Mortgage broker cashback.

So far this calendar year, the quickest and easiest deal I've had go through was a first home buyer with a family guarantee. I did everything myself during the holiday period, it was assessed and approved without any further intervention.

** The data entry, checking and submission took about 6 hours.

** I probably spent about 2 hours researching across about 8 lenders as this deal had some unusual components in the family guarantee. It turns out that there's only a single mainstream lender that could do this deal, and they're not one you'd usually associate with family guarantees.

** About 1 hour organising documentation and valuations.

** Overall I spent about 2 hours with the client and 1 hour with the guarantor.

Whilst this wasn't a simple application, it wasn't a difficult one either. It went straight through and still represented about 11 hours work. An application that doesn't go through can easily blow out to 20 hours.

Keep in mind that in all this, there's no consideration to the effort I put into marketing, compliance or any of the dozens of other things I do in order to run this business.

 

Agreed. I've found the easiest and quickest of deals takes approximately 10-15 hours these days.

 

For a $1m simple loan commission equates to $7500 (assuming 0.5% upfront and 0.25% trail)
for 12 hours (average) work.

This includes about 6 hours of data entry. Quick google search tells me data entry operators are paid $23 per hour.

So effectively $1227 per hour for mortgage brokers.

Looks like mortgage brokers are heavily underpaid.

 

@PhilGood the average loan size is $400k. Upfront is 0.5% to 0.6% (let's say an average of 0.55% and trail is almost uniformly 0.15%. I'd say 12 hours is at the low end of work required, not the average, which would be about 15. If you're only paying $23 per hour for data entry, in this business you're going to spend a few additional hours checking the work.

It's really difficult to break down an hourly rate because a lot of the work we do isn't directly paid for. I can agree that a $1M loan can be really good money, but a $200,000 loan is probably a net loss.

Here's what I do know. In 2017 the average broker's total revenue was around $140,000. After expenses the taxable income was just over $80,000. If anyone things mortgage broking is easy money, feel free to give it a try.

 

Have you operated a business by any chance? As I'm sure you are aware there is a big difference between revenue and the money that ends up in the business owners hands. On top of your suggested $23/hour admin assistance there is:

+ compliance costs
+ insurances
+ rent & office expenses
+ marketing
+ aggregator costs
+ approximately only 1 out of 3 new leads being revenue generating
+ completing loan applications that actually cost you money (top ups and small loan amounts)

I can't recall who said it earlier but generally market forces tend to reduce margins over time. If there was so much room to reduce margins why is the average broker income before tax $86,000 and median approximately $67,000?

In the end, if you as a broker are happy to rebate some of your commission, good for you. I and many others have come to realise customers who place a greater value on a rebate than the service and knowledge you provide are ones to avoid anyway.

*edit*.... and the great thing as a consumer you get to choose whether you see the value or not.

 

I do a million dollar loan in around 2.5 hours, so I'm earning way more per hour than you suggest

 

Did you get any takers by the way? It;s been a week since you asked, I'm sure you must have been flooded with offers?

 

He is busy.... trying a scheme where he splits the health fund rebate 80% in his favour so his dentist earns $23 a hour for data entry to the health fund.

 

I’ll do the rebate. Split half the comm I receive. Paid on the 2 year anniversary of settlement. With clawback I don’t understand how brokers can rebate Comms?

 

Guess how many $1M loans I've done in my entire career?

1.

If I based my profitability calcs on the $1M loans, I'd be in for a very rude shock.

 

sounds like you just done your PI questionnaire

 

Nah - it was just memorable

 

Just read this whole thread...so what's wrong if any broker is willing to share his/her commission with the client? If the client is happy and the broker is happy then I don't see any issue.

I agree that there are running costs of the business etc etc...but this is upto an individual broker to figure out if his/her business is sustainable if operated in a commission sharing basis.

If the OP has done the leg work and know exactly what he wants and looking for someone who can share the commission then there's nothing wrong in that. I know few brokers who share their commission 50:50 and they are still operating for the last 7 years I've known them.

 

Also, does anyone know if there are any industries outside of the financial services where you can receive professional advice that saves you money at absolutely no cost to yourself?
If I was a broker there's no way I'd devalue my service and let a "client" use me as an ATM machine.

Willy

 

Cash rich brokers who have good network of clients and have plenty of work coming may not agree to offer cashback.

But for someone who is looking for work it’s better to accept cashback client than no client.

A large %age of brokers drop-out within 2 years of starting their career. Not because they lack knowledge but because it’s a highly competitive profession with low barrier to entry. Offering cashback may be a great way to establish themselves and build network.

Finding a client is the biggest challenge for brokers who is starting fresh.

Note: OP is not looking any professional advise here just someone who would use their broker license to lodge an application to a lender that’s already been researched.

It’s true that it’s a broken system. Broker is a middleman and there should be an incentive for customer should they chose to bypass middleman and deal directly with lender.

The system is highly biased in favour of brokers. Currently there is no incentive for customers to deal with lenders directly. All big lenders offer same rate whether a customer goes directly or via broker.

This creates the need of a cashback broker.

There are few online lenders that don’t accept broker deals hence are able to offer low rates but they are far and few. Not many people know about them.

The day major lenders started offering different rates for brokered and direct deals you can imagine how many customers would go via brokers.

I am writing from the perspective of a customer.

Of course majority of comments in this thread look valid if you put yourself in the shoe of a mortgage broker.

 

Come down to whether you think the broker adds value. Same with accountants: if you think they just type numbers you want cheap.

 

lol at all the brokers on the list saying no way they would cash back.....its coming and its a thing

here in New York we actually have both listing and buyer brokers who are offering cashback (eg 1% of the entire value of the property as a cashback) keep in mind broker commissions over here in the USA for residential property is 5-6% but the brokers cover all marketing costs etc.

But still not a bad little kickback eg if you are buying a $1m property.....your broker who gets 2-3% commision kicks you a check for $10k

 

Your talking about buying and selling agents. This is about mortgage brokers?

Next youll be telling us 30 year fixed mortgages are coming to australia because they have them in the US. Maybe city income taxes like new york has are coming too? Ppor interest deduction? Low stamp duty? High local property taxes? Local police force?