The life of a loan from a mortgage broker’s perspective

  • Staff Reporter | May 29, 2018
Mortgage Broking - Job Search

Mortgage broker's look after loans from day 1 till they finish, and there's good reason why.

The mortgage broking lifecycle

Like anything, it takes time to become successful as a mortgage broker, but the benefits of one sale can flow on through the years. Here’s a snapshot of the mortgage lifecycle from the point of view of its broker.  

New clients

Mortgage brokers find their clients through a variety of different ways.

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You might work with a mortgage aggregator (a franchise in layman’s terms) and they provide you with a lead, or you might source your client through advertising or a partnership with a real estate agent. Or – even better – your clients came via a recommendation from one of your happy customers.

Client meeting

The first step is meeting with your new clients. You might meet with them at their home or your office to talk about their home loan needs. You’ll discuss their current finances and assess their circumstances using various loan calculators.  
 
Mortgage brokers have access to advanced databases containing hundreds of loan products from many different lenders, including major banks, smaller banks, credit unions and other lenders. You’ll review these products and make a recommendation to your clients.
 
As a broker, you have a responsibility under the Act to carefully consider the needs of your client and ensure they get the best possible deal and are able to repay the loan without “undue financial hardship”.
 
There are several pieces of information you are legally required to provide to your clients, like information about complaint resolutions and their right to information.

Application

Your clients have chosen to go ahead with the loan you’ve recommended – great!
 
The next step is to help your clients complete the application paperwork and liaise with the lender on their behalf. This includes completing and submitting the paperwork as well as overseeing the communication between the borrower and lender until everything is approved and the loan is settled.

Payday

Mortgage brokers are paid commissions by the lender as a percentage of the loan amount; typically between 0.3 to 0.5 percent. You might have to pay a percentage of your commission to your aggregator/franchise and cover any other applicable fees and costs.
 
One of the great things about being a mortgage broker is that your commission doesn’t end at the settlement of the loan. Most lenders also pay an ongoing amount, called a tail commission, as a percentage of the outstanding loan amount. This is generally between 0.01 to 0.03 percent of the loan balance. You’ll continue to receive these trailing commissions for the lifetime of the loan. The average Australian home loan is refinanced every four years.
 
However, if your client decides to refinance their loan too soon after settlement (this period varies by individual institutions), the lender has the option to charge you a clawback and require you to refund them the amount of your initial commission. Fortunately, clawbacks only occur in 1 to 2 percent of mortgages brokered.

The future!

It’s a couple of years down the track and you’re still enjoying the trailing commission from the mortgage you helped broker.
 
One of the great perks about mortgage brokering is that with the amount of competition in the market, buyers rely heavily on recommendations from friends and family, so you could potentially receive work from the same circle of people for years to come.

Get started today

Mortgage brokers in Australia need a minimum qualification of a Certificate IV in Finance and Mortgage Broking – find a Registered Training Organisation near you.

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