Mortgage broker commission and trailing fees rebate

ok, can anyone here share what we should be asking to the mortgage broker before we sign the deal with them ?
I’m curious to use mortgage broker to find me a good loan for my IP rather than visiting the Big4 personally myself.

Cool, thanks for the reply Michael

Many thanks for the reply Sally,

wow that is good to know, but is that listed in the ATO ruling ?
“to collect trailing commissions from your Mortgage every year” –> does that means I can tax claim/deduct as negative geared components for that part ?

Gidday Pokeutpia,

Back when I owned bSmart, I know that the brokers were able to arrange cash backs without a full refinance. The policy will vary from lender to lender and also on the skill and experience of your broker or borrowers agent.

Although dealing with a regular cash back mortgage broker is fine, they still carry the bias hazards of ordinary brokers. Think about asking your question directly to a pro-consumer mortgage broker or better still a borrowers agent.

All the best,

Michael

Terry you must remember Michael from his Mortgage Detective activities.

I am sure he will explain to us what a borrowers agent is.

Cheers

Yours in Finance

Gidday Terry & Richard,

Yes.. there has been a username change to avoid confusion with the active mortgage broker called Mortgage Detective and simplify things. Nothing else of course has changed.

Thanks for raising the example of a doctor Terry, but you are probably better off looking at the real estate industry for a distinction.

A real estate agent works for the seller and operates on commission. This is most similar to how a mortgage broker operates, although fair to say, there is no agency agreement as a broker, its an introducer agreement which, in a legal sense, makes the broker neither an agent for the lender, nor an agent for the borrower. Simply a commission based sales professional.

A  buyers agent is a real estate agent who has done their time as a real estate agent and swapped sides to work for the buyer. Same too for a Borrowers Agent. They work strictly fee for service and do not take commissions. If lenders offer a commission or similar, this money is paid back to the borrower.

I hope that helps you both and if you ever feel like working for the borrower instead of commission, you can have a poke around http://www.borrowersagent.com.au to find out more. Heavens knows we need more of them.

Cheers,

Michael

Terry,
I sometimes get clients coming to me from other brokers who only have ever offered one lender to them.
In talking to a number of different aggregator BDM's, the same story comes across, there are brokers that only deal with one or perhaps two lenders.
NCCP withstanding, until MFAA / FBAA / whoever or even aggregators themselves step up and say this is not good enough, we will have the perception that some brokers are simply sales people for lenders. They do us all a disservice.

However lenders strongly encourage this behaviour with their volume incentives, or gold class, or white knight classifications (as you can see I am not one of them) to just use the one lender, then I am not sure it will change.

Call a spade a shovel (or a borrowers agent) will not do much either, the unscrupulous will simply change their name or logo.
Greg

Greg / Michael

Perhaps you can confirm how you handle a client with say a $20K loan increase or a client who doesnt want any additional borrowing but just wants to do a product switch (involving a new application with many lenders) or a simple split for a variety of purposes.

Do you charge them an hourly fee ?

Cheers

Yours in Finance

Sounds strange to me.

So a Borrowers Agent (BA) would charge the client a fee for finding a loan for the client. This loan would be the best option for the client with the BA unswayed by commissions or bonuses offered by the banks. The BA would then refund any commission to the borrower despite not receiving a commission so as not to be swayed.

Richard,
As a general process, for new clients as owner occupiers I usually charge a fixed engagement fee which is refunded in full on settlement, mainly to sort out the shoppers from the serious clients but also as an indication of professionalism and commitment. For returning clients, I do not charge this. For investors wanting a full strategy mapped out, I charge a fixed fee for the strategy and rebate the up front commission if they use me as a mortgage broker.

A client with a $20k increase, I would generally use the same lender unless there were issues (servicing perhaps) or significant cost differences. Depending on the lender, I may not get paid at all for that.
A client wanting a product switch, depending on what they want/need, again I look at overall cost to them and will generally offer 3 to 5 different lenders as well as their existing lender and they chose.

I think a bit like Terry, what Michael appears to advocate sounds strange to me also. I have trouble understanding from a licencing point of view how you could operate like that, under a credit rep model, very few aggregators will permit off panel lenders and if you have your own licence, the work required to go into investigating other lenders or other broker offerings is daunting.

I expect a BA (is there such an animal?) is still a credit assistance provider and needs to be licenced. It looks as if the term BA came from the US and adopted here.
Looking at both the Vanilla Loans site and Borrower Agents sites, they both seem to be able to spin a story but I am unsure on the sustainability of their models and the accuracy of some of their 'facts' or perhaps assertions.Perhaps there is a way to negotiate with lenders so the customer gets a lower rate in lieu of commissions or that the aggregator is happy not to get their cut or perhaps happy to handle commission refunds to clients monthly.  I can't imagine many clients comfortable paying an upfront fee of $2k in return for deferred commission or even a  lower rate.
Greg