Do mortgage & finance brokers charge fees?
At Highline Lending, rather than charging our clients, our service is completely free to use! The bank we introduce and settle your home loan to, pay us commission for doing business, this is usually a percentage of the loan amount settled.
Commissions are paid based on a percentage of the loan balance that is drawn down; which in most cases will be net of any amounts you hold in an offset account. The way commissions are calculated and will vary. By following the responsible lending requirements, your broker will ensure the loan recommended to you is not unsuitable for your situations and objectives.
While other brokerage firms may charge fees for service in addition to the commission paid by the lender, here at Highline Lending our client commitment and retention is of utmost importance. We don’t charge any additional fees for service and our remuneration will come from the banks direct.
It is a common misunderstanding that by using a mortgage and finance broker for your home loan, the banks charge higher interest rates as a compensation for paying commission. This is completely false. Due to the relationships we’ve developed and volume of business we introduce to lenders, we’re actually in a position to possibly get cheaper interest rates than what is offered if you were to approach the bank direct.
How Do Mortgage Broker Commission Rates Work?
Mortgage and finance brokers get remunerated by the banks in two ways, an upfront commission and a trail (ongoing commission for the life of the loan), the commission is only paid if the loan introduced is approved and settles.
The commission rates vary from lender to lender however the below is the more commonly used rates brokers expect:
- Upfront commission:0.715% (+GST)
- Trail commission:0.165% (+GST)
When Is The Commission Paid
For the upfront commission, this differs from each bank however we’ll work off the more common approach which is the lender paying commission the month after the broker settles the loan. Some banks offer same week/month commission payment once a loan settles however this isn’t as common.
For example, on a settled $1,000,000 home loan and a 0.715% upfront payment, the broker can expect to receive $7,150.
The trail commission is a monthly payment to the mortgage broker for the life of a loan to numerate the broker for their support, maintenance and service provided to mange the loan and ensure the customer is constantly in a suitable loan. The first trail payment is usually paid the month following settlement and each month after until the loan is paid off or discharged.
For example, if a broker settles a loan of $1,000,000 and the trail commission rate is 0.165%, this gives us $1,650, dividing this between 12 months in the year, gives us a monthly trail of $137.5. The aim for most mortgage and finance brokers is to grow this trail book to provide a constant reliant source of income.
Who Pays Mortgage and Finance Brokers
Technically, the banks pay mortgage and finance brokers however they would require an aggregator to be engaged with the brokers business. Aggregators act as a ‘middleman’ between the broker and banks. Many brokers join an aggregator to access accreditation with their wide panel of lenders, have the aggregator collect and facilitate the commission from the lender and also take advantage of the aggregators admin support, industry compliance and updates and ongoing training.
Claw Back – The Only Fee We May Charge
What is a Claw Back?
Whilst we do not charge you a fee to process your loan, lenders will charge Highline Lending a penalty fee should you repay, refinance or discharge your loan within 24 Months. This fee is called a ‘Clawback’. Clawback fees are charged to Highline Lending by lenders as they have deemed that we have introduced to them a short-term unprofitable loan.
How Much?
Clawback charges vary from lender to lender and can range between 0.35% and 0.85% of the total loan amount. Clawbacks may also depend on how far into the 24-month period you repay, refinance or discharge from the loan. This amount will be subject to request from the lender.
Why will we charge you the clawback?
Clawback is a direct charge that is incurred by our business. We need to protect our business by making customers aware of this fee and ensuring that they understand our policy on Clawback. Whilst we endeavor to ensure our customers are in the correct loan at all times, we need to protect our business against a clawback as we do not have control over this area post settlement.
If we incur a Clawback from a lender as a result of you repaying, refinancing or discharging your loan within 24 months after settlement of your loan, we will seek to recover the Clawback in the form of an invoice from you.
Note: No clawback will be requested for payment should the loan subject to clawback be refinanced or transacted through Highline Lending for the new facility.
We only charge the amount that has been charged to us by the bank.
If you think this may be a problem then let us know up front and we may be able to apply with a lender that does not have clawback.
Get In Touch For More Information
Using a mortgage broker for your loan is a no brainer, not only is our service complimentary but we have access to over 60 lenders, do all the hard work for you, have experience in processing unique and complex loan scenarios and hold ourselves to a high standard with our client commitment being a main priority. Using Highline Lending is like approaching 60 banks in the one appointment, we’ll assess your financial position and provide recommendations on your best options and deals. Contact us on 02 8530 1107 or submit your scenario online. Alternatively e-mail us concierge@highlinelending.com.au to discuss your scenario today!
