Been working for the past 2 years and try to do about 2 loans per week. Never gotten a loan declined.
Ask me questions and i will try my best to answer them all!
[AMA] I Work as a Financial Advisor / Mortgage Broker. Ask Me Questions
L[Deactivated] on 11/01/2019 - 13:55
Last edited 11/01/2019 - 17:32 by 1 other user
Last edited 11/01/2019 - 17:32 by 1 other user
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Trust is a great thing.
Not when someone's managing your money.
Well i am not recommending anyone to get a loan through me.
I'm just sharing my knowledge and experiences.
Yeah this is more of an ad for services than a genuine AMA
As you wish.
What are the risks with using online lenders who offer significantly lower interest rates than the big banks with similar products?
In my experience with brokers these are never on the list of recommended products.
Online lenders are my personal favourites!
To be honest 80% of the loans I submit are with online lenders. My online lender which I generally use offers a rate of 3.69% p.a and no annual fee plus a redraw feature. The only bad thing about these online lenders are that some of them don't offer as many features, such as a transactions account or a offset account.
As with the risks, they are generally the same as with the big banks. You see, most of these online lenders are a subsidiary of one of the big four banks.With your last point, it really depends on individual brokers. In my case, at least one online lender is always on my recommended list.
but online lenders usually are not ADI institution, hence your first 250k will not be guaranteed by the government, correct?
meaning if things go really pear-shaped, then you will lose your money (or will it simply automatically used to pay your loan balance)? is that how it works in the extreme case?
how much commission do you get
The lenders generally pay us 0.65% of the total loan value. Plus 0.15% trail commission which gets paid every month till the customer is with the lender.
After the lenders pay, our aggregators take a percentage (generally 5 or 10%), leaving us with 90% or 95% commission in our pockets. If you are getting mentoring, which a new broker must for 3 years, then the mentor takes a percentage of anywhere between 5 to 20% of your commission.
How transperant is this for the customer?
Before a loan proceeds, we are required to prepare a form, called a Credit Proposal in my case, which details all info about the client, the credit they are seeking and the commission percentage and the dollar figure that will be paid to the broker along with any percentages that the aggregator or mentor will take.
The client should read all of the document before signing to acknowledge, but I find that many just skip through and only read the main info.
Work tangentially to the industry (very remote tangent) and this very rarely makes any practical difference: client pays the final %-age amount which is clearly set out and which tends to be lower than they can get directly from banks anyway.
so how much have u been earning annually as broker/fin adviser?
Both combined, an income of $150,000+
Trailing commissions are something not many people know about,fewer know that you can actually be reimbursed for them.Can you give a heads up as to how this is done (on current and historical financial products)at all? That could be a pretty nice "Ozbargain" for a lot of people.
How do you be both a financial advisor & mortgage broker without getting conflicted on commission fees?
Financial advising and mortgage broking are two different titles. With a mortgage broker, the lender pays you commission with every loan that you do and for a financial advisor, you generally charge the client, either a hourly rate or a per-job basis.
As with the fees of both types of titles, the commission you get covers them.
The point is that you might be getting a sweet commission in pushing people into a certain home loan structure but from a financial advising perspective your advice will not be unbias in terms of institution/loan/structure etc.
A comparison would be your GP who was also a health insurance broker. Sure knowing about health insurance deals would be helpful, but would it be completely unbiased? Would you trust the GP and their advice if you knew about the commissions they were earning on certain health funds?
Not saying you are unethical personally OP, but how do you ensure you not bias in terms of your products you recommend?
That's a great analogy… if you don't know about pharma reps. No health insurance needed.
@HighAndDry: I know about pharma reps well. But they don't pay cash commissions and trailing fees for doctors to prescribe their drugs! A free mousepad and a (potential) conference sponsorship is a little different than paying hard cash to someone to recommend a panamax over a panadol etc.
@serpserpserp: You'd think that. But
https://www.washingtonpost.com/opinions/big-pharma-gives-you…
A 2016 ProPublica analysis found that physicians who received payments from drug and medical device companies were significantly more likely to prescribe high-cost branded medications. In another study, researchers found that a single drug-company-sponsored meal can make a physician more likely to prescribe an expensive brand-name cholesterol medication instead of a less expensive generic one.
This is bias, mostly subconscious, unnoticeable bias. It's not a calculation of objectively measurable benefit.
@HighAndDry: It is a different beast in America. In Australia they can't get away with as much.
I'm not saying it isn't an influencer, but it is certainly not in the same vain as commissions.
It is the same as Lawyers taking clients out for dinner, if you have a good time you are likely to use them again if all things are equal, but receiving dollar commissions back from them for their service is a little different.
Anyway, would like to hear from OP on the methods he/she uses to stay unbias when switching hats.
@HighAndDry: Pharmacists are a bit like this. People approach them for medical/health advice, but one look at their shelves shows that they are really motivated by selling snake oil to unsuspecting chumps.
Hello,
I agree with your point there.If one is a financial advisor, and a good one at that, then being unbiased is not hard at-all. Once you reach a certain point, you don’t go after the commission, because in the end, satisfaction comes when your clients say thank you and appreciate your help, not when you get paid nicely.
are brokers all one and the same?
Don't quite understand your question there but I will try my best to answer.
All mortgage brokers must be with a aggregator, (big ones are FBAA OR MFAA) and then have their own platform runners / mentors, like AFG.
All brokers undergo compliance every year or every 6 months where some loans are checked by a different party regardless if they were approved by lenders, through their own aggregators.
So, in a sense, all brokers are different, with their own aggregators and mentors.
Is your full time job a FA and you do mortgage broking on the side?
Full time mortgage broker and do financial advise on the side, generally to customers who come in to get a loan but can't because of their financial situation.
What are you financial advisor qualifications and are they the same as your mortgage broking qualifications?
FA qualifications: Bachelor Of Financial Planning (RMIT) and 2 years of fieldwork training.
Broker qualifications: Diploma in Finance and Mortgage Broking, and 3 years of mentoring.So, they are different.
My FA is accredited with CFA, while the broker side is with ASIC and FBAA.@[Deactivated]: Your FP qualifications are not accredited with CFA.
Fairly concerning that you don’t know this.
how would u recommend to pick a broker?
Ask people! Literally, ask your work friends, friends, family. A broker's business generally relies on mount to mouth recommendations. All my new clients that come in are through recommendations of my previous clients.
Look for a broker who does not charge too much fees and has a reliable reputation.
I wouldn't recommend mount to mouth
Mouth to ear?
Do you know the name Kenneth Hayne?
Enjoy the liar loans while they last
😊. 50% of home loans in Aus are done through brokers and I suspect many of them are "liar loans".
If the banking royal commission were to not allow any "liar loans", I suspect a great blow to the Australian market.
I doubt they would wanna do that now.Come the 1st Feb I think you may be in for a shock
well if you know how to do your business then there won't be much of a change. It wont make a difference to the big companies or experienced brokers.
But the royal commission sure has made us do a hell lot more of paperwork.
@[Deactivated]: Sorry, but I have to agree with you OP.
Since royal commission, loans have to do away from Household Expenditure Index and look into your every nitty gritty expenses including bubble cups and netflix. That's how ridiculous it is.
Interest rates may be low, but getting loan is as hard when interest rates are 20%.
Nothing ever good coming out of Govt intervention.
Now with Private Health Insurance reform, again, another govt intervention, about 30 procedures on my cover will be removed AND I will still pay higher premium on 1 April 2019.
Household Expenditure Index
As ASIC's case against Westpac has shown, most people underreport their expenses, which is why the Index was used to begin with - basically at the behest of regulators to stop banks from relying on self-reported expenses of borrowers.
@HighAndDry: Just because they under-report their expenses, it does not mean they cannot service their debt.
Expenses can fluctuate and many are one-offs. This new system ensures that those one-offs are treated as regulars.
They also failed to take into account the future change behaviour/actions as the result of loan. For example, now I have a loan so I better stop buying bubble cups. The bank statement will see lots of Chattimes but borrowers are NOW stopping to buy them.
ANother example, now I have a holiday, so my overseas holiday now becomes once every 2-3 years instead of every year.
@burningrage: I'm not disagreeing with you - I think using the index was a very common sense solution to a hard problem. The wider economic implications notwithstanding I wouldn't disagree with even going solely by a borrower's self-reported expenses if the lender agreed. Just one note though:
For example, now I have a loan so I better stop buying bubble cups.
Yeah, most people are nowhere this responsible. In fact I'd bet that most people go in the opposite way - "now that I have a property and so much cash liquidity, I can splash out!" Kind of like how credit cards encourage spending, and having credit card debt very rarely discourages it.
@burningrage: @burninggrave:
"Interest rates may be low, but getting loan is as hard when interest rates are 20%."Totally agree with you there. Whether one can get a loan or not depends on the broker. Many if my clients come after multiple refusals from lenders and brokers.
However, the HEI and others are not hard to tackle if one knows how to. The banks do not have permission to access a person's bank statements if their account is in a different bank. Meaning the brokers have to provide the bank with their statements. Now that leaves room for manipulations of the statements 🙃.
@[Deactivated]: Okay, even if that's an open secret in the industry (which it has to be because it's basically an open secret outside the industry), just for the sake of your AFS licence you might want to not advertise that haha.
@HighAndDry: “But for the sake of your AFS licence you might want to not advertise that”.
I never said that i do that sort of stuff. However, i know thats common practise in the industry.
Hopefully not, for the sake of the economy and anyone wanting to enter the housing market. You think people who couldn't afford houses now are going to be able to afford them when banks make it harder to get loans?
@HighAndDry: It's not about making it harder. It's about whether or not a customer can afford to repay the loan.
If 50% of loans are from brokers and as OP states, a lot of them are liar loans, how long do you think it will be until a housing melt down occurs?
If interest rates go up to 6%, hundreds of thousands of customers will struggle with repayments and a lot will need to reduce consumption significantly, resulting in a recession at the minimum, perhaps a depression/great recession
It's not about making it harder. It's about whether or not a customer can afford to repay the loan.
I get what it's about, but for all intents and purposes it's the same. If you raise the bar for what constitutes "can afford to repay the loan", you make it harder to borrow money.
I understand the macroeconomic effects of unsustainable lending. At the same time, suddenly increasing lending requirements will basically have the same effect of cratering the housing market and by extension the wider economy.
On a (somewhat irrelevant) angle, why did it suddenly become expected that adults are no longer responsible for making their own budgets and that they need to be babied by banks?
Back on topic - I agree with you that the past few years of lending were unsustainably high. At the same time, it defeats the purpose of reining in that kind of lending to forestall a future crash by causing a crash now by choking lending now. It needs to be a gradual process, as with 99% of economic management.
@HighAndDry: When the same mistake has been made several times overseas and the taxpayer has footed the bill.
In regards to banks doing propper due diligence, not having to manage peoples budgets
https://en.m.wikipedia.org/wiki/List_of_banks_acquired_or_ba…
@Mrgreenz: Let them fail - the survivors and their successors might be more motivated to do their due diligence properly then.
@HighAndDry: But that won't happen, as they will likely be deemed too big to fail, as previously demonstrated overseas. Then the costs are borne by the taxpayer.
@chumlee: Housing melt down was predicted ever since John Howard was PM and it never happened until NOW.
And guess what happened now? Investors banned or being charged much higher interest from Interest Only loan thanks to APRA and HEI has been banned.
These are all government intervention. Only now, APRA is drastically relenting by scraping the interest only limit.
https://www.domain.com.au/news/interest-only-lending-benchma…
Talked about being hit left and right.
It's too late now. Enjoy the ride.
@HighAndDry: If they couldn't afford them then, they wouldn't be able to afford them now or even dissuaded to apply in the first place since those new lending due diligence are all over the place in the media
That's the reason why "corrections" (ewwww) are now happening everywhere.
@burningrage: Exactly. I think a lot of people are applauding the Royal Commission and the lending practices because they think it's led to inflated property prices and investors buying everything up, and so making housing unaffordable. I'm just saying - all this stuff? It's not making it any more affordable.
Yeah, it's kind of hilarious that at the same time as cracking down on "irresponsible lending", the government itself is asking banks to lend more:
https://www.afr.com/news/politics/josh-frydenberg-tells-bank…
"I would encourage the banks when it comes to lending, in particular for small business, make sure you get the balance right, keep the books open and don't lose sight of the broader public good," he said.
In a way there is no real distinction between "responsible" and "irresponsible" lending, it's only a difference of degree in how high the requirements are to lend money to someone. The more "responsibly" you want the banks to lend, by very definition the less loans they'll approve.
Agree with you there. The responsible lending has definitely taken its effect and the RC report has not yet been released either.
Am I correct in saying that there is no such thing as an Independent FA?
Most FA' work independently, but you are correct in saying that all FA's need an aggregating body and a regulator such as ASIC.
I disagree, most advisers are aligned to a licensee and work through the licensees approved product list. ASIC takes a very dim view on advisers who call themselves ‘independent’, unless you might very strict criteria.
There are independent mortgage brokers who charge a fee for service and rebate 100% of the commissions they receive from the lender to you. 1. No conflict of interest and 2. On high value loans the commission rebate to you is significantly higher than the fixed fee you pay. Not so beneficial (potentially) on low value loans.
Can you pay mybudget accounts on credit card?
Never used them, but i doubt a budgeting site which claims to leave you debt free would allow one to even have a credit card.
What is now the best go-to bank for the lowest interest rate if:
- I want to loan as much as I can;
- I'm interested in a self-occupied property;
- I'm worried about the floating interest rate therefore the bank has to be reliable with a good reputation.
therefore the bank has to be reliable with a good reputation.
Maybe look overseas?
Please give me an example of a country with a better regulated banking industry.
Go on, I'll wait.
Your lending amount depends on your broker, literally.
Many of my clients do not earn enough income to pass the serviceability tests. We all know the wonders a good broker can do 🙃.With the interest rate, i generally do not recommend locked rates, as they lock in an interest rate for you which is usually higher than the market rate, plus, the interest rates never fluctuate that much unless due to market crashes, etc.
The interest rates also depend on wether you deposit 20% or 10%. The 20% deposit loans will always have a lower interest rate and is generally easier to get approved and requires less paperwork.
Good lenders with 20% deposit;
1. AFG (Online Lender) AFG Edge, offering 3 69% for lending above 200k with 20% deposit.Other lenders that offer good interest rates are ANZ and ME Bank.
So if someone isn't going to pass the servicibility test based on income, does a broker just shift around expenditure figures to make it serviceable?
Yes, that and increasing the income earned.
I usually make my clients have 100k income for a 500k loan (single, not married).@[Deactivated]: I did all this without a broker with a part time job. I don't understand why people use brokers ¯_(ツ)_/¯
@[Deactivated]: Surely this isn't legal, what happens if the borrower can't afford to pay back the loan, do you share culpability?
@robbyjones: There's no culpability to be shared - the borrower would just lose the property, and the borrower fully agreed to the loan.
@robbyjones: If you default on the loan they take your house. That's why self reporting expenditure is so stupid. You can just make it up provided its 'believable'.
@crashloaded: That seems perfectly fair and balanced to me. You can lie to borrow more money, but you also pay the price if you stuff up.
@robbyjones: If the borrower cant repay, the borrower looses the property and get a default on their credit history. As for the broker, there is usually an investigation which leads to the broker getting exposed.
This is why a broker must be sure that the borrower can repay the loan, regardless if the serviceability allows it or not.
@[Deactivated]: …so you fake the information in applications, putting customers at risk, for your financial gain? I think there is a term for that starting with ‘F’. Serviceability calculators have inbuild sensitivities to protect customers such as testing serviceability on higher interest rates or to factor in times between tenants in investment properties. It is important customers can afford the loan for the life of the loan not just until your commission cheque clears.
@[Deactivated]: Jesus christ this is just money grubbing tactics…
Like feeding a crack addict when they have no money..
There are some really concerning comments here.
Your borrowing capacity does not depend on your broker at all.
You're 100% right…. theoretically.
Yep practices like this result in things like….US subprime! How short some peoples memories are. This is exactly the sort of behaviour the royal commission is designed to stop.
@knasty: I mean, alternatively you could crack down on people lying on their mortgage applications. But that wouldn't be as election-friendly.
@knasty: Well considering 50% of all loans are done through brokers, and im sure most of the brokers use that "activity".
You have your answer. Most people would not be able to get a home.You see, practically, a borrower needs to have an income of 50k to 60k to repay a loan of 500k, but the serviceability only accepts incomes of 100k.
Thats why there is this activity, because the serviceability rates are so high.
@[Deactivated]: If what you are saying is true, this is the most unethical claim I have heard anyone make. As per NCCP, you the broker must have an in-depth discussion with your client to find out their true living expenses.
"Most people would not be able to get a home." If most people can't get a home loan because they can't afford it, then they need to save more deposit or buy a smaller house, not lie on their credit application.
@[Deactivated]: OP I am assuming you are younger than 30 and have no concept of what the global financial crisis actually was. It was only 10 years ago! If you are older than 30 you should really know better. I suggest you spend 10 or 15 minutes researching how what you are doing, whether well-intentioned or not, facilitated one of the largest global financial crises of a generation in the late 2000s. I worked in financial services for 8 years before the crisis and 8 years after so I rode that rollercoaster and it wasn't pretty.
You are doing no one a favour by encouraging people to over commit to credit during a period of historically low interest rates, with historically low unemployment. Neither will last forever; there's only one way to go and it's not positive for borrowers. When you add to that stagnant or negative property price growth it's a disaster that's not just waiting to happen, it's already begun.
@knasty: I never said that i am the one who manipulates the payslips or statements. Since i am in the industry, i know what others do and am simply passing on what i know happens.
And, I know that another financial crisis is close to hapenning again, there is only so mich growth the market can handle.@knasty: Very well said. There's also the fact that people lose jobs, become ill, need time off work etc that expenditure doesn't account for but brokers should be considering.
@[Deactivated]: Are you sure you are a mortgage broker? If you truly are, then you must be the one of the worst ones out there.
"You see, practically, a borrower needs to have an income of 50k to 60k to repay a loan of 500k"
Weekly repayments on a loan of this amount with 3.69% rate is $530 p/w. Someone earning a salary of $50,000 p/a is taking home just under $800 p/w. Leaving $300 per week to cover every expense. If you don't want a mobile phone, internet connection, clothes, car, food, water, gas or electricity,(life?), then yes, "practically" it is possible.
There are no wonders a broker can do. A broker can lie and make fake documents which should mean that the brokers licence be revoked and after a criminal investigation, he/she be sent to prison for their criminal activity.
- What are the type of commissions you get?
- Do you inform your potential clients of the commission (e.g. trailing) which you'd receive as a result of a successful application?
- We get up-front commissions (generally 0.65% of loan value). This is paid by the lender upon settlement of the property. We also get trailing commission which is paid monthly by the lenders till the customer is with the bank. We generally do not charge the customer, however, sometimes small charges of $100-300 are necessary to cover office costs, equipment, etc.
2.Not many of my customers ask what commission i will get. However, there is a document, credit proposal, which details the clients info, loan info and our commission info (upfront and trail and how much % the broker will get). This document needs to be signed before we can proceed with the loan.
What is the best rate available to you for an Interest only PPOR mortgage with 100% offset account?
Do you have a fiduciary obligation to your customers?
Yes, of course.
OP can you cite what legislation or regulation imposes a fiduciary duty on a mortgage broker? There is a very big difference between the responsible lending requirements for credit licensees and representatives as per below (ie not to suggest something that is unsuitable) and a fiduciary obligation which requires them to put the interests of clients first.
RG 209.12 RG 209.13 The objective of the responsible lending obligations is to ensure that credit licensees do not suggest, assist with or provide a credit contract or consumer lease to a consumer that is unsuitable for the consumer.
In case you don't respond to this, and for the benefit of others, mortgage brokers do not have a fiduciary duty to their customers (currently). You'll see from a quick Google search that the concept is currently a hot topic in into context of the royal commission given the current licensing requirements are so loose, which has allowed for much of the behaviour described above to occur with little to no recourse against brokers.
@knasty: Yes that is correct, we do not have a fiduciary duty enforced, however, i personally find it an obligation i should follow. As of now, we can recommend any lender or product, be it a biased loan, and can be in our best interest (i.e best commission), as long as the product chosen is ‘not unsuitable’ to the customer.
I have 5% deposit to buy a home now. Should I go for it now or should I wait for the deposit to build up to 20% (suffering loss of paying rent money)?
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Proof?