Broker's commission on home loans

Hi All,

Just have a few questions that has been on my mind for a while.

Do broker's still receive their initial 0.62% commission if say the loan settled on residential home loans, but the mortgage was discharged say a month or 2 after settlement? I understand broker's receive their trailer fee for life every 6ish month or thereabouts.

Obviously this may depend upon the bank, but say for CBA or ANZ Bank?

Thanks all.

 

Yes they will receive it, but be required to pay it back in full if the loan is paid out in less than 12 to 18 months.

 

Not that is my problem, but that is a bit slack considering if someone discharges it after even 6 months, it is not the broker's fault they discharged it? They still did all the work for the loan to go through.

Do you know if this is say for all banks?

Thanks Terry.

 

Nearly all.

 

Many brokers will build into their client agreement that the client will compensate them if this occurs.

If you think you'd be discharging the mortgage within 2 years, talk to the broker about it. There are lenders that are competitive that don't have clawbacks. There are ways to turn this into a win-win.

 

Claw backs are nasty.

How common are they post APRA? Are more people tending to stick with what they have for longer?

 

Yes it is pretty slack! I had one where the client decided to sell a property almost 12 months in it discharged and I had to pay back all the comms.

Now it is harder to refinance so clients are less likely to move, but a few people are selling and cashing in on the boom in values.

 

I have a fee of $1000 if I secure a client a loan and they don't proceed. This is not a fee to make an application. It is only payable if a loan is approved unconditionally and they do not proceed.

I also have clawback provisions clearly detailed in my client agreements.

No one likes charging a client a fee, but loans are time consuming and my knowledge and expertise has been developed over a long time, and I should be paid for my time and knowledge, like anyone else is. No one else works for free - not planners, not accountants, not conveyancers or solicitors, and not any of my clients in their day jobs.

 

Had a forum client refinance in December 4 days before the end of the 18 months.

They went directly to a lender to save 25 bps who subsequently has increased the rate by 15 bps. Great saving.

50% clawback not nice that time of year on a decent sized loan so we definitely incorporate a clawback fee in on our new loans.

 

1. discharge, meaning refinance and/or selling the property?
   
2. what happens to a construction loan, when you decide to sell upon completion (less than 12months), hence discharging?

 

discharging means paying out the loan completely. It applies to construction loans too.

 

Hmm, what if someone in the acquisition phase revalue and refinance with the same broker within the clawback period?

 

Assuming they refinance with a new lender they get clawback on one hand for the original loan and paid a new upfront on the other.

 

This can also be done with no clawback by just creating a new loan for the equity release - there's no need to trigger a clawback in this instance if the client is happy to stay at the same bank.

 

If it's with the same bank they'll get paid a small commission from the top up.

If it's with a different bank - they'll get a clawback and will get paid a new commission from the new lender.

Cheers

Jamie

 

For the brokers that do chrge a fee for discharged loans, how do you get the client to pay this?

Say 14 months rolls by and the ex client unknowingly goes into a bank and refinances and then you get stung with a 5k clawback.

Is it just a simple email with perhaps the signed Agreement attached to the form and your bank details?

Has this happened to anyone and how did the client react?

 

Yes

 

Hi, what is CBA's clawback period? I am thinking about refinancing for development with a new broker (from this forum). But dont want to do the wrong thing by my old broker.

 

Depends on the aggregator - 18 months generally

 

18 months from memory.