Mortgage broker commission and trailing fees rebate

Hi

Thought I get some opinions on this matter.

I read about companies like YourShare, who claw back upfront commissions and trailing fees from lenders / brokers. They act as your 'middle person' and give back between 50 - 70% of the commissions and fees to you.

Example:

A $400K loan, with 0.6% or $2400 upfront commission, and 0.2% or $800 trailing fee per year.
50% of that rebated to you in Yr 1 equals $1600 (50% of $2400 + $800). From Yr 2 onwards, you get $400.

I spoke with YourShare and they will get their partner broker to be my 'middle person' to rebate the 50% of commission and fees. The staff from YourShare also suggested I ask the broker I deal with if they are happy to rebate 50% of their commission and trailing fees.

So, the question is: 

Have anyone had experiences with companies like YourShare?
Anyone approached their broker and asked for a 50% rebate of their commission and trailing fees?
Is this one of those cases where 'you get what you pay for'.
 
Regards
Daniel Lee

Has been dealing with YourShare for the last 2 years without any problems.
Got rebate from managed funds/superannuations/insurance .... 50% of trailing commission.

How about if you repay your loan to $0.01in 2 years... No one will probably get the commision...

Cheers

Probably best i dont comment on such organisations as the quality of staff and experience within these organisations is reflected in what they earn.

Most of these organisations would have no idea how to structure a loan properly and have no experience in dealing with investors. There are few organisations out there of which many of the Banks will not deal with due to the level or Professionalism.

Guess like anything you get what you pay for.

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Thinking of buying your next investment property using a SMSF. Email me for a copy of my SMSF EBook.

Hi, Richard

That was what I was think as well, that you get what you pay for. Unless there are brokers out there providing solid advice at cut-throat prices.

The staff from YourShare told me that they are starting up a new mortgage division, and have partnered with a mortgage broker who has agreed to go with their business model. That got me thinking that if their broker was rebating 50% of all commissions and fees, then they would have to do volume work in order to earn their profit, so how much time can be spent advising individual clients.

That was why I wanted to find out from the fellow forumites here if anyone would go for such a service over their preferred broker who has hopefully been providing good advice to you; considering the amount of rebate is not small amount too.

Regards
Daniel Lee

Daniel

You are right with the way in which commissions have been slashed over the last 6-9 months the amount a Broker can earn is reduced so if they are giving away a percentage then the amount of time spent on your deal is limited.

Any Professional Broker who rebates the sort of amount you have mentioned cannot survive too long on that business model. 

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Thinking of buying your next investment property using a SMSF. Email me for a copy of my SMSF EBook.

Hi Daniel,

Could you please let me know what is the different between getting the managed funds through Yourshare or through the 'broker'? and if you can get the rebate from your super funds... why not?

Advise for managed funds... well.. look at Storm financial services... 8% comision on top of rebates.. ripped off...

Please enlighten me... 4% upfront fee and 0.8% trailing commision on the managed funds...go into 'broker' pocket with providing minimal advice? you can get star ratings from independant advice

Hi, Richard

Regards
Daniel Lee

If you needed to have an operation done, would you go and see a doctor who rebated 50% of his fees? Now if you wouldn't do that for a doctor, why would you do it for your mortgage?

A 50% rebate would be something like $500, however we have seen clients AFTER they have been to outfits like these with a pre-approval in hand, and we were able to restructure the loans which saved the clients thousands per year.

Whilst we don't charge a fee for our service, you will be surprised at how many of our clients offer to pay - if that is the case we put the money to good use and donate that to charity.

Hany Pham
Central Choice
Ph: 03 9317 4446 Fax: 03 9317 4448 Mob: 0488 884 269
email: hany@centralchoice.com.au
www.centralchoice.com.au

Ask me to get a free property report!

much worse if you give it to the incompetent broker...
at least with the doctor.. it is fully registered and regulated. :)

GOM

Maybe the patients who where treated in Qld by Dr Patel would disagree with you.

Obviously only those who are still alive could comment and many of his former patients are 6 feet under.

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Thinking of buying your next investment property using a SMSF. Email me for a copy of my SMSF EBook.

Still better than many spruikers that preying on the unsuspecting customers :)

Hello folks,

I am currently writing an article for Your Mortgage Magazine on retail vs. mortgage rebates, then as a subset of mortgage rebates, ORP vs SRP.

I need two inputs and hope you can help.

The first is from borrowers willing to share their experience with a Retail mortgage broker, an ORP mortgage broker or an SRP mortgage broker. You must be able to substantiate that you have dealt with one or the other and your contribution can be either anonymous or (preferably) with name attached.

The second input is from a mortgage broker that doesn't rebate, confident of their skillls and can show their superiority to the discount brokers using a hypothetical scenario. I'm hoping for a cover for this article, so it is a great opportunity for a leader to shine and will include a business profile and contact details. The mag runs nationally with 37,000 subscriptions (I think) and the article should, subject to editors discretion, run for Octobers edition which comes out in September. No commission, but some great free advertising.

I have until 20th July to find you all. Anyone interested please post a comment or contact me via my profile.

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HI there Micheal

I may have a mortgage broker for you. He does a little more than just that - basically the full gammot of finance from retail mortgage to business finance. He is able to deal with just about any structure you can throw at him and has done both business and finance for 6 IP's for me in the last few months

Is this the type of person you are looking for?

Thanks Robrok,

If you think he/she fits the bill, by all means let them know the opportunity is there.

The hypothetical scenario will be a fairly basic one because of the amount of ground the article needs to cover.

I have already had a couple of broker responses and the calibre so far has been quite impressive.

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OK

Sorry for the late reply. How would this person contact you?

Hey, thanks for the support, but the opportunity has closed as the article has to be put to bed early next week.

However if they are interested in future opportunities, they can reach me via my profile on this board. That seems to work fine as I have had quite a bit of off forum conversation around this article.

Thank you again.

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Haha, time to do a little spruiking :)

Our Financial Planning firm charges no commission at all on super and managed funds etc.  Nil upfront, and nil ongoing.  We only charge for the advice that we give.  So, you pay for what you get, you don't have to worry about paying 0.8% for the next 10,20, 30 yrs and not getting any service or advice. 

Eventually, we expect the industry to move this way, we're just starting a little earlier.  For mortgages, the same thing may happen, but it's going to take a lot longer.  I already know of some mortgage brokers that charge an hourly rate for the work they do, and then rebate some or all of the commission.  At least you know there are no conflicts of interest!

FS

Sydney Financial Planners
Independently Owned & NOT Commission Based
Visit our blogs! http://www.financial-planner.com.au

The difference between  mortgage broking and financial planning comissions is vast. If you go directly through a mortgage broker or bank you get the same charges, rates etc. (so why worry if the broker gets paid, particularly if they give you good advice). 

Many people choose not to use a financial adviser to invrst in managed funds, in suc h cases it is cheaper to use a company such as YourShare, because only an advisor can dial down contribution fees, the fund manager generally won't. Some of them rebate part of the trailing comission they receive also.

I like to make my own investment decisions and use www.rebatefinance.com.au for this reason, it is cheaper than going through the fund managers direct. This company also pays its rebates three times a year.  

Thanks APerry,

My focus is strictly mortgage broking - that sector is complex enough as it is.

You raise an interesting point on mortgage broker commissions when you write "why worry if the broker gets paid, particularly if they give you good advice" and there are any number of responses that come to mind.

For example, how does the borrower really know if they are getting 'good' advice. Okay, acknowledged they hopefully aren't getting rubbish advice, but 'good' is a very open concept.

And on that point, how does the borrower 'value' that advice if the fee is hidden to the point it is not really understood, Of course I know that disclosure exists etc, however I have neverinterviewed a borrower that gets within cooee when they tell me what they THINK the lender pays and what the lender ACTUALLY pays. Then there's conflict of interest etc.

But put all that stuff aside and ask this question. If a broker who shares their commission with you gives you as good or better advice than one who keeps it all, why shouldn't you worry?

After all the commissions come directly from the borrowers repayments, so really, it's there money.

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It's up to the borrower to make up their mind if they are getting good advice, if they don't get enough info to make an informed decision on this then they should go elsewhere. The fact is that if you get a loan from Westpac, ANZ etc you get the same terms whether it is through a broker or a bank, if the product is the same. Also the same question can be thrown back at you,  If you give advice to borrowers, how do they know you are giving good advice? There is no difference except the method of payment. Consumers benefit from the banks inability to offer decent advice and service in branches by having them pay someone else do their job for them. I won't get into the other differences between using a broker and going direct, that is another topic.

When you say the commission comes from the borrowers repayments, this is true as far as the bank is concerned, but it is not true from the borrowers perspective as they would not have their interest rate etc altered by going directly through the institution.

Gidday again APerry,

I'm not altogether clear on what fired you up, or why you feel the need to 'throw' things back at me, however here are the answers to the questions you raise.

I agree that borrowers often get the same lender terms (I presume you mean the loan contract terms),  whether they obtain their loan directly from the lender or via a broker.

So let's assume a borrower is rebated commission (which a lender just won't do, but a broker might) and the borrower deposits that rebate against their loan (via offset or the loan account itself).

That borrower then pays a lower effective rate than they would had they obtained the identical loan from the lender directly or a broker that won't pay a mortgage rebate.

As a result, regardless of the loan contract and lender terms, the borrower pays a reduced effective rate for the identical mortgage.

In plain English borrowers get the same thing, spending quite a bit less money.

Although that may not be important to you, it might be to others, especially when mortgage rebates and offset savings can represent 15% of their actual borrowings.

It is also worth pointing out that brokers offer important value add services including the ability to maintain rapport and service regardless of a borrowers need to switch lenders; the ability to offer comparative analysis and quite a few other factors.

It therefore follows that, if you can get the loan you want from a broker, then it's definitely worth thinking about getting it through a broker rather than going direct. This argument fortifies if the broker pays either ORP or an SRP as a part of their offering.

Again importantly, from time to time, brokers do get better deals than retail and vice versa. Although this is true across all lenders, there is no clearer example than NAB Broker vs Homeside.

However there may also be individual  factors too where the skill of a broker in deal submission may ecxceed that of the lenders branch service officer. This could mean deals may receive more favourable treatment than if submitted directly, which could be the difference between acceptance and declinature as well as a range of other concessions.

The simple fact is that, from time to time, terms between channels vary and borrower outcomes such as cost, can be independent of the loan contract terms. It is simply incorrect to suggest otherwise. (i.e. via mortgage rebates etc).

As for the 'advice' you're suggesting I dispense, I'm not sure exactly what you mean. Wherever I write, I make a genuine attempt to deliver as a complete a truth I can, in the most balanced way possible where any bias that might prevail is in favour of the borrower.

And of course finally commission. Regardless of who is collecting the commission  it is the borrower who pays it (if the lender doesn't pass it on to a broker, they call it profit). This never more clear than when a borrower ceases to make loan repayments and trail commission payments also cease.  For the sake of completeness, this obviously does not include NAB Broker or Bluestone any other anomaly that PV commission rather than pay trail.

I hope that clears it up for you.

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