situation, to give the best likelihood of a loan approval. Choose not to use the broker if you like. Maybe you will approach the wrong lender and get rejected. This will go on your credit file and last a few years. Then try and get an approval from another lender and see how badly that goes with a rejection stamp on your file. And watch how many tens of thousands of dollars the properties go up in value while you are trying to save yourself a few hundred bucks….
The broker fee is just a cost of doing business. And anyway, if you are applying for a loan it is because you want one and will accept the loan offer. Thus the bank will pay the broker fee. Non issue for you.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
thanks for your help, sounds like this is the norm, terry, I thought a lot of the contract was bad english, I will read everything in depth now I think.
the main thing im worried about is clause 2- due to me working away in isolation for weeks at a time and the IP purchase being interstate, It may be a challenge to find let alone purchase an IP in the given 40 days, I might ring the broker and see if they have some flexibility on this clause..
cheers
Ah I see your dilemma. So maybe then either use a different broker, or do not apply for the loan thru this broker till you have found the property in question.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
waydo77 wrote:thanks for your help, sounds like this is the norm, terry, I thought a lot of the contract was bad english, I will read everything in depth now I think. the main thing im worried about is clause 2- due to me working away in isolation for weeks at a time and the IP purchase being interstate, It may be a challenge to find let alone purchase an IP in the given 40 days, I might ring the broker and see if they have some flexibility on this clause.. cheersI would assume approval refers to "formal" approval rather than a preapproval – but I could be wrong. Definitely call to find out – if it relates to a "pre-approval" then bypass this altogether and contact your broker once you've located a property and need "formal" approval.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
appreciate the advice Jac, Im basically trying to get finance setup, to a set amount, say 400k, so that I can start to shortlist some properties and have the option to put in an offer or deposit, without having to go through all the approval process after I have put in an offer…I figure this is the logical way to do it?
cheers
hey jamie,
i get ya, i will call them and find out tomorrow, that was the solution i was looking forward, new to this as u can probly tell.
Hi waydo
It will save you a week or so in approval time after you find the property… but hey, three weeks, four weeks… I think agents are getting used to the fact it now takes 28 days or so to secure finance. I think so long as your broker has done some calculations for you on how much you can reasonably expect to borrow, and is solid in his/her confidence on getting you finance with a particular lender, you ought to be fine.
For my next purchase, I'm really hoping for a particular kind of property. But if a different kind comes along in the meantime so be it. The lender that my broker will approach will depend on the kind of property I want to buy, so there is little point in arranging pre-approval. For instance, some lenders would not touch small apartments, others will. Just using this as an example.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Heh Jac big day today double settlement
28 days for finance you must have a good broker !!
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard
Indeed !!
Jac
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I went to Aussie yesterday to see about getting finance also for my first IP. I spent 2 hours there and not once did the lady say anything about clauses or anything like that. I still have to go back with payslips and things before I can get pre-approval so they might go over it then. But I have to say they were so helpful and informative. All those investment magazines I’ve been reading has paid off, otherwise all the lingo would of gone right over my head. I walked in knowing pretty much exactly what I wanted and they provided me with all the options from all the different lenders.
Unfortunately you get what you get with Aussie.
Last week the adviser could be a plumber working on your dunnie the next week advising you on Trust structure loans.
Ask you adviser how many investment properties they own and see if that matches your investment goals.
Would you go to see a surgeon who had read the books, has done the course and watched the videos / other operations for a heart op.Each to their own.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
he he good one Richard
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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