latest update for Finance for Trusts!

For HDT Yes DT or UT No

For Corporate Trustees some lenders wont offer arate discount for larger loans.

Hi, Pos

The wife and I recently set up a DT with Corporate Trustee and went with MyRate. The consultant there understood how the whole Trust worked, and was mainly concerned with our salaries, because that was a key factor in determinating the eligible lending amount.

The lending rate was still the same as if borrowing in our personal names. The consultant was unfazed by the whole trust structure to begin with.
 
Regards
Daniel

Gidday Daniel,

Just out of curiosity, what made you go with a mortgage originated ING product vs taking the real deal ING loan through an ORP Broker at a lower rate than the MyRate version?

And Richard, here's a shock for you. I'm with you on 100% on the comparison based advertising. Why is it that MyRate compares a basic variable product with a peak reference rate product that lenders discount down from? It ought to be illegal.

If MyRate's product is so good, why don't they compare it more honestly?

And one final thought (for this comment), how on earth is it ethical to shout No Fees* then fine print lists costs that other lenders, and most of the English speaking nation would call fees?

Hmmm.

Hate to say you can forget Citibank now.

Hello Daniel,

Thank you for the detailed response.

You need to watch out for infochoice and similar web sites because their information is often incorrect and is always incomplete. I'm actually working on a piece on these types of sites right now, which should be out mid August.

Infochoice was wrong on the lowest cost point of they stated MyRate. Especially given the likelihood of Mortgage Insurance based on your LVR. I looked at a scenario for a client a few months back whose LMI was about $4K dearer with MyRate than it was with a standard lenders. Granted the LVR was 90% and loan was $600,000, but still. If you're surprised by this, then let me know and I can get you a copy of the piece I wrote on LMI for Your Investment Property Magazine.

There are a bunch of inaccuracies in what you've been told re: MyRate, but here's a couple of majors:

One Direct is mortgage originator which is a wholly owned subsidiary of ANZ. That means is it covered by ANZ's banking licence etc.

MyRate has no such relationship with ING. They ARE a mortgage originator and their funds are sourced from ING (not ING Direct per se), so too are Resi's and number of other mortgage originators. They are a private company and are not backed by, or a part of ING Direct as far as I know (which by the way is a JV between ANZ and ING).

However you are now looped into dealing with a mortgage manager, so whilst ING may be the ultimate lender, that's about it. You can't deal with ING directly. Is this a big deal? Can be, but hopefully not for you. You did however, miss out in ING's self insured version of LMI called REF, which probably cost you because REF regularly kicks the pants off GE and PMI.

But to answer your question, ORP Brokers are as rare as the proverbial rocking horse poo and there are few different models out there. They are mortgage brokers in the true and regular sense (i..e standard lender panel, do the paperwork, manage the work-flow to settlement etc) however they pass up to 100% of trail over to you.

WARNING: Gratuitous plug coming up…

Ironically I came to this forum researching ORP and SRP for a Your Mortgage Magazine article I'm writing due out later this year (that was the plug), finding your post and Richard's response in google. I didn't look at the Your Share model as it was too new and needs some time in market to see how it settles in and holds up.

However the sharpest ORP Broker in market today, credits 100% of the trail commission to your loan account on a monthly basis. No restriction on lender or product and has been doing ORPs since 2004 (verified).

I have however, run into some problems with fake opinions on various mortgage rebate models in the market, so I shifted the story angle to secret shop instead. I know Richard was very keen to bag this style of broker, however they all ranked surprisingly well in both complex and simple scenarios and they beat the retail broker on cost, solution and compliance.

In fact the sharp ORP Broker also gave the shopper referees for two borrowers who spoke very highly of the skill and care they received and continue to receive.

One is a Sydney based real estate agent with a $6m commercial+resi portfolio at 50% gear with a mix of trust types with different partners + of course complex agency income, The other is a Singagpore based ex pat with a similar size portfolio, more basic structure, but expat complications. Anyhow, they were great to interview, but no use for the YMM demographic as their situation is way too complex. However stay tuned, I hope to get them into Investment Property Mag.

There are two standout things I noticed about that broker. Their website is disgusting and they do a really bad job of overcoming the 'too good to be true' stigma for some people. They told me their website is being overhauled, but they are doing just fine and want to take it slow and steady to 'maintain the standard'. Go figure.

So looking at your scenario, the LMI would probably have been cheaper, who knows by how much. Moreover, the ING 'genuine product' would be rebated to you at 0.15% paid monthly so that puts your ING Mortgage Simplifier at effective rate of around 5.09-.015 = 4.94%, or if you were eligible for smart pack then 5.03 – 0.15 = 4.88% vs. best MyRate of 4.99% for over 600K. Of course the broker would have done your paperwork too.

Not to mention that there are at least 3 other lenders that would kick the ING rate around the block by up to another 0.2% that you could also get with an ORP.

Anyhow, no use crying over spilt milk and on the bright side, you have a better tax deduction.

Sorry for the war and peace, however I was flamed elsewhere for not providing enough context up front. I hope this covers it.

Thanks Terry,

That MAY be a problem however fees and LMI etc is somewhat independent of whether it is an originated/managed product or not. Very few originated products suffer the mortgage insurance issues you have sighted nowadays.

In terms of exit fees, penalties are no more the domain of originated products than they are of credit unions and banks. And you need to risk analyse that as well. Would you rather pay a higher rate every day, or risk a DEF that you may never pay, in exchange for an every day low rate? Depends on the individual, their plan and view.

The real problem is how they advertise more than anything else.

But just to be clear, ORP Brokers offer exactly the same products you do, i.e. retail lender products, not originated products (although some may also broker originator stuff). So there is no difference in product, just cost.

Good question Richard,

So a couple of quick responses which I hope covers this off for you.

This is the first time in this rather interesting post about Trust lenders that nab has been raised, so it begs the question of how they are relevant even on credit policy let alone pricing.

Assuming they are (I also presume you are not talking about Homeside), then NAB, who doesn't pay trails should be taken with a single rebate payment, or SRP.

At least one of the ORP Brokers I shopped offers a choice. You would then pick up between 25% and 32%  of the gross upfront commission (depending on which brokerage you use), so that money could then be parked against whichever debt works best for the borrower to extend it's value.

However Homeside (powered by NAB), generally offers lower priced products than retail NAB and have one of the most generous trail commission structures which would turbo charge the borrowers savings even further. i..e 0.35% p.a. at 6 years plus. This means that although it is an internally originated product, the borrower winds up with a NAB backed loan, at a lower retail cost and rebates to smash the effective rate even further. If the broker can't argue credit policy issues through, then stick with NAB and simply switch from ORP to SRP.

It is important to remember that NAB is just one of many lenders an ORP Broker might deal with and they are the only mainstream lender falling into the "no trails" category. Given they are expensive to start out with, the fact they don't pay trails for an ORP broker to pay you just ramps out how expensive NAB really is.

If you REALLY need a NAB solution, then it would make sense to deal with an ORP broker that offers you a rebate payment choice, take SRP on the NAB stuff, and ORP on anything else with trails. Then when you are ready to switch out of NAB, you have an existing relationship with your ORP Broker to smooth through the transition with ORP savings from the new lender (unless you prefer SRP).

I hope that helps, please let me know if you have any other questions.

Hi Michael

Yes i was referring to the NAB rather than Homeside for a reason and would disagree with you that Homeside offers a  lower priced product than retail NAB.

Personally in my experience the pricing depends on the relationship you have with the Business Development Manager the volume of Business you transact as well in NAB's case whether you are a 4 Star Broker.

I am unaware of any major lender who offers a 95% LVR on both investment and owner occupied properties for non customers in all security areas so again find the comment that NAB is expensive strange to comprehend.

Surely isnt part of the process in making a recommendation to a client factoring in everything from interest rate to credit policy and speed of service. The 2 lending channels have different credit teams and in some cases different credit criteria.

I often use lenders that pay absoluely no commission (Upfront or Trail) at all especially in the Commercial and Development arena and openly charge my clients a fee to be totally transparent. For example the Bank West Rate Tracker product when it was not available thru the Broker network.

How do ORP & SRP Brokers manage this situation ?