All Topics / Finance / Mortgage Brokers verses doing it yourself

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  • Profile photo of 4jojo4jojo
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    @4jojo
    Join Date: 2009
    Post Count: 18

    Wondering-  Do mortgage brokers get better rates etc?  Yes, I know they don't charge us a fee for their service (as they get their money from the banks – over the term of the loan).  But I'm wondering whether I am better off going directly to a variety of different banks myself (yes, I'm aware it can be time consuming but so can dealing with a mortgage broker).  In the end will I end up getting the same result?

    I would be happy to use a mortgage broker to do the initial work and pay he/her a fee for this service but I'm not keen on the long term fees they get paid, even if it's paid by the bank.

    What do you think?

    Profile photo of Dan42Dan42
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    For our first loan, we went straight to the bank. We got a reasonable deal and we were happy enough to go with who we were banking with.

    For PPOR no. 2, we have gone with a broker, (after first dealing with our bank) and I'm glad we did. Firstly, my wife and I are both self employed, so the information the bank was after was detailed to say the least. We just forwarded all the info to the bropker, and he was able to deal with the bank and their ridiculous requests. It saved us time, effort and heartache.

    Some background, my dad worked for NAB and its predecessors for 32 years, so going over to the 'broker' side was not an easy step. Dad is still talking to me though, which is good.

    I also would prefer to pay a 'fee for service', rather than have the bank pay a trailing commission, and am reminded of the saying, 'he who pays the piper calls the tune'. But if the banks are happy to pay the broker for introducing business to them, and the broker can get me a better deal than I can get myself (which he did), then isn't this a win/win/win? I think so.

    Profile photo of Alistair PerryAlistair Perry
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    Hi 4jojo,

    I think you should reassess your attitude toards brokers on a number of fronts. Firstly, if a lender gives you the same rate through a broker or direct, why  would you pay for advice so you can do it yourself and end up with the same product. Both you and the broker end up worse off, only the bank benefits. Secondly, you do yourself a diservice if you reduce the role of the mortgage broker to being a comparison and processing service, a broker who has expertise in dealing with investors should be able to give you advice on setting up a loan structure that saves you money and best places you to build a property portfolio. If you want to get an idea of what a good broker can do with you i suggest you call Richard Taylor or one of the other great brokers on this site, you will be surprised at how much assistance a good broker can give you.

    If, in the end, all you want is a loan processor, use one of the services that rebates their commissions.

    Regards
    Alistair

    Profile photo of DerekDerek
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    @derek
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    Posted this elsewhere

    My thoughts;

    1. Maybe/maybe not depending upon the individual broker – property investing is more than just 'interest rates' as there are far more important things to worry about. You also need to consider such issues as capacity to maximise borrowing but even more important loan structuring. To me these last two items carry much more weight than 'interest rates'

    2. I would be very surprised if you only get the 'same result'. Maybe from an interest rate perspective but as indicated above in 1 – interest rates are almost secondary in consideration to other aspects of lending money.

    3. Yep brokers do get trailers. Not sure why this would be a concern as brokers are not allowed to people into unsuitable loans and if ever questioned by authorities need to justify why lender X and package Y were chosen. I am happy for my broker to earn his trailers – believe me he earns them.

    4. A bigger perspective is required.  

    Profile photo of 4jojo4jojo
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    Thanks Alistair, but I don't have an attitude towards mortgage brokers.  I'm just looking for advice on which way to go.

    I am open to suggestions that why I posted on this site. 

    If people have used a mortgage broker and found them more than helpful (as you mentioned more than just a loan processor) than that's the sort of thing I interested in knowing about.

    Profile photo of 4jojo4jojo
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    @4jojo
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    It seems to me that people who use mortgage brokers, can,t say enough good things about them but I'm also interested in hearing from people who have done good deals for themselves (and I'm aware it's not all about the interest rate).

    I already have 2 investment home loans and looking to do another deal.  I agree this is went it becomes more difficult and maybe it's time I use a mortgage broker (looking forward to good suggestions of who to use and why?).

    Thanks in advance for any helpful advice.  I am still learning…

    Profile photo of Alistair PerryAlistair Perry
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    @aperry
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    Post Count: 891
    4jojo wrote:
    Thanks Alistair, but I don't have an attitude towards mortgage brokers.  I'm just looking for advice on which way to go.

    I am open to suggestions that why I posted on this site. 

    If people have used a mortgage broker and found them more than helpful (as you mentioned more than just a loan processor) than that's the sort of thing I interested in knowing about.

    But you do, you stated "I would be happy to use a mortgage broker to do the initial work and pay he/her a fee for this service but I'm not keen on the long term fees they get paid, even if it's paid by the bank."

    This scenrio is bad for you because you would have to pay a cash fee and bad for the broker because this would unlikely be as much as they would make in commission. The end result would be that you would end up with the same loan, if you were lucky, but the broker would undoubtably not waste much time on you. The only winner in this situation is the lender. My other point was that if you only treat a broker as a loan comparison service, that's likely all you will get, you should demand more, go to http://www.cannex.com.au if you want to compare loans by interest rate.

    I'm sure others will give you their experiences with brokers, I'm biased because I am one so I'm not going to comment here, but you really should speak to one yourself. If you already have a few IP's there should be numerous ways to assist you. 

    Regards
    Alistair

    Profile photo of Tracey BTracey B
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    Hi 4jojo

    I used to have a view that I was happy to deal with my bank directly and sort finance myself BUT…since the GFC when I went to do an equity draw down and my bank's policies had changed, I found it much better to use a broker than go and knock on every door myself.  That changed my view totally and I'd use a broker every time in the future…..the only exception is if I want to use ANZ or MyState financial as they are currently not included in my brokers list of lenders.
     
    Our local guy has access to 35 lenders and he knows straight away which ones are most likely to fit our circumstances for each deal we do.   Also, two days ago he mentioned to me that some banks are lending up to 95 – 97% on properties here locally and some are even paying LMI to get the business.  I was surprised to hear this and it's also good to know that big picture information, rather than just the perspective of one lender. 

    Hope this helps, Tracey

    Profile photo of 4jojo4jojo
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    I have actually spoken to a few mortgage brokers around Australia and I guess I just haven't found a good one.  That's why I am seeking open opinions from people who have used them and people who have been able to be successful by doing it themselves.

    Interesting Alistar, you mentioned that you are 'biased because I am one' , glad you mentioned this.  Of course you would agree with a trailing commission and not a one off payment for service. 

    I don't agree with a trailing commission on each an every home loan  (which could obviously go on for years – that's a lot of money ).

    I don't care if the bank pays it directly to the mortgage broker , the bank has to get it from somewhere and as a customer I a probably paying higher fees for this in the long run.

    I would prefer if the mortgage broker shared his/her trailing commission with me – that seems like a fair deal.  A win win for both.

    Lots to consider…

    Profile photo of Jamie MooreJamie Moore
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    Hi 4jojo

    Welcome to the forum.

    From my perspective, I spend the majority of my time with clients discussing loan structures. Working out the most cost effective and efficient way of setting up their finances in order for them to continue building their portfolios.

    While interest rate is important, if you’re investing in property (and looking to purchase multiple IPs) it shouldn’t be the driving factor behind which loan to take out.

    Also, something that hasn’t been mentioned is that some of the most competitive rates are actually only offered through lenders that operate via the broker channel.

    The brokers trail does not impact upon the product you receive. If it were – they’d have to inform you of a conflict of interest.

    All the best with whichever path you go down.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Alistair PerryAlistair Perry
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    4jojo wrote:
    I have actually spoken to a few mortgage brokers around Australia and I guess I just haven't found a good one.  That's why I am seeking open opinions from people who have used them and people who have been able to be successful by doing it themselves.

    Interesting Alistar, you mentioned that you are 'biased because I am one' , glad you mentioned this.  Of course you would agree with a trailing commission and not a one off payment for service. 

    I don't agree with a trailing commission on each an every home loan  (which could obviously go on for years – that's a lot of money ).

    I don't care if the bank pays it directly to the mortgage broker , the bank has to get it from somewhere and as a customer I a probably paying higher fees for this in the long run.

    I would prefer if the mortgage broker shared his/her trailing commission with me – that seems like a fair deal.  A win win for both.

    Lots to consider…

    I'd be happy to not earn trail if i could pass the savings on to the client. Financial planners can do this with trails on managed funds etc. I would just charge a fee for service and could model this in a cost effective manner for clients, as do fee for service financial planners. I make most of my money fee for service because most comes from Development finance, where trails mean next to nothing anyway so this business model would suit me fine. But the banks won't let us do this as it would mean the end of branch lending, so trail becomes part of how brokers make money.  You need to consider that paying back trails is an administrative cost, one that I certainly wouldn't entertain personally, there are plenty who will but I doubt you will get the sort of service an investor should demand. Good luck with your investing.

    Regards
    Alistair

    Profile photo of PaulliePaullie
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    4jojo, do you get paid to do your job?

    Profile photo of 4jojo4jojo
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    @4jojo
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    Paullie, why would u want to know this? 

    But since u are keen to know.  No, I do not get paid to do my job?

    Profile photo of god_of_moneygod_of_money
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    Join Date: 2008
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    If u don't want to go to mortgage brokers…
    why not try no frills loan
    such as myrate, Ubank, etc

    Profile photo of Marty McDonaldMarty McDonald
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    Join Date: 2010
    Post Count: 64

    Hi,

    I don't understand why you feel ripped off if a lender is paying ongoing commissions to a broker. If you are paying the same rate as if you went direct to the lender yourself isn't it irrelevant? It is just the lender spreading the cost of acquiring you as a client over the life of the loan.

    There are brokers who rebate ongoing commissions but really if that is their value proposition then stear clear IMO.

    Good luck,

    Marty McDonald | Mortgage Experts
    http://mortgageexpertsonline.com.au/
    Phone Me

    Profile photo of Jamie MooreJamie Moore
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    Post Count: 5,069
    4jojo wrote:
    No, I do not get paid to do my job?

    How do you expect to take out a loan?

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of god_of_moneygod_of_money
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    from donation or rob the banks

    Profile photo of JNMJNM
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    I am not sure if mortgage brokers get better rates! they would however, or should be aware of the best rates out there. But a word of caution, there are other factors to consider in getting the best loan for one’s given situation at the time then just best interest rate – e,g ongoing fees, offset facility, etc.
    Also to note that brokers not only get a trail commission for the life of the loan but they also get an upfront commission. Someone has calculated that on a $350,000 loan over 30 years, the broker gets over $13,000 in commission.
    Apart from going directly to banks yourself or using a broker, there is a third option. You can hire a borrower’s agent, in the same way you can hire a buyer’s agent to purchase a property. They charge you a fixed fee (usually around $4000) and they then search for the best loan for your situation AND every month they refund you the monthly commission that would have gone to them.
    I think this is the kind of situation where the loan person is really impartially working for you to get you the best loan for your situation because they are getting paid by you. Mortgage brokers get paid by the banks, usually through their the aggregator they are working for, so they could be influenced to push one particular lender over another.
    If I can afford it, I’d rather hire a borrower’s agent myself. there are not many around but I think this model of doing loan business will increase in the future. A good one that I came across is based on the gold coast – check it out at http://www.vanillaloans.com.au
    cheers
    JNM

    Profile photo of god_of_moneygod_of_money
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    JNM… $4000 fixed fee… HOHOHOHOHOHOH

    Profile photo of Richard TaylorRichard Taylor
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    GOM

    Yes not bad is it.

    Just think assuming they paid you trail commission on a loan of $400,000 at say 15bps and paid you from day 1 (and many lenders dont offer that) it would take 6 and half years to break even.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

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