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Is it common for brokers to charge a fee?

Discussion in 'Property Finance' started by Giuseppe, 28th Feb, 2016.

  1. Giuseppe

    Giuseppe Active Member

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    i was wondering if anyone has ever been charged a fee ($3,500) for a broker to find a loan for an investment property. (The property worth less than $500K) The $3,500 had to be paid upfront whether or not the loan came through in the end.

    This is on top of the broker's commission paid by the bank and/ or trailing commissions.
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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  3. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Different brokers have different models:

    1. Some don't charge regardless of the transaction type
    2. Some only charge if the transaction is deemed "complex", SMSF, Development, etc.
    3. Some charge regardless and they charge upfront
    4. Some don't charge upfront however they have a clawback clause so if you repay your loan within a certain timeframe (say 2 years) then they charge you a fee.
     
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  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Wow that is a big fee. How do they justify it?

    I charge 660 for the first loan but i give additional structuring and tax advice as a lawyer.
     
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  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Was it a commercial loan?
     
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Very few brokers charge fees. There may be certain situations where fees are charged, but but it's unusual.

    I know a few brokers that charge a fee of around $1k on top of the commissions they receive. This often acts as a filter to get rid of people wasting their time.

    Some brokers might charge a fee if the loan is quite small. Kind of fair enough because a small loan often costs more for the broker than the revenue.

    Others will charge a 'clawback' fee. In the event the loan is refinanced or paid off within about 2 years, the lender usually recovers the commission they paid to the broker. Quite a few charge this back to the borrower to ensure they still get paid for their work.

    I am aware of one broker charging fees around $3k. In this case all commissions were rebated to the borrower. If you're an active investor, this is probably going to cost you more money than it saves (depends on the loan size and circumstances).

    It's not uncommon for fees to be charged in commerical or business lending as the lenders may not pay a commission.

    In all cases, the broker must disclose the fees in writing prior to commencing work.

    I don't chage any fees. I believe the commission structure paid to brokers is quite reasonable and charging additional fees is unnecessary.
     
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  7. Redom

    Redom Mortgage Broker Business Member

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    Strange one - brokers can charge a fee if they want, but most don't. Advice on lending is generally a part of the service, so it may be related to the complexity of the loan. Or perhaps you may be selling within a short time period - and the broker is charging a fee knowing a clawback is coming, hence the upfront fee which is broadly similar to the commission received on a loan around that size.
     
  8. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I'd say that this is reasonable, but you'd think they'd explain to the borrower why they're charging a fee of that amount.
     
  9. Redwood

    Redwood Well-Known Member Business Member

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    Depends on the scenario. For development commercial finance, there are a number of brokers that will charge a set fee with agreement in addition to bank finance, its becoming very competitive now where brokers are negotiating heavily with commercial finance and banks are lending as much to developers. I don't - I know many do.

    For self employed loans that are 'complex' - I have - why, you get the paid the same as the resi refi however, the amount of work involved in self employed loans can be significant, many are in a whole and cannot get finance from traditional sources of finance so you can charge brokerage upfront, by agreement. The lenders used, most have not heard of, however you need to be transparent.

    For SMSF - which is my 'bread and butter' - no brokerage, but I do small loans which don't make money at all, more just to help the client to the end objective, for example a $150k purchase with 70% LVR - is a small loan with the same amount of documentation as as $500k purchase with 70% LVR. Many brokers don';t touch these deals....there is still alot of compliance that needs to take place, so brokers have a right to charge - as long as its transparent.

    Cheers, Ivan
     
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  10. Giuseppe

    Giuseppe Active Member

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    No. Basically, it was a refinance of one property and an attempt to secure another loan.
     
  11. Giuseppe

    Giuseppe Active Member

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    Thanks, Ivan. That clarifies a few things and it now makes sense.
     
  12. Jason Tyrrell

    Jason Tyrrell Well-Known Member

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    That is very steep.