Mortgage Broker Costs
Have you ever wondered how mortgage brokers get paid and how they calculate how much to charge? Do I have to pay mortgage broking fees? What other costs are involved if I seek out the help of a mortgage broker? If these are the questions you have been asking, this is the blog to answer them! Let’s discuss how actually mortgage brokers get paid and what’s the cost for you when you seek out their help.
How do they get paid?
Mortgage Brokers don’t normally charge fees, their consultations are free of charge. Some mortgage brokers & firms do charge fees so it is good for you to do your research before applying for a consultation. Most of the time there is no direct or upfront payment to the services of a mortgage broker. Mortgage brokers instead get paid by banks and other financial institutions in the form of a commission for directing business to them. These commissions come in 2 forms, upfront commissions, and recurring commissions. Upfront commissions are paid when your home loan settles and will be the most common of the 2 commissions making up the main part of a mortgage broker’s salary. An example would be if a mortgage broker helped a bank settle a home loan of $600,000, the bank could offer a 0.5% commission which will give the mortgage broker a one-time payment of $3,000.
Recurring commissions are commissions paid monthly throughout the period of repayment of the home loan. These commissions are not as common as upfront commissions and are usually a smaller percentage paid to the mortgage broker, usually less than 0.5% p/m.
How does this affect me?
Depending on the lender, they all offer a different commission rate for your mortgage broker and this could affect your mortgage broker’s decision. Mortgage Brokers are here to help you save money, but are also people with lives and are here to make money. This means if a mortgage broker gets a larger commission from suggesting one home loan over the other, they will most likely opt for the larger commission. This can be avoided by working with the right-minded broker, a mortgage broker who acts following the best interest duty; Where mortgage brokers act for the best interests of the borrower and seek to give you good advice and recognise what conflicts with your interests. One thing to note in terms of other fees is cancellation fees which you may have to pay if you decide to cancel applying for a home loan when you’ve already gotten pre-approval for the loan, but the majority of the time this fee does not apply. Clawback fees can apply if a mortgage is refinanced or prepaid 2 years before the date of settlement. There are also other types of fees such as commitment fees, administration fees, and small loan fees.
Information Disclaimer:
Any advice provided is general and does not take into account individual objectives, financial situation and needs. All individuals should consider whether the advice is suitable for them and their personal circumstances.
