There are all kinds of home loan providers – or lenders – in Australia. In fact, financial comparison site Canstar lists 91 of them. They fall into four main categories: major banks, small or regional banks, credit unions and building societies, and non-bank lenders; and most of these work with mortgage brokers. The ones that don’t are primarily online-only lenders.
Why does the relationship work?
First, it’s important to know why the broker-lender relationship exists. At its most basic, lenders benefit because brokers offer them a guaranteed stream of business (for example, 32 percent of NAB’s housing lending in 2016 was through brokers). In return, brokers receive commissions or fees from lenders for managing the successful application for a mortgage.
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Online-only lenders: what’s their story?
By dealing with customers directly, online lenders avoid having to pay broker commissions and other costs associated with the broker-lender relationship. This lets them pass on the savings to customers through cheaper interest rates.
Most are usually backed by a bank or large lender that provides the actual funds for the mortgage, as well as the regulatory licence and framework for the mortgage lender to work under.
So how do I choose?
Mortgage brokers have considerable choice and flexibility when it comes to establishing their own business and working with a lender. One of the great appeals of becoming a broker is the opportunity to set your business up the way you’d like to operate. So, what’s the best way to establish what kind of group to join and what kind of services you can expect?
In almost every instance a new broker will need to join an aggregator or brokerage.
Being a member of a group will give you access to their lender panel as well ensuring you meet ASIC licensing requirements by becoming a Credit Representative under another provider’s Australian Credit Licence.
But aside from the basics, there are a number of other factors to consider to help you decide which kind of group is right for you.
Consider how much help you might need with the following requirements:
- Do I want help generating leads?
- Do I want to operate under my own brand or take on an established brand?
- How much help do I need with my marketing?
- What kind of training and education am I looking for?
- Do I want to work as part of a team or go solo?
- How much support do I need to get my business started?
Some groups are geared around providing brokers with a comprehensive support package, whereas others will give you the basics and let you run your own business.
It’s important to consider what kind of support you’ll need in the early stages of establishing your business, so you can choose a partner that can cater to your needs. Just remember that the more services that are provided, the more you’ll pay.
What’s the process?
To recommend home loan products from a particular lender, a mortgage broker must first be accredited by that lender. Brokers apply for lender accreditation through their aggregators. Mortgage aggregators (aka “dealer groups”, “franchise groups” and “franchisors”) are the wholesalers – or middlemen – between lenders and mortgage brokers. Some lenders are harder to become accredited with than others. For example, they may have additional criteria such as minimum volume requirements, minimum education standards, or may charge accreditation fees.
Not all mortgage brokers are alike.
Mortgage brokers don’t offer all home loan products that are on the market. In reality, each broker is accredited with a panel of lenders. So as a mortgage broker, one of the things that will set you apart from other brokers is which lenders are on your panel and what home loan products they offer. A broker may act for a broad range of lenders so that they can offer a greater choice of products to suit most customers’ needs, or they could act for select lenders with products suitable for specific types of customer, such as first-time homebuyers.
It’s also important to understand how your group charges you for their services. Some charge a flat monthly fee, while others will take a clip of the commission you earn.
What’s important to consider is what's right for your needs, with a view to the long-term profitability of your career as a mortgage broker.