Mortgage brokers fee - How it works

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ankit816

147 posts

Master Geek

#106704 30-Jul-2012 12:58

Hi, I understand a Mortgage broker is paid a commission by the bank for his services to a customer.
My question is - Do banks pay them for new customers only? Or do they get paid for retaining an existing customer to them as well?

e.g. if I am having a mortgage at bank A currently, I engage a broker who goes to Bank B for a pre approval and gets pricing. He goes to Bank A and gets a good pricing from them and helps them retain me by ensuring I got a similar deal from Bank A and did not go to Bank B. Will Bank A still pay him?

P.S. - I want an answer so that I can try and understand how biased brokers are when giving advise for refinancing.

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#663953 30-Jul-2012 13:15

That may well depend upon the bank you are with, as they have different takes on mortgage brokers.
If you're looking to refinance rather than just stay with them then perhaps this could work. The broker would be best placed to answer this as I suspect they'd be well up with how they could make money from the deal!

ankit816

147 posts

Master Geek

#663954 30-Jul-2012 13:17

Thanks. But would the brokers be honest enough to answer this question? are they obliged to reveal it?

Byrned

455 posts

Ultimate Geek

#663965 30-Jul-2012 13:28

A broker won't necessarily get paid for this type of work, but a good one would do it anyway as it's about keeping their customer base loyal, and for not much work. I met a good one in Wellington who was quite happy to do this type of work, banking on the fact that you would keep using them in the future.

Byrned

455 posts

Ultimate Geek

#663968 30-Jul-2012 13:33

ankit816: Thanks. But would the brokers be honest enough to answer this question? are they obliged to reveal it?

Honesty should not be a problem as I believe Mortgage Brokers need to be registered Financial Advisors. Most likely if it they can't see anything in it for the they'll just tell you so. It wouldn't be worth there livelihood and prosecution just for a few bucks. Mind you, not everyone takes that view.

ankit816

147 posts

Master Geek

#663969 30-Jul-2012 13:36

Byrned:
ankit816: Thanks. But would the brokers be honest enough to answer this question? are they obliged to reveal it?

Honesty should not be a problem as I believe Mortgage Brokers need to be registered Financial Advisors. Most likely if it they can't see anything in it for the they'll just tell you so. It wouldn't be worth there livelihood and prosecution just for a few bucks. Mind you, not everyone takes that view.

I am in the middle of this situation and dealing with a broker who is keen to take me to another bank without even checking with my existing bank as to what rates would they offer to try and retain me. I don't want to unnecessarily changes banks while I feel my current bank could match the deal given by others but I also don't want the broker to loose his fee coz I know he has spent the time to come meet me, submit my application to another bank etc.

Jaxson

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#663974 30-Jul-2012 13:43

ankit816: I also don't want the broker to loose his fee coz I know he has spent the time to come meet me, submit my application to another bank etc.

Take a step back here and don't get to emotionally involved. Those costs are part of the broker doing business, whether the deal goes ahead or not. It's your money and future you're talking about, so hurting the brokers feelings is rather insignificant and you don't owe them anything.

Also them applying on your behalf doesn't take much in the grand scheme of things. Watch out for this too by the way, as if a broker applies for credit with multiple lending institutions, (including the more dodgy options), 'to get search out and get you the best deal' then this looks very bad on your credit history. It reads as if you were desperate for money and tried everywhere, as if you were declined at each one. Just keep a close eye on what they do on your behalf.

(Last I heard brokers don't get paid until you've been with the bank for 1 year.)

ankit816

147 posts

Master Geek

#663979 30-Jul-2012 13:50

Jaxson:
ankit816: I also don't want the broker to loose his fee coz I know he has spent the time to come meet me, submit my application to another bank etc.

Take a step back here and don't get to emotionally involved. Those costs are part of the broker doing business, whether the deal goes ahead or not. It's your money and future you're talking about, so hurting the brokers feelings is rather insignificant and you don't owe them anything.

Also them applying on your behalf doesn't take much in the grand scheme of things. Watch out for this too by the way, as if a broker applies for credit with multiple lending institutions, (including the more dodgy options), 'to get search out and get you the best deal' then this looks very bad on your credit history. It reads as if you were desperate for money and tried everywhere, as if you were declined at each one. Just keep a close eye on what they do on your behalf.

(Last I heard brokers don't get paid until you've been with the bank for 1 year.)

Thanks for this, a very eye opening advise indeed.

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tchart

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#663982 30-Jul-2012 14:03

We just changed banks for our mortgage, so my 2c

1) The first time we renewed our broker managed to get a better rate than the bank offered us. I believe he mustve got paid for this as he sent us some bunnings vouchers.
2) Second time we renewed the broker was no longer with the company so we negotiated ourselves and we got a crap rate
3) Third time same thing, bank wasnt willing to budge. I was very displeased with them after this episode.
4) Fourth time, got a really good rate from new bank and lots of extras (e.g. solicitors fees). Old bank didn't even bother try to match the rate after the crap rate they offered me. Our so called personal manger didn't even bother calling me back.

Shifting banks does cost you though as we've had to pay another low equity fee (as we don't have 20% equity yet) but I calculated I would've paid this back within 12 months.

PS The banks are very competitive at the moment so bargain hard. If you cant do it then ask a broker as they know who is offering the best deals and how to negotiate them.

ankit816

147 posts

Master Geek

#663987 30-Jul-2012 14:10

tchart: We just changed banks for our mortgage, so my 2c

1) The first time we renewed our broker managed to get a better rate than the bank offered us. I believe he mustve got paid for this as he sent us some bunnings vouchers.
2) Second time we renewed the broker was no longer with the company so we negotiated ourselves and we got a crap rate
3) Third time same thing, bank wasnt willing to budge. I was very displeased with them after this episode.
4) Fourth time, got a really good rate from new bank and lots of extras (e.g. solicitors fees). Old bank didn't even bother try to match the rate after the crap rate they offered me. Our so called personal manger didn't even bother calling me back.

Shifting banks does cost you though as we've had to pay another low equity fee (as we don't have 20% equity yet) but I calculated I would've paid this back within 12 months.

PS The banks are very competitive at the moment so bargain hard. If you cant do it then ask a broker as they know who is offering the best deals and how to negotiate them.

Thanks a lot for sharing your experiences. My broker seems keen to move me to another bank without checking with my current bank if they would match or beat it.

I have seen that banks generally offer better rates via broker units then they would via personal managers at the branch.

BlueShift

1692 posts

Uber Geek

#664006 30-Jul-2012 14:27

Except BNZ, they don't pay brokers. So if your current bak is BNZ, that might explain it.

I was playing poker with a BNZ bank manager the other week, he was saying he had just written up a mortgage that would lose the bank $2000 in the first year, just to retain the business (presumably because they'll more than repay that $2K over the life of the mortgage).

ankit816

147 posts

Master Geek

#664008 30-Jul-2012 14:28

BlueShift: Except BNZ, they don't pay brokers. So if your current bak is BNZ, that might explain it.

I was playing poker with a BNZ bank manager the other week, he was saying he had just written up a mortgage that would lose the bank $2000 in the first year, just to retain the business (presumably because they'll more than repay that $2K over the life of the mortgage).

Thanks, no BNZ is not in the picture for me. I am with Westpac and my broker is pushing to go to ANZ.

BlueShift

1692 posts

Uber Geek

#664012 30-Jul-2012 14:32

ankit816:
Thanks, no BNZ is not in the picture for me. I am with Westpac and my broker is pushing to go to ANZ.

I'm heading into WP tomorrow to chat with my banker about my mortgage which is about to come off fixed-term. It'll be interesting to see how that goes.
Has anybody else renegotiated a rate lately?

Jaxson

8041 posts

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#664021 30-Jul-2012 14:45

BlueShift:
ankit816:
Thanks, no BNZ is not in the picture for me. I am with Westpac and my broker is pushing to go to ANZ.

I'm heading into WP tomorrow to chat with my banker about my mortgage which is about to come off fixed-term. It'll be interesting to see how that goes.
Has anybody else renegotiated a rate lately?

I just went to floating and get a bit more off because of a deal they have where I work. We're strongly considering moving to ANZ soon too, as they offer a better work deal than Westpac and Westpac screwed us around on our last move with them.

I wasn't going to mention it, but yes BNZ don't deal with brokers at all, and they have little in it for them come refinance time as (well did a while back) their targets are based on new customers only. So they typically offer good deals first time around and won't move to match anyone else after that first term.

BlueShift

1692 posts

Uber Geek

#664023 30-Jul-2012 14:51

Jaxson:
BlueShift:
ankit816:
Thanks, no BNZ is not in the picture for me. I am with Westpac and my broker is pushing to go to ANZ.

I'm heading into WP tomorrow to chat with my banker about my mortgage which is about to come off fixed-term. It'll be interesting to see how that goes.
Has anybody else renegotiated a rate lately?

I just went to floating and get a bit more off because of a deal they have where I work. We're strongly considering moving to ANZ soon too, as they offer a better work deal than Westpac and Westpac screwed us around on our last move with them.

I wasn't going to mention it, but yes BNZ don't deal with brokers at all, and they have little in it for them come refinance time as (well did a while back) their targets are based on new customers only. So they typically offer good deals first time around and won't move to match anyone else after that first term.

Yes, I'm thinking I should shop around a bit, but its such a hassle - they all have pretty much the same listed rates, but differ as to what you might be able to squeeze them down to if they really want your business. Which basically means having the same boring interview with 3-4 different banks. It probably pays off over time, a .25 difference adds up on a big mortgage over the decades, but, as is always the case, laziness pays off right now!

ankit816

147 posts

Master Geek

#664024 30-Jul-2012 14:55

Yes, I'm thinking I should shop around a bit, but its such a hassle - they all have pretty much the same listed rates, but differ as to what you might be able to squeeze them down to if they really want your business. Which basically means having the same boring interview with 3-4 different banks. It probably pays off over time, a .25 difference adds up on a big mortgage over the decades, but, as is always the case, laziness pays off right now!

A bit of hassle for sure, but even .25 on an avg 400k mortgage means a free iPhone every year!

Perhaps use a broker to save yourself the hassle, they generally visit you once and do the rest on your behalf. Also, somehow banks apparently offer them better rates then they would if you do the hard work and go direct.

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