Mortgage Brokers verses doing it yourself

For our first loan, we went straight to the bank. We got a reasonable deal and we were happy enough to go with who we were banking with.

For PPOR no. 2, we have gone with a broker, (after first dealing with our bank) and I'm glad we did. Firstly, my wife and I are both self employed, so the information the bank was after was detailed to say the least. We just forwarded all the info to the bropker, and he was able to deal with the bank and their ridiculous requests. It saved us time, effort and heartache.

Some background, my dad worked for NAB and its predecessors for 32 years, so going over to the 'broker' side was not an easy step. Dad is still talking to me though, which is good.

I also would prefer to pay a 'fee for service', rather than have the bank pay a trailing commission, and am reminded of the saying, 'he who pays the piper calls the tune'. But if the banks are happy to pay the broker for introducing business to them, and the broker can get me a better deal than I can get myself (which he did), then isn't this a win/win/win? I think so.

Posted this elsewhere

My thoughts;

1. Maybe/maybe not depending upon the individual broker – property investing is more than just 'interest rates' as there are far more important things to worry about. You also need to consider such issues as capacity to maximise borrowing but even more important loan structuring. To me these last two items carry much more weight than 'interest rates'

2. I would be very surprised if you only get the 'same result'. Maybe from an interest rate perspective but as indicated above in 1 – interest rates are almost secondary in consideration to other aspects of lending money.

3. Yep brokers do get trailers. Not sure why this would be a concern as brokers are not allowed to people into unsuitable loans and if ever questioned by authorities need to justify why lender X and package Y were chosen. I am happy for my broker to earn his trailers – believe me he earns them.

4. A bigger perspective is required.  

Hi 4jojo

I used to have a view that I was happy to deal with my bank directly and sort finance myself BUT…since the GFC when I went to do an equity draw down and my bank's policies had changed, I found it much better to use a broker than go and knock on every door myself.  That changed my view totally and I'd use a broker every time in the future…..the only exception is if I want to use ANZ or MyState financial as they are currently not included in my brokers list of lenders.
 
Our local guy has access to 35 lenders and he knows straight away which ones are most likely to fit our circumstances for each deal we do.   Also, two days ago he mentioned to me that some banks are lending up to 95 – 97% on properties here locally and some are even paying LMI to get the business.  I was surprised to hear this and it's also good to know that big picture information, rather than just the perspective of one lender. 

Hope this helps, Tracey

Hi 4jojo

Welcome to the forum.

From my perspective, I spend the majority of my time with clients discussing loan structures. Working out the most cost effective and efficient way of setting up their finances in order for them to continue building their portfolios.

While interest rate is important, if you’re investing in property (and looking to purchase multiple IPs) it shouldn’t be the driving factor behind which loan to take out.

Also, something that hasn’t been mentioned is that some of the most competitive rates are actually only offered through lenders that operate via the broker channel.

The brokers trail does not impact upon the product you receive. If it were – they’d have to inform you of a conflict of interest.

All the best with whichever path you go down.

Cheers

Jamie

4jojo, do you get paid to do your job?

If u don't want to go to mortgage brokers…
why not try no frills loan
such as myrate, Ubank, etc

How do you expect to take out a loan?

Cheers

Jamie

I am not sure if mortgage brokers get better rates! they would however, or should be aware of the best rates out there. But a word of caution, there are other factors to consider in getting the best loan for one’s given situation at the time then just best interest rate – e,g ongoing fees, offset facility, etc.
Also to note that brokers not only get a trail commission for the life of the loan but they also get an upfront commission. Someone has calculated that on a $350,000 loan over 30 years, the broker gets over $13,000 in commission.
Apart from going directly to banks yourself or using a broker, there is a third option. You can hire a borrower’s agent, in the same way you can hire a buyer’s agent to purchase a property. They charge you a fixed fee (usually around $4000) and they then search for the best loan for your situation AND every month they refund you the monthly commission that would have gone to them.
I think this is the kind of situation where the loan person is really impartially working for you to get you the best loan for your situation because they are getting paid by you. Mortgage brokers get paid by the banks, usually through their the aggregator they are working for, so they could be influenced to push one particular lender over another.
If I can afford it, I’d rather hire a borrower’s agent myself. there are not many around but I think this model of doing loan business will increase in the future. A good one that I came across is based on the gold coast – check it out at http://www.vanillaloans.com.au
cheers
JNM

GOM

Yes not bad is it.

Just think assuming they paid you trail commission on a loan of $400,000 at say 15bps and paid you from day 1 (and many lenders dont offer that) it would take 6 and half years to break even.

Cheers

Yours in Finance