We offer a free service to you the client as we are paid a commission by the lender. The commission is a once off upfront fee which is worked out as a percentage of the loan amount. This commission is paid to us to do the work that a bank manager would normally do. So if you went to the bank or to a broker the interest rate, fees and charges would be at least as good as the branch, if not better. We may also receive an ongoing trailing commission as payment for continuing to assist with your ongoing home loan administration requirements.
Again, all of this is at no cost to you as we are paid instead of the branch manager being paid. Remember though that we can search 100's of home loans from 35+ different lenders. Compare this to the bank manager who can only search their banks home loans, rates etc and are not going to tell you the bank next door has a better deal.
What is Clawback?
Clawback is an industry term which describes what the banks do to our commission if the loan is paid out partially or in full within the first 18 months to 2 years of the loan term. Essentially clawback is where the banks make us refund the commission back to them that we were paid to originate the loan. Eg, if we were paid $500 for organizing the loan and the loan was repaid within the first 18 months because the client sold or refinanced the property, we would have to pay the bank back the $500.
Why do Banks Clawback Commissions?
The banks argument is that they do not make money from a mortgage until after year 2. Therefore they will make a loss if the loan is paid out before then and as a result will clawback any commission paid to a mortgage broker.
Often this leads to us doing all the work for the home loan only to have the entire commission taken back for circumstances out of our control.
What we ask of you?
Of course we are always available to assist you as we see our relationship with you as a lifelong service to assist with your first home, upgrading, investment and so on. So if you are going to sell your property or are interested in refinancing, please contact us and we would be very happy to assist.
If this is during the first 18 month we will get paid from the new lender that you refinance to (providing we assist with the refinance) but will be clawed back from the old lender meaning we come out about even.
If you have any questions at all about how we get paid etc please do not hesitate to ask.