Just one tip, if you had got an unsecured loan to reduce the principal amount, it would most likely have cost you even more. Good luck with the sale of the proprty.
Robert Bou-Hamdan
Mortgage Adviser
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© 2004 Mortgage Packaging Pty LtdKerri
i think most lenders calculate exit penalties on original balance or as a fixed fee, ie. $800 if paid out in first 4yrs etc.etc.
i really can’t think of any that calculate on balance at time of discharge – they have ‘wised’ up to that one.
if i can ask one question – were you happy with the broker at the time of making application? would you have changed brokers if time permitted?
cheers
brahms
Mortgage Broker
[email protected]There are a few who calculate discharge fees on current balance. I personally try and stay away from products with discharge costs but it is getting harder as lenders are trying to prevent ‘churn’.
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltdi would have thought discharge fees were an attempt to recover set up costs of the initial mortgage – increased clawbacks being in place to prevent churn?
cheers
brahms
Mortgage Broker
[email protected]Hi All,
Just a word on mortgage brokers…
Before I ever logged on to PI.com I was taken for a ride big time by a broker. Initally he had several lenders that I could go with. I just had to pay $750 (or thereabouts – it was a while ago now) and he’d get things happening for us. He then led me up and down the garden path for about six weeks before telling me that we couldn’t get finance and we couldn’t get a refund. At that point I decided mortgage brokers belonged in the same basket as used car salesmen (sorry if any are reading but the cliche gets the point accross).
After a spending a while here and getting to know a few brokers I can say that I have changed my mind. I now know some mortgage brokers that I hold in very high regard.
I think it is like most professions where only about 5% of people truly excell at what they do while the rest range from being honest and capable through to having no idea or being outright scam artists.
It’s all learning and I certainly won’t be taken for that sort of ride again
Regards,
SonjaOriginally posted by brahms:i would have thought discharge fees were an attempt to recover set up costs of the initial mortgage – increased clawbacks being in place to prevent churn?
cheers
brahms
Clawbacks usually don’t last more than 12 months. Discharge costs are usually up to 4 years or more. More lenders are implementing these to recover costs AND prevent ‘churn’. This helps prevent ‘churn’ as a borrower may not want to move when they see the cost to them for doing so.
Clawbacks are not effective as they reduce in most cases. Even if you refinance during a claw back period, you can move the loan into a new lender and not lose the trail and still be in front.
Luckily, I have not experienced a clawback yet and hopefully never will.
Robert Bou-Hamdan
Mortgage Adviser
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© 2004 Mortgage Packaging Pty LtdIs it just me? But it seems obvious to me that the best way to reduce churn would be to keep your customers happy with a product that kept on being competitive, rather than just woo you in at the start and hope you stay with them because you cant be bothered changing/think you are going to suffer hefty exit fees. Or think you should be greatful to have anything at all.
I was very happy with the bank I set up my first mortgage with. I found the service very good in general, and was more than happy with my loan product. I felt pretty loyal about keeping my business with them. Then I purchased a 2nd property as a PPOR. They wouldn’t touch it, despite having 75% LVR over both properties, excellent servicability, and positive cashflow on the original property… So I switched, plenty of others willing to take me on. As it turned out even with all of the early exit fees, I still saved the exit fees over again in the first year due to discounted rates.
I would however, have been very happy to stay with my original lender, and save all of the paperwork and other associated hassle, if they had given me the 2nd loan.
So thanks to my very good broker for showing me that it was all possible, and saving me a heap in repayments.
I am now even happier with the new loan products.
~jo~
It is interesting to see how quick your ‘loyalty’ went out the window when you did not get what you wanted. Your story is a great example of why borrowers should not go direct for their loans and expect they can do all their business with the one lender as they grow and diversify.
When I speak of ‘churn’, it has nothing to do with borrower happiness. It is about shonky brokers moving their clients around for the sake of making more commission. Many of us in the industry are trying to change the legislation to prevent this.
The poblem with trying to prevent ‘churn’ is defning it in the first place. I consider ‘churn’ to be when a loan is refinanced and there is no benefit to the borrower. Benefit can be either a financial benefit or other benefit that the borrower may receive.
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdBrahms
I would most definitely have changed brokers if there had been time. I actually contacted a few, some who said they couldn’t help with 100% finance, and others who were too busy to help in the time frame I needed. I even considered scrapping the idea of buying the unit completely at one stage. Rang everyone and cancelled everything, and started looking for another rental (the owners of my then rental were wanting to move in), even though I would have lost a fair bit in non-refundable fees a stuff. The broker’s boss and the boss at the finance company rang and assured me again and again that my finace was approved, and I had nothing to worry about. I had already heard that so many times it wasn’t funny. My finance took over 2 months from being conditionally approved to full approval, with me having to jump through the most horrendous hoops. In the end, I decided to continue with the purchase, as rentals were really thin on the ground, and I was reluctant to lose the money I had already spent.
The broker had said I did not pay his fee, that the finance company paid it. When my loan contract finanlly got to me, there was a fee for “morgage originators fee”. When I rang up and query it, I was told that yes, it was the broker’s commission, but that a clerical error had occurred on my documents, and it should have been written down as an establishment fee. I was furious that I was being slugged directly for something I had been told I would not have to pay, but couldn’t see any way out of it by that time. I had been talked into signing the contract with a 14 day subject to finance clause. The thirteenth day of that clause was the day I spat the dummy and told them all to shove it. I had already extended the date for vacating the rental for as long as I could.
I tried to attach part of an email I sent to the finance provider, which outlines some of the problems I encountered, but couldn’t work out how[blink].
I guess all’s well that ends well, but the amount of angst I went through with these people was almost enough to put me off ever trying for property finance again. (note that I said almost [wink4])
Kez
I wish I could tell some horror stories about borrowers. It is not always the broker or lender’s fault. Some times, once the checks commence, it is the borrower who has done things or not diclosed things which may be discovered and cause delays.
Kez, in you case though, I would have requested everything in writing. We all know the answers with hindsight!
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdHow many times have clients forgotten to tell me crucial things – remember the broker is on your side – tell him everything otherwise you are compromising your chances and wasting everyones time!
I figure that these clients are pretty common and as I grow I become better at communicating with my clients and understanding their needs.
All the best Rob, you are doing a great job!
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Todays Hot Rate
***3 year fixed – 6.49%***Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Some of the extra things I was asked for at different times, after I had already submitted everything that had been requested were:
*a letter from my credit union to say that my visa was a debit card only, even though I supplied 12 months worth of statements which clearly showed there was no overdraft on the card
*a medicare card to prove that I had no dependants, which I could not supply as I am in the defence force and don’t have a medicare card. I had to go to work and get them to find something that stated my status and MWOD (Member WithOut Dependants), and explained what that meant.
*a ‘letter of employment’, even though they already had a letter describing me as MWOD.
I don’t know if it was the broker or the lender who decided to draw the process out and not tell me everthing I needed to get together for them right from start. It was incredibly frustrating though, and each time I asked the broker if anything else would be needed, and he would say that was everything now.
Something really ridiculous was a fax I received from the lender, with the subject line of “Notice of Final Approval”. The special conditions were that the mortgage insurers required, prior to instructing solicitors to prepare documents, a signed contract of sale for purchase of property, to be submitted with my FHOG application. At the bottom of the fax though, they said that this is not a formal offer, and that I should not sign any contract until their solicitors had sent the unconditional approval documents to my solicitor.
So, on the one hand, they would not draw up the documents until I had signed the contract, and on the other hand, they were saying not to sign the contract until I had received the documents.
The broker told me to just sign the document with any old date, that it didn’t matter. When I was unsure about doing that with a legal document, he scoffed, and said something to the effect of “Surely you’re not going to throw this all away because of some silly date on a piece of paper?”. Still feeling unsure, I rang the office of state revenue and found out that they did require a copy of a legally exchanged contract, and not just a copy of the contract signed with any old date, as the broker had suggested. So that was when I went to my solicitor, and he added the ‘subject to finance’ clause to the contract and we exchanged.
I really think that if the broker had been worth the fee I paid(which above mentioned fax said was not payable), he would have done a lot more to smooth the way for me, and would certainly not have tried to get me to falsify documents.
I know brokers are supposed to make life easier, and have access to more resources than me, but I will be extremely cagey about ever using one again.
Kez
‘scuse my ignorance, but what is churn?
Kez
Originally posted by Kerri-67:what is churn?
It is the practice of redoing ‘deals’ unnecessarily so that the broker earns extra commission.
Churning has been known to apply to some finance brokers who regularly and unnecessarily refinance deals. It is also known to occur in stockbroking trading when advisors tell clients to ‘buy and sell’ more frequently than they need too.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping.
Kerri
wow – you did have a really rough time – 100% finance has lots of hoops to jump thro (they are truly anal retentive, focussed on how to decline rather than how to approve) – but you had a really plain experience – i hope your future ones are better.
‘churn’ is a term used to describe deliberate re working of clients by bank staff and mortgage brokers with the sole aim of refinancing to a new lender so the bank or broker gets a new upfront fee etc etc.
most of us are too damn busy to do this, but i’m sure some of the ‘bottom feeders’ out there are trying it on.
cheers
brahms
Mortgage Broker
[email protected]Originally posted by Kerri-67:*a letter from my credit union to say that my visa was a debit card only, even though I supplied 12 months worth of statements which clearly showed there was no overdraft on the card
The broker could have directed them to the non-existen ‘available credit’ limit on the statements if it was not a credit card.
*a medicare card to prove that I had no dependants, which I could not supply as I am in the defence force and don’t have a medicare card. I had to go to work and get them to find something that stated my status and MWOD (Member WithOut Dependants), and explained what that meant.
I would guess this loan was with St George 100%. This is part of their standard documents and the broker would have known this.
*a ‘letter of employment’, even though they already had a letter describing me as MWOD.
I don’t see the point of this either especially if you provided income verification as well as the MWOD letter.
…each time I asked the broker if anything else would be needed, and he would say that was everything now.
I think this explains a lot.
Something really ridiculous was a fax I received from the lender, with the subject line of “Notice of Final Approval”. The special conditions were that the mortgage insurers required, prior to instructing solicitors to prepare documents, a signed contract of sale for purchase of property, to be submitted with my FHOG application. At the bottom of the fax though, they said that this is not a formal offer, and that I should not sign any contract until their solicitors had sent the unconditional approval documents to my solicitor.
The loan offer documents can be issued without the FHOG application. The signed contract of sale is a Government requirement to be eligble for the FHOG. All lenders I deal with will process a loan and settle as long as the completed FHOG application gets there before they book settlement.
So, on the one hand, they would not draw up the documents until I had signed the contract, and on the other hand, they were saying not to sign the contract until I had received the documents.
I think this is a misinterpretation.
The broker told me to just sign the document with any old date, that it didn’t matter. When I was unsure about doing that with a legal document, he scoffed, and said something to the effect of “Surely you’re not going to throw this all away because of some silly date on a piece of paper?”. Still feeling unsure, I rang the office of state revenue and found out that they did require a copy of a legally exchanged contract, and not just a copy of the contract signed with any old date, as the broker had suggested. So that was when I went to my solicitor, and he added the ‘subject to finance’ clause to the contract and we exchanged.
As you found out, it was a Government requirement to have a signed contract for the FHOG.
I really think that if the broker had been worth the fee I paid(which above mentioned fax said was not payable), he would have done a lot more to smooth the way for me, and would certainly not have tried to get me to falsify documents.
You would have most likely paid the “fee” even if you went direct. If it came out of the application fee, I take back my guess of it being St George as they certainly do not do this.
I know brokers are supposed to make life easier, and have access to more resources than me, but I will be extremely cagey about ever using one again.
Many brokers are useless! GOOD BROKERS are what you should look for. You will learn to tell them apart if you speak to more than one until you find one you are comfortable with and who you know will go into battle for you!
Kez
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdRobert,
It all comes down to human failings I guess. There’s those that realise that its dead money and that they should move, and others that just hang on through sheer stubborness or laziness.
Unfortunately, the smart ones probably researched there loan better and therefore are less likely to benefit from a mortgage brokers’ services. The ones on the expensive loan with a bank could most benefit from your services, but are also less inclined to do so.
Kinda ironic isn’t it…
Cheers,
Michael.PS I went to Cannex and decided on Gateway CU at 6.5% variable currently. Even though my CR card and DR account are with The National. I just have to allow 24 hours when doing internet transfers between institutions. I have a fully offset account at GCU so get my salary paid effectively straight off the mortgage. It sits there until the CR Card comes due and I pay it in full each month by funds transfer between institutions. Its too easy, I don’t know why more people don’t do it.
A lot of people do do it for cheaper and within one lender in a package. A lot comes down to overall borrowings as well when determing rates.
One thing about Cannex, the information they present is received from the lenders. Some constructive structuring will make one loan appear cheaper than another. An example of this is charging an application and a slightly lower rate instead of no application fee and a slightly higher rate. Figures can be skewed quite easily. This is where a good broker will come in. Behind the scene policies etc are also important.
Robert Bou-Hamdan
Mortgage Adviser
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© 2004 Mortgage Packaging Pty LtdT.M.A – Some possible reasons (don’t shoot).
1. Thinking that staying with one inst. est a
usuable record.
2. I have pawed (poured) over loans until I was
exhausted trying to factor in fees ect.
3. Better the devil you thought you did than the
devil you don’t.
4. You all know that financial literacy is not a
keystone of our formal or non-formal ed.Even when you want to know it is not nec. easy to find the relevant info. Some websites are emerging that are quite useful, but we have more ground to cover to comprehensively service peoples needs. Here’s an axiomatic question, how people feel they get comprehensive,
trustworthy service from their financial vendor?Greg, some good points, but doesn’t looking over the different loans become the broker’s role? That is what they are there for.
Robert Bou-Hamdan
Mortgage Adviser
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© 2004 Mortgage Packaging Pty Ltd
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