are mortgage brokers the best option ?

Hi my name is Jaye first time post

I am curiouse to find out people thoughts as I have recently purchased my first property in April and I used mortgage choice.

I am currently reading a book called
mortgage free debt free. by Michael Lee

And he states that instead of using mortgage brokers where they receive trail commissions from the bank . It is best to use borrowers agents and pay them a fee at the start.

Michael uses an example in the book called the free money strategy
he says the average mortgage is $379,000 and you can have savings of up to $57,000

they are cash back deals and you can get the commission that would have been paid to your broker paid into your loan potentially saving bucket loads in interest.

Just curious as to what people are doing as everyone told me just to go to a broker.

And am now not very happy that those commissions could have been paying down my loan but they are now going to my broker I wish I could go back to him and pay him a once off fee and do it all over again

 

Most of those commission refunding brokers have gone out of business.

 

Thanks for the reply , So I am assuming mortgage choice doesn't do trail commissions then ? how do they make there money ?

 

Choose one thats actually going to steer you through the path you need to your goals over one that offers gimmicks.

 

Yes brokers can be underhanded and recommend options that might be more in their interests than yours. But so can a buyers agent. At the end of the day it's about trust.

 

Yes they are.

 

I'm biased by default.

So, I'll just recommend you listen to the consensus from the experienced investors on here.

 

Without a doubt, we have done far more in terms of being able to effectively use our money to buy property with a broker, then we possibly could have without using one.

It's a bit like doing your own tax - if you're a straightforward PAYE salary earner then you can probably do it yourself. If your tax affairs are complicated, then the money spent on accountants (or in this case, mortgage brokers) is completely worth it.

 

I read that book not too long ago - paints a very bleak picture about the broking industry. The whole point of the book was part of a clever business pitch to promote his business (a fee for service broker model). There aren't too many out there, so painting an ill brush on the broking industry served to promote his business.

In saying that, i do believe there is definitely room to explore a fee model for a brokers services and there'll likely be new players in the industry that operate on that basis that do very well for themselves. I also believe the standard disclosures brokers are required to make are quite poor and probably need some industry attention (this is often talked about at industry level).

But like any industry, the competitive and regulation dynamics aren't perfect.

In saying that, Michael Lee's book was fear mongering at its best. Because brokers are paid trailing commissions it doesn't mean they're ripping you off. Also it does have alignment benefits, there's a lot of post settlement service that goes into a broking business that is part of where the trailing commissions go to (time!).

There's been some misconception of late about the broker proposition being one based solely on price. IMO if you're going to a broker simply to find yourself the best deal or rate, than your missing the true value of the service itself or you haven't experienced it yet. We don't make our living solely on price, but rather on expertise, knowledge and service. Its why the broker model is growing and will likely continue to grow over time as a % of the market.

In terms of the author of the book, he did publicly try and harm the reputation of a very valuable member of the PC/SS community on his webpage not too long ago (when he came on SS briefly). It was simply a pathetic and insecure way to promote their business and at the expense of someone who's likely 10x the broker he'll ever be. I wouldn't be surprised if he picked out a few words from this post, doctored them together and then posted it online to further his interests too.

Cheers,
Redom

 

Why would you assume that? My understanding is exactly the opposite, they receive commissions.

A team can help you succeeded in the IP game and a broker is a great person to have on your side. Also coming up with deposits is the hardest part to start with. Getting two quality properties up front will far out perform getting one, paying for a broker and receiving a trail.

 

You definitely need a good broker on your team. You need one that understands your goals, structuring and an investor themselves. You need to understand banks are just businesses, if you are green and approach them yourself they can make a real mess of your portfolio and most likely will want to cross collaterise everything.

Also with today's technological advances you can access brokers from all over the state. Mines in a different state and the process works well for me.

I wouldn't have what I have without my broker that's for sure.

 

def use mortgage brokers but depends on what you want to do in your journey. Not all mortgage brokers are equal and there are some great mortgage brokers here in the forum who provide heaps of pro bono work (advice) and they can guide you.

 

Ahhhh - yes. I remember him. There's a motive behind that book - Redom touched on it above.

As for using a broker - totally up to you. There's some great ones and there's terrible ones - choose carefully.

Cheers

Jamie

 

do you have any tips on how to know if you have a good broker or not ? as I am very green to this I don't know as I only went to 1 and had nothing to compare to.

But I do think next time I will be using a broker from property chat as I have found information they have posted very useful.

 

Look at the brokers on this forum. Read their posts, look for ones with styles and personalities that suit you.

 

Mortgage Choice brokers do receive trail commissions. Their point of difference is that Mortgage Choice pay their brokers the same commission regardless of which lender is used, whereas other brokers simply get paid what the lender pays (minus the aggregator commission).

If a lender pays the Mortgage Choice broker extra, Mortgage Choice keeps the difference (not the broker or the borrower). Their argument behind this is it removes bias from the broker. However I think you'll find that most brokers don't make their recommendations based on how much the lender pays. The difference is usually negligible from one lender to another and we'd rather have happy clients who understand why a recommendation was made so they refer their friends (which makes us more money!)

I think you've answered your own question. Finance is far more complicated than most people appreciate and wouldn't know good advice just from talking to a single broker. Most of the brokers posting here are quite good at what they do, but it's the old Somersoft forums where you'll really see which brokers have years of experience. Picking a broker from the phone book or a franchise such as Mortgage Choice, you've got nothing to measure them against.


As to the original question:
1. Michael Lee has his own agenda and is likely making quite a lot of money out of it. As I understand it his business takes a fee from referring you to a broker or lender based on some very basic criteria. He keeps his fee even if you don't even want a loan, let alone get one.
2. There are brokers that rebate commissions and charge a fee. Given the fees charged, the average loan size for the investors here and the frequency of how often they work with their broker, it usually costs more in fees than the rebates paid back to the borrower.
3. If you don't like that brokers are paid via commissions, don't use a broker. There are some very cheap lenders not accessible via brokers, but it often costs many investors more through lack of advice in missed opportunity and tax deductions.

 

I got mine from the SS forums a number of years ago, I've been very happy to date.

I would be happy with a number of the brokers who have replied to your thread based on reading their posts over a number of years. A good broker should be one of your first stops for anyone looking at IP IMO.

 

Refund home loans did this for a while but they are no where to be seen. The objective is for them to build a big book value and then on sell it. New owners might mean new terms.

We all need to make money some how and the biggest part to success is building a good team!!! will $19.00 a month make a big difference to you? or a broker setting up the correct structure and being your beg and call worth more?