Are you willing to pay a broker 1% +GST of the loan amount to secure you a loan/mortgage?

Discussion in 'Property Finance' started by euro73, 20th Nov, 2018.

Join Australia's most dynamic and respected property investment community
?

Are you willing to pay a broker 1% + GST of the loan amount to secure you a loan/mortgage?

  1. Yes

    6.2%
  2. No

    93.8%
  1. euro73

    euro73 Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,587
    Location:
    The beautiful Hills District, Sydney Australia
    Brokers are generally paid an upfront commission of between 0.60% and 0.65% ( plus GST) of the settled loan amount, and a trailing commission of 0.15% of the monthly loan balance for the life of the loan - however long that is .
    Their upfront commission is also subject to clawback if the loan is repaid/refinanced within 2 years...so its conceivable that a rate shopper who refinances regularly would earn a broker ZERO income.

    If commissions are banned, are you willing to pay a broker a non refundable fee to write the loan for you? I think brokers really need to charge at least 1.2% +GST in order to have a sustainable business - especially if all trail is removed as well... but lets settle for a more conservative 1% + GST of the settled loan amount .

    Who is willing to pay?
     
  2. hammer

    hammer Well-Known Member

    Joined:
    28th Aug, 2015
    Posts:
    1,795
    Location:
    Darwin
    As a normal buyer....Why would I pay that when I can use a comparison website and contact the banks directly?

    Using a broker now makes sense because they can support me finding better deals etc, but a few grand is aalot of coin, especially when the same service is available at the bank for free...

    It'd probably be worthwhile for serious investors etc....but for the vast majority of us at the bottom of the food chain it'd be a big fat no.
     
  3. Barny

    Barny Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    2,392
    Location:
    Australia
    I’d pay, as long as I’m better off financially at the end of that loan written period. Broker rates would have to better the banks.
     
  4. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,689
    Location:
    Melbourne
    I just refinanced a 750k Loan.
    Their is absolutely ZERO chance I or anyone is going to pay 8.25k for a service that is entirely free at branch.
    I don’t care how good your offering is, any broker who thinks otherwise is extremely naive.

    I reckon you would be at a stretch for most people to pay .1% of the total loan amount.

    The only exception as @Barny said would be if I could get some white label broker only product where the life of the loan is cheaper....good luck with the banks letting that happen.
     
  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    5,150
    Location:
    Perth WA
    $8250? I don't think I've ever had that as a commission from any loan, ever.
     
    albanga likes this.
  6. Barny

    Barny Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    2,392
    Location:
    Australia
    Didn’t you make more than this on my previous loans :)
     
  7. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,689
    Location:
    Melbourne
    Hey I’m just following @euro73 rules :p
     
    qak likes this.
  8. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    5,150
    Location:
    Perth WA
    Haha I wish! :)
     
  9. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    5,150
    Location:
    Perth WA
    Got ya. :) Agree - no-one will pay that. I wouldn't.

    More to the point, no-one should have to pay that! What kind of 'good customer outcome' is that?
     
    G TOWN likes this.
  10. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,391
    Location:
    Qld
    Why set the fee as a percentage of the loan amount? Surely the actual work involved is similar for every loan. Sure, many RE agents do, but that business model is being challenged by newer, fixed fee agencies.
    Marg
     
    Danyool and Blueskies like this.
  11. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    231
    Location:
    QLD
    Common misconception I think. Some loans are much easier and less work than others, others harder/more complex
     
    Eric Wu likes this.
  12. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

    Joined:
    18th Jun, 2015
    Posts:
    19,064
    Location:
    Remote
    I wouldn't pay
     
  13. willy1111

    willy1111 Well-Known Member

    Joined:
    16th Jul, 2015
    Posts:
    175
    Location:
    Melbourne
    Matt Comyn head of CBA when speaking at the Royal Commission yesterday implied the branch level would also charge the same fee to get a loan as would be charged via the broker channel.

    Maybe like an application fee that is paid to the loan writer whether that be broker or banker.

    It would be flat fee, about a third of what current upfront is.

    Not sure how that would work? The commercial viability of small loans the banks don't make much margin on. So i think it would be the customer being charged an application fee regardless of loan size.

    I don’t see how it would benefit the customer in any way shape or form...but commissioner Hayne seems to be eating out of the banks hands when it comes to talk about brokers.
     
    Lindsay_W likes this.
  14. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    231
    Location:
    QLD
    "Implied!" Come on, do you really believe branch land will charge the same fee? Even if they do I'm sure they'll offset it in other ways to make the broker path less attractive.
    It's happened already with refinance rebates, brokers can offer $1250 (as advertised by the lender) but the lender's branches were allowed to increase it up to $3000+ Doesn't look good for the broker when client goes into the branch to sign their loan docs and sees $3000 refi rebate on the wall - gives the impression the broker has pocketed the missing $1750...
     
    albanga likes this.
  15. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,391
    Location:
    Qld
    Of course. Clearly some situations are more complex than others.

    But is that solely due to the size of the loan?

    Which would justify basing charges on the loan amount as per the original question?.
    Marg
     
    Danyool and Lindsay_W like this.
  16. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,689
    Location:
    Melbourne
    They will initially play by the rules until the dust settles. Then they will slowly rebate or cleverly discount the fee into a product.
    Once the last of the remaining brokers are gone they will just flat out charge it again likely as part of the package fee.

    It will eventually become like LMI whereby the incentive is to stay with the same lender or pay a new fee. They will offer things like “no new app for for internal refinances”.
     
    miximitosis and Lindsay_W like this.
  17. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    12,490
    Location:
    Sydney or NSW or Australia
    If the burden shifts from the bank to the consumer to pay the commission, are the banks going to come to the party to discount the loan?
     
    Lindsay_W likes this.
  18. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

    Joined:
    18th Jun, 2015
    Posts:
    19,064
    Location:
    Remote
    No. They want to make more profit so they will make a token discount initially which will quickly disappear
     
  19. tobe

    tobe Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,696
    Location:
    Melbourne
    The banks make more money off the size of the loan. They employ people to write loans and make their profit. Brokers could charge a fee similar to an hourly rate, but they aren’t employed. The hourly rate doesn’t mean sick pay, holidays, super etc. the commission needs to be tied to loan size (and banks profit) IMO.

    If banks were happy to forgoe larger profits on larger loans perhaps brokers would consider an hourly rate...airtasker style.

    If banks wanted to keep brokers, but only pay them a fixed fee per loan, perhaps they could contribute to some industry fund that paid a stipend to brokers between deals, super, sick pay, like an old fashioned friendly society
     
    Lindsay_W likes this.
  20. Burramys

    Burramys Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    271
    Location:
    Melbourne
    There's a town that has dozens of farms growing crops, selling beside the road. Some produce is fairly priced, some not. Some is a good quality, some not. The only way for a person to assess these aspects is to visit the roadside shops and take notes. This means looking at 37% of the sample to get an idea of the market, and then picking the next one that suits.

    The town has fruit shops with all the produce from the growers. This costs more than the roadside shops but is far quicker and easier for the buyer.

    Replace the farms with banks and the shop with a mortgage broker. There's one difference - as far as I can determine the cost via a bank or broker is the same. I engage experts to assist me - doctor, lawyer, conveyancer and mortgage broker. I do not know enough about these areas to make informed decisions. Experts are used if they can do a job better, faster or legally when I cannot.

    I'll happily spend time painting, cleaning, and doing minor reno items that take my time but save paying a tradie. I painted a property, two weeks, cost about $500 for the paint. Other jobs were being done so there was no rent forgone. The painters quotation was $4500, so I saved $4000.Getting $2000 a week after tax is nice.

    My mortgage broker found me a loan about five years ago. He asked me what I was after, obtained a lot of information, and gave me a list. I sold that property and am after another mortgage, new PPOR. He got me a mortgage with the same bank.

    A mortgage broker can quickly assess several options; I cannot do that. The commission was a small fraction of the $8000 cited above.