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Financing & Broker Questions

Discussion in 'Property Finance' started by SaberX, 16th Jul, 2015.

?

Would you rather use a mortgage broker or apply directly?

  1. Mortgage Broker - Convenience/Time

    36.4%
  2. Mortgage Broker - Better Rates/Haggling power and product choice

    45.5%
  3. Direct to Lender - better rates/product offering

    9.1%
  4. Direct to lender - other reasons?

    9.1%
  1. SaberX

    SaberX Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    197
    Location:
    WA
    Hi all,

    So I was discussing with some friends and family recently about my view of using brokers over direct lending, was hoping to enlighten myself and hear it straight from brokers and others alike who have experience in the area:

    1) Can you usually negotiate better rates, product or flexibility and offerings direct than via a broker? GIven you have to be paid a commission surely the bank would be willing to take a cut of that commission and offer it back to you in return for going direct? Win-win for both of you in there eyes?

    Also what is the name of those brokers that return a portion of commission as part of their service? Any reason why the majority of these aren't popular over conventional commission models run by brokers?

    2) Direct lending means your in control of what you're getting - is it the best offer?

    Any thoughts on this? I saw the argument both ways: a broker can offer a superior lending panel, but at the same time unless your micromanaging the process (why get a broker then) how will you ever know if the product chosen is most suitable or the best rate/product out there at the moment, versus the best one for them (commissions) or easiest to place you in?

    Not broker related but financing questions

    3) Any reasons for submitting one loan application for land and preliminary building works contract as opposed to splitting the two?

    Personally (as in my scenario) coming up with enough LVR to avoid LMI is alot harder this way, and was discussing it with family and we couldn't come up with reasons why you can't apply for the land loan now, and the building in a few months time before the land settles?

    This would bypass the issue where 20% deposit is only assessed as per your cash balances at time of application (not available now) which isn't a problem in a few months time?

    4) Pro's /cons in using LVR to avoid LMI versus incurring it and offsetting it against property income? Is the main purpose of purposely going LMI to take a hit now to ensure a deposit to purchase an additional property in faster time?

    5) Is LMI proportionate? i.e. if you have a 19% deposit (short 1%) would you incur say $5k of LMI versus if you had a 10% deposit and paid $8-10k LMI? Basically wondering whether its best to either trigger LMI and lower your initial deposit (save it for next property) or if your close to it, do whatever you can to avoid it? If having a 19% deposit means only a $1-2k LMI as its proportionately reduced then it changes things quite abit.

    6) Do lenders assess your first home buyers grant of $10k up-front for your LVR calcs?

    Thanks for any advice/feedback! :)
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,600
    Location:
    Adelaide, SA
    1 / 2 - sounds like you don't know what a good broker does, so you're asking the wrong questions.

    3 - no idea, let a broker answer

    4 - I like LMI, it means I can leave more equity in buffer which I feel safer

    5 - no it's more exponential than linear

    6 - Yes sorta. Different lenders will want to see genuine savings in various amounts , another reason to run it by a broker
     
  3. SaberX

    SaberX Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    197
    Location:
    WA
    D.T - thanks for responses.

    1/2 - enlighten me?

    4 - so youd rather pay thousands of dollars but in order to have 10-20k more in equity that can be pulled from offset?

    5/6- ok.
     
  4. Redom

    Redom Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    863
    Location:
    Sydney (West) and Canberra
    Quick response to 1/2 - many lenders get a lot of their market through brokers and hence dont provide products different to the customer (that'll cause conflict between broker and retail channel).

    You can go to cheapies that go direct to market and get some rate savings.
     
  5. SaberX

    SaberX Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    197
    Location:
    WA
    Good points Redom. Was more curious along lines of rather than going an El cheapo direct lender if you went direct to a bank e.g. your pepper, p&n, cba etc would there be a rate difference bargaining through retail channel versus your broker.

    Sounds like there's nil difference (even if you have a broker with a large aggregator like afg, vow?) in terms of negotiating power?
     
  6. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    465
    Location:
    Adelaide, SA
    The poll question is so different to the questions in the 1st post.

    Broker v Banker is a moot point, it all comes down to who you're dealing with. A great banker will beat a great broker with the same bank everyday of the week, but a banker can't offer you different banks. All comes down who you trust and can they get the job done.

    Product offered by each is usually exactly the same.
     
    Redom likes this.
  7. Redom

    Redom Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    863
    Location:
    Sydney (West) and Canberra
    Hmm you can find savings by going to direct to market lenders (loans.com.au).

    Reading your post im not sure the value proposition of a broker necessarily aligns. Convenience/rate/negotiating - thats more the value proposition for first home buyers.

    I think many investors use brokers for their expertise and knowledge, not their transactional prowess in rates/convenience.

    Thanks,
    Redom
     
    Kael likes this.
  8. TaylorChang

    TaylorChang Well-Known Member

    Joined:
    2nd Jul, 2015
    Posts:
    167
    Location:
    Sydney
    Many bankers turn to become brokers because of inflexibility of the bank they are working for.
    Often, lending guideline, credit departments and a whole lot of unnecessary politics within a bank makes bankers feel frustrated with the bank they are working for.

    In the home loan - residential lending environment, if you are only buying one or two properties, you may not necessary see much value added by using a broker vs go direct to a bank.

    A broker's value is reflected on structuring lending and presenting/negotiating cases to banks, which is more often a must on complex lending or commercial/business lending.

    If you have a huge property portfolio or doing more complex thing rather than buy and hold, you are better find a broker rather than a banker.

    If you are purely look for the rate or kickback from broker, maybe just like Redom mentioned loan.com.au, you may find the cheapest rate there.

    In commercial/business lending environment, you will see a huge different by using a broker vs banker. It is because of complexity in it's nature. Hence, there are far less commercial/business brokers out there compare to home loan brokers.

    A client of mine went to a bank directly and got knock back (decline) on his business lending proposal. They have a long business history but their business is showing loss on their financial statement for two continuous years.

    I have been working on this case for more than 2 months, it is included understanding client's business, client's business association, how their financial statement constructed, and designed a more presentable case and most effective lending structure for them to banks. Now, I can see many positive feedback from banks even including the one he was dealing before, which mean their loan is likely to be approved.

    What I am trying to say here is some people are purely focus on rate which is ok. However, a good broker is focusing on the lending structure and presenting the deal to banks with best rate possible.

    Also, mentality wise, a broker only get pay when the deal is done. But a bank employee is getting pay regardless if they try hard enough to help the clients.