Mortgage broker cashback.

I have done a number of loans though Cashback Mortgage (Jon) in the past, I am sure some of these were fixed. He has definitely assisted getting good fixed rates on my loans well after settlement (had some 2yr fixed @ 3.64% IO Investment Loan which just finished which he did after settlement).

 

I’m interested in finding out the lender without a clawback....

 

this is interesting, refi to a lender to share comm, wondering how your Credit file looks like.

 

Even if I already knew exactly what lender and product I wanted for a loan, and wasn't looking for any cashback, I'd still go through a broker to spread the love and make the whole process that bit easier. Oh and to stiff the bank out of a few thousand $$.

 

Just out of interest, noting that as i understand it broker commission is % of loan would any of the brokers here negotiate a cap on fee and effectivly cash back the difference for a larger loan amount. What loan amount would it take? Obviousy 2m isnt enough
What about 5M? 10M? Everyone has their price.

On a related topic, good old labour will have avg borrowers subsidising the larger lenders with their proposed commission caps.

Labor abandons Hayne on mortgage brokers, proposes fee limits

So very labour. Again, banks pocket the difference and avg lender subsidises the more affluent / indebt (at least compared to current arrangements).

 

If Labor wants to get mortgage brokers on side really easily, their position should be to simply leave broker remuneration as it is and let the industry figure it out. Their current proposal is a slap in the face to brokers no matter how you spin it.

As for my price where I'd give a rebate? No. There isn't a price.

Go back to my original analogy of a job interview where the interviewer asks for some of your salary and ask yourself if that's the sort of person you'd want to work with on an ongoing basis? The person that asks this sort of question tends to undervalue what you do for a living. They're not interested in an equitable outcome, they only care about a win for themselves and you can pick up whatever scraps are left, if any.

In 15 years in business and I have gone down this path more than a few times. Every single time, regardless of the amount, eventually I come to a point where I wish I'd refused the work.

Perhaps everyone does have a price but this needs to be weighed against the likely hood that the other party will actually pay up.

 

@Peter_Tersteeg appreciate the insight. I suppose in the majority of cases larger total lending probably equals more complexity across the board and provides the ability and incentive for brokers to service the more complex needs of such a client. If a client doesn't need that from a broker - they could always try to negotiate with the bank for a better rate without the assistance of a broker - good luck to them I say. Personally - I'd always go with the broker service.

 

Do you always negotiate a cashback?

 

With clawbacks it's just not feasible, imagine you go to work, sign up a new customer who is very price sensitive and is very likely to jump ship to a competitor in the future. To get the deal across the line you pay them your weekly salary.

8 months later the customer leaves your company and as punishment, your boss withholds a weeks salary.

You have now lost two weeks salary - one week paid to the customer and one week docked by your boss.

Would you ever do that again in the future?

 

I think its completely fine to use a cash back broker if your situation is straightforward and your purchasing a single PPOR with no intention of further investing etc. I also think its wrong to label all cash back brokers as not capable of structuring as I am sure there would be some that are capable. I have never used one, however if it was my kids first home or something I would get them to as I would rather them have the extra cash if the broker is just filling out and submitting paperwork.

 

SO you would rather the few thousand go in someone else's pocket than your own if you knew exactly what you wanted? If your employer offered you a few thousand extra in your week's pay packet would you rather tell them to keep it or give it to someone else? That is just crazy to me. Im happy to pay for a service, but not when its something that I would do myself if it was the situation you described.

 

And what if for example the loan vanilla or not ended up costing your kids more than the $2k they received in cashback?

These are the brokers that should eliminated from the industry. Too many conflicts here.

I have refinanced a number of clients that have used cash back brokers in the past. Wht didn't they go back to the refund brokers? Hmmm I wonder

Remember refund home loans, they were like a $2 sales shop on morning TV. Are they even still around?

 

Why does it matter after you have your vanilla loan?

 

Because that vanilla loan could be costing you a lot more than the cashback you received

 

Many, many years ago I met with someone who'd had a quote from Refund Homeloans. The quote included cash back of half the upfront commission, which was total of 0.35% of the loan amount.

They were recommending a lender that allowed the broker to define the rate and load in their trail income. The proposed rate was 0.5% more expensive than the rest of the market at the time.

So effectively the client was being sold on a few thousand dollars upfront, which she'd pay for in higher interest over the next 8 months, then again every 8 months after that. The loan also had a 2% exit penalty in the first 4 years.

She was going to get 0.35% back of her loan amount, only to pay an extra minimum amount of 2%.

 

Sometimes I like to ask my GP to rebate part of the medicare rebate as I am just after a prescription and the consultation only involves him writing a script… Why should he receive the full scheduled amount given that the consultation only lasts for 2 minutes.

 

@ChrisP73 - putting the 'customer hat' on, I don't think your position is unreasonable given the remuneration system is tied to the value of the loan, it's fair for a customer to question the value of remuneration one is paid and tie it to the level of service they are actually providing to you. Should a broker really be paid $20,000 for a very simple transaction? That is a matter of debate and I don't think it's entirely unreasonable to suggest that you get a fair share of this.

Nonetheless, explaining what it's like as a broker, we spend a whole lot of time dealing with all sorts of customers. A lot of experienced brokers have plenty of clients and business to keep them busy.

From my experience, those that ask for cash backs typically don't value the service offered as much and are often far more difficult to deal with. I'm not saying this is always the case, its just a signal. In this industry, often 20% of your customers feel like they take 80% of your time and often generate little/no revenue. As a business, this is a pretty significant drain on resources, so business owners look to manage these situations as much as possible. The 20% display characteristics that act as warning signals for brokers, including: asking strange questions, asking for rebates, displaying a lack of trust in your skills or brokers in general, etc. Often the 'rebates' issue falls into this category, it kind of signals a direction to brokers. Brokers typically try and focus on customers that value their services, it's a much smoother transaction for all involved.

There's also issues with the actual remuneration paid too - it's actually quite uncertain now (offset accounts, clawbacks, etc). It's not as simple as what's paid is what's received, as its subject to clawback in various ways since the remuneration changes in 2019.

As an aside, for our larger vanilla loans, our experience is that given the income required for a single multi-million dollar loan, they're not too concerned with rebates/etc. They just want an expert to get it done & utilise our services because they trust the services being performed.

 

Realisically if someone is eligible for $10m in lending, it's going to be a pretty complex scenario, or commercial. Either way, you're likely be earning your money - multiple applications, and complex financials.

I don't ever entertain cashing back - it costs the borrower nothing regardless, and the big deals help offset the costs of the really small ones.

And as Redom said, it's usually a symptom of a client who's going to be a pain in the butt!

 

Don't the commissions cap out before this level too?

 

Over the past couple years, we've done a handful of very big resi loans. Usually very complicated (5+ entities, multiple trusts, etc), usually self employed (often medico's). It's not capped. Almost all of these circumstances had relatively large cash balances post loan though (preference of wealthy usually), so now it'd be a much smaller payment with industry changes in 2019.

We've also done some relatively large commercial deals too. Remuneration works very differently here. Usually a much smaller %, no trail/ongoing, etc. Much more work involved too given case by case assessment and changing funding field. This is effectively more of a fee for service arrangement, as the buyer pays it upfront @ settlement via the loan contract.