“My work on your loan comes at no cost to you,” is something you have probably heard a mortgage broker say. Many mortgage broking companies offer this service to their clients but what does it actually mean?
The work of finding the best loan for you and preparing and lodging loan documents can take many hours and it is only right that whoever does the work, should be paid for it. If you walk into a bank branch, they can only offer you their loans and the bank is paying for its employees and the branch structure to write your loan. If you use a broker, they can offer you loans from many different financial institutions and tailor your loan to suit you. If the broker writes the loan, the lender does not need to pay their employees for writing that loan and instead they pay the broking company.
Different broking companies pass on this payment to their employees or franchisees in different ways. Not all financial institutions pay the same amount. Some broking companies pass on the different amounts to their employees or franchisees and this can lead to a broker favouring one lender over another based on how much they get paid and not always on what is the best for you. At Mortgage Choice, franchisees are paid the same amount, no matter which lender your loan is with so they can be truly impartial, finding the best loan for you. Brokers have access to all of the same interest rates and specials that are offered at various times by the financial institutions, so you can use a broker knowing they will get the best loan for you.
While financial institutions are happy to pay mortgage brokers for doing the work, they are also very quick to ‘clawback’ the payment if the loan does not stay with them for a reasonable time. If a loan is rewritten with another financial institution within 12 months, the broker will have their whole payment for that loan taken back by the original financial institution – that’s a 100% ‘clawback’! The broker has done all of the work for the initial loan but has now received nothing. If the loan is rewritten with another financial institution 12-24 months after settling, the broker will lose 50% of their payment. This is a great incentive for brokers to find you the best loan right from the outset.
So next time you hear the words ‘At no cost to you’, you’ll know how the broker is able to offer that!
For more information call Mark on 0403 577 287.