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Mortgage Broker Commissons?

Discussion in 'Real Estate' started by Crusher, 25th Feb, 2010.

  1. Crusher

    Crusher Well-Known Member

    Joined:
    11th Jul, 2008
    Posts:
    83
    Location:
    Newcastle, NSW
    Hi all,

    Getting ready to buy my first house and have a question in regards to Mortgage Brokers, are they worth it, why etc..

    I just got back from ANZ and they said they'd pre-approve me $335k etc.. But i saw the mortgage insurance for them was close $6k. Now... A month or so ago, i went to see someone at Mortgage Choice and they quoted me around a loan or $320k or so and mortgage insurance was a bit over $4k..

    My question is: Why the 2k difference? Who's ripping me off more?

    Of that $4k the mortgage Broker quoted, what expected commission would they receive on this? I ask, because recently i read an article at news.com.au about travel agents charging 30-50% more for travel insurance, so whenever i hear this word 'insurance' one must expect they are being ripped off so someone can type some figures in and make a smooth 20-30% commisson.

    Anyone had any dealings with Mortgage brokers / banks, preferences? Thanks.
     
  2. davo6253

    davo6253 Well-Known Member

    Joined:
    11th Jul, 2008
    Posts:
    74
    Location:
    Melbourne, Victoria
    I believe they should have to say what their commission is so if you have any doc's for it check those, as to which cover is better it is impossible to say. You have to weigh the amount of cover as well as what you are covered for (or not covered for) and that means looking at the PDS in detail. You cannot base insurance simply on price.
     
  3. Crusher

    Crusher Well-Known Member

    Joined:
    11th Jul, 2008
    Posts:
    83
    Location:
    Newcastle, NSW
    The woman i saw at Mortgage choice said her commission was exactly the same no matter what lender i went with, so she had no biased view to which loan i got... Is that true? or bogus..

    Also, are there different things mortgage insurance covers? - different lenders, etc..?
     
  4. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    Crusher,
    There are two elements here, what the LMI is (lenders mortgage insurance) and what the brokers commission is.
    Each lender has their own negotiated position with the two major mortgage insurers (you can chuck in the self insured lenders as a third) and the premiums they pay and on-charge to a customer are different. In broad terms, the bigger the bank, the cheaper the LMI premium.
    The higher the LVR, the greater the percentage LMI in general terms. The higher the loan amount within bands of borrowing, the higher the LMI %. A loan <$300k will incur a lower LMI % than a loan in the $300k - $500k range.

    A $250k loan at 82% LVR may have a LMI of 0.4% to 0.7% (plus stamp duty)
    A $320k loan at 88% LVR, LMI could be 1.54% to 1.94% range depending if it is a regulated loan or not (owner occupier or investment).
    You need to compare apples with apples and a broker can give you that comparison where as a single lender will just give you their rate.

    Commissions should be disclosed separately via a finance brokers afreement. Many brokers are just paid by the lender via their aggregator. It is no additional cost to you, however make sure that white labeled mortgages do not contain the commission within the interest rate, some do.
    Each lender has a different commission scheme and rate. For most brokers, they can be paid anywhere from a low of 0.43% upfront to 1% (or higher for speciality lenders). Mortgage Choice model may be that their individual brokers are paid the same and the aggregator/franchise takes the difference but it is not normal for most brokers. It does influence brokers recommendations and anyone who claims otherwise is either a fool or very ethical or like me, offer to charge a fee for service and rebate the commission back to the client.

    I hope this helps and it is worth comparing lenders and costs with a good mortgage broker who operates under a finance brokers agreement and discloses up front, their commission entitlements from each lender they deal with.
    Greg
     
  5. Kristy Sheppard

    Kristy Sheppard New Member

    Joined:
    1st Mar, 2010
    Posts:
    1
    Location:
    Sydney
    Hi Crusher

    I'm the Corporate Affairs Manager at Mortgage Choice.

    I can assure you that we are different to most mortgage brokers in that we pay our franchise owners exactly the same commission rate regardless of the home loan product or lender chosen by their customer. We disclose this on our website in the 'Consumer Protection Initiatives' area here: Consumer Protection Initiatives - Mortgage Choice. Look for our Finance Broking Agreement.

    As for your LMI query, GregR has provided you with a good description. It depends on the lender and your loan to value ratio (LVR), which in turn depends on the size of your deposit and how much you want to spend to purchase a property.

    Best of luck with your purchase! Feel free to call me on 02 8907 0502 if you have any further questions.
     
  6. bcoombs

    bcoombs New Member

    Joined:
    1st Mar, 2010
    Posts:
    3
    Location:
    Adelaide, SA
    That is absolute rubbish commission influences brokers recommendations.