Am I Being Selfish Here with My Home Loan Broker?

sss143 on 11/08/2021 - 10:01

Took my investment loan through broker and stayed with that bank for about 30 months. So she would have got at least 75% commission on that. Then I refinanced it through the same broker in last year. I have not finished 12 months yet but now I'm looking for cheaper interest rate with another refinance.

She will not get her commission if I go this way as I have not finished at least 12 months yet. She highlighted this point while I was having a chat about cheaper loan. She is not forcing at all but I'm feeling kind of guilty to do that.

What do you all suggest?

Financial Home Loan

Comments

  • Pelicannn on 11/08/2021 - 10:04
    +20

    Guaranteed she already received an upfront commission from the bank and the 12 monthly is just a trail for keeping your loan.

    In any case, nothing personal, just business.

    • djkelly69 on 11/08/2021 - 10:23
      +7

      From what I understand, the bank can 'claw-back' the commission if the customer refinances within certain timeframes.

      Usually the full amount if they refinance within 12 months, and 50% if they refinance within 12-24 months.

      • AutomationGuy on 11/08/2021 - 10:52

        Yeah absolutely do claw-backs, and it can hit broker stats poorly as well for them. Those numbers sound about right.

        BUT if you refinance through the same broker they will probably make back what they lost. It is a cost of business for them.

        The biggest thing is just not to screw them over when it makes no difference to you. I.e. if you cross shop rates and your current broker has an equivalent rate don't go elsewhere just because.

  • Hithere on 11/08/2021 - 10:13
    +12

    No friends in business.

    Do what's best for your own situation, ask her if she can beat or match any other cheaper interest rate you can source.

  • footyboy on 11/08/2021 - 10:33
    +6

    Broker here, we will often lose 100% of commission within the first 12 months, and 50% from 12-24 months. Hope this helps!

    • SnoozeAndLose on 15/08/2021 - 14:45
      +1

      in case of losing the commission, what would you do to the customer? just cursious.

      I think you did not sign a contract with them and saying they need to be held the loan for at least 12 months or you charge them money right?

  • netjock on 11/08/2021 - 10:33
    +6

    They would have got paid up front thousands already. Don't worry they are hardly living on the poverty line.

  • Drakesy on 11/08/2021 - 12:05
    +1

    I'm still confused why in the day and age of the internet we still have mortgage brokers.

    Like i'd like a cheaper rate than what's on the market but because i don't have a mortgage broker license i'm not entitled to it.

    Does someone want to shine a light on why this is?

    • sagrules on 11/08/2021 - 12:11
      +1

      They help manage some of the paper work for you as well at the back end. Depends how important this step is for you. I have done both.

      • Drakesy on 11/08/2021 - 14:50

        But what if you manage the paper work yourself. Surely you should get the same price as the brokers then if you effectively pay yourself the commission?

    • jpl on 11/08/2021 - 13:38

      Some are good, some not. The good ones have bulk rate, hidden quota, mates-deal, etc.

    • Adrian Player on 11/08/2021 - 15:35
      +1

      Broker here - Because its insanely complex. Here i am 12+ years in consumer lending across 3 consumer lending products. Hard enough as a full time broker here spending 50+ hours to stay on top of all of this. All clients see is an interest rate and fees. Banks are changing rates / policys / appetite for certain types of deals all the time. And each bank has their own niche's and deals they like. Clients dont understand this.

      • Drakesy on 11/08/2021 - 15:47

        I get that, maybe back 15-20 years ago when the internet space didnt exist but now its a completely open market with 100's of mortgage interest rates in one place. Literally just need to sign up, fill in the info, get signed off and you've got a mortgage.

        I just struggle to understand why the average punter would have to pay more to do more of the grunt work

        • Adrian Player on 11/08/2021 - 15:48

          For vanilla simple deals yes. But with experience thats not the majority of clients.

          • Drakesy on 11/08/2021 - 15:50

            @Adrian Player: Still doesnt really say why someone doing the work themselves should have to pay more by not going through a mortgage broker

            • Adrian Player on 11/08/2021 - 15:53

              @Drakesy: Ahk so your looking from op's point of view. My suggestion would be to go back to that same broker allow them to write the new deal, yes they get clawed back but they also get the new deal so both parties win.

              But if Op is going to manage a 25-30 year mortgage yearly after 3-4 refinances they will start having issues with how the banks will deal with them for the next 5 years after that.

              • Drakesy on 11/08/2021 - 18:37

                @Adrian Player: Not really the op's position. Moreso if i bypass the mortgage broker process why dont i have access to the cheaper rates they get given i dont charge a commission?

                • CheapskateQueen on 11/08/2021 - 21:10

                  @Drakesy: it's the same reason why retailers are paying cashback websites a commission.. "why not just give me a 5% discount/cheaper price instead of paying the cashback website. i mean i came here in the end right"

                  brokers are another form of advertising for the banks.. brokers stream clients to the bank.

                  • Drakesy on 11/08/2021 - 23:52

                    @CheapskateQueen: But wouldnt they get the mortgage anyway if they were offering the cheaper mortgage from day 1?

                    I'd imagine the internet would put that right in front of you

                    Unless the mortgage broker is really offering you a product purely based on kickbacks, in which case they may not be working in your best interest

                    • CheapskateQueen on 12/08/2021 - 07:24

                      @Drakesy: again, isn't that the same question for any product for sale?

                      if I want a product I'll jump online, find the cheapest price, factor in shipping costs, the type of product and whether an in store return is likely, store reputation etc etc. That's what most of us on here do. But that's certainly not what most the population does.

                      When we go to a cashrearwards site, all other factors being equal, I'll use the shop with the highest cashback. Why didn't the shop just make the product cheaper then?

                      • Drakesy on 12/08/2021 - 10:56

                        @CheapskateQueen: What i guess i'm suggesting is that the cashrewards site isnt working for you so where they send you doesnt really matter, and shopping online is a pretty open market

                        However mortgage brokers are appointed by you to work in your best interests. If they get a higher commission from bank b, yet bank a is cheaper then they'll send you to bank b as you won't have seen bank a's rate as only mortgage brokers are privy to that

                        • omego84 on 14/08/2021 - 21:15

                          @Drakesy: I had always gotten home loans directly in the past but recently used a broker. This was at the onset of Covid and it was good to be removed from the admin and chasing the bank. The broker also paid a few grand of cash rebate/reward for going through them and got very competitive rates so much so that when I speak directly with the bank time to time they ask if I’m bank staff as my rates appear low. So I definitely think it serves to do our own research on rates and also go through a broker and compare. You have nothing to lose as they obviously don’t cost $ for the client.

                          • Drakesy on 15/08/2021 - 13:33

                            @omego84: But that still doesn't explain why if you cut out the middleman shouldn't you get access to the cheaper rate from the get go?

                            It shouldn't require a license to access cheaper rate, of which the broker takes a commission out of

                            • omego84 on 15/08/2021 - 14:37

                              @Drakesy: True. The average person can definitely achieve the same objective. The broker typically gets pricing from different banks and uses price match techniques to get the best rate from a particular bank. The average person should be able to do the same but maybe they don’t because they are time poor etc which keeps brokers in demand.

                            • Adrian Player on 11/10/2021 - 15:28
                              +1

                              @Drakesy: Because the banking royal commission standardised everything. You cant get a better deal through a broker or banker. Its all the same now. Banks like brokers because they dont have to pay for branches / salarys / desks / it / leave. No fixed costs. Just costs on results.

                              Do you think writing a deal through a branch involves zero cost vs a broker?

                              • Drakesy on 11/10/2021 - 18:49

                                @Adrian Player: Unfortunately thats not the case
                                Mortgage brokers still have access to rates lower than that offered to the general public
                                Even then they can offer cashback on top of this

                                Yet the average Joe gets penalised for going directly to the bank

  • Blackadda on 11/08/2021 - 12:34

    forget about the comm.. unless there's a massive difference in rates offered the cost of moving will outweigh any interest saving … often you're talking hundreds to move so you'd want to have a big loan to make it worthwhile… also if you do you should be getting a great deal anyway …not something you should have to move every 12 months unless you're getting sucked into honeymoon rates.

  • blonky on 11/08/2021 - 13:09

    I used to work on the side where we paid the comms to brokers; it's a big lump sum up front then an small percentage trail commissions each month for the first year. That was about 80% up front effectively for our business

    You have no obligation to provide commissions to your broker by paying higher mortgage rates; don't feel guilty

    • stirlo on 11/08/2021 - 13:12

      The upfront sum will be clawed back if the customer leaves within 12 months however.

      • blonky on 11/08/2021 - 13:17
        +2

        Nope, that is the purpose of the trail comms - they cease if the customer left at x months. Otherwise we would've paid the entire amount up front and then clawed the entire amount back

        This is relevant for the company I was doing work for, anyway

        • stirlo on 11/08/2021 - 13:22

          This was with ANZ. I also confirmed this with Len from Bundle Loans who regularly posts refinance deals on here.
          Funnily enough he stopped talking to me after I told him I was willing to jump between providers quickly for better deals. :P

  • stirlo on 11/08/2021 - 13:11
    +1

    I screwed my broker over with this. She lost 100% because I moved after 7 months.

    That said I saved $250 a month from a lower rate, got a $6000 cashback ($5300 net of fees) and a better product (unlimited rather than a single offset account).

    At the end of the day it's a business. They have to account for a certain percentage of customers leaving within 12 months. I think on our $1mil loan she received around $8k commission. She could have rebated some of this to us (at 12 month mark) like some brokers on Ozbargain do as a retention bonus but chose not to.

    I think if your broker went above and beyond for you (like finding extra income or getting a below market rate or a 95% loan) then it's a tad unfair. But if you can submit the refinance documents online yourself and it's a straight forward approval with your PAYG income then the work really isn't worth $8k, so no harm in them losing it occasionally from those who are happy to frequently refinance.

    At the end of the day you look out for you. When you're talking thousands of dollars you really have to put yourself first.

  • bemybubble on 11/08/2021 - 13:11

    https://www.ozbargain.com.au/comment/10829555/redir

    More or less the same - give them the opportunity to do better. That's the difference between 'business' and 'good business'

  • drprox on 11/08/2021 - 18:56

    It's business mate, they still pickup 15bpts trail and given some of the book sizes they manage generally make off like bandits in my experience. Go for it.

  • bradl822 on 14/08/2021 - 21:20

    As everyone else has said it's a business, they choose to do it. Also I wouldn't feel guilty specifically for the fact they brought it up. Bringing that point up is so wrong, especially when their job is to get you the best deal. I'd probably go elsewhere tbh.

  • rektrading on 13/10/2021 - 14:59

    Middlemen like brokers will be replaced by code in a few years.

    They should prepare to learn new skills now or risk being unemployment.

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