Earlier this year I engaged a broker to refinance my loan. He is an old family friend. Since then my loan is looking less attractive to other options out there and there’s so many cashback options that would really help out my financial situation. The cashback in particular is a big driver. So with that in mind I’ve considered changing banks. The issue is that I understand that there is a clawback period for brokers if you refinance within 2 years? I don’t want to cause any issues for this broker so I’m unlikely to do anything but I’m wondering if anyone else has had a way around this? Is there any situation that is mutually beneficial?
Doing Right by a Mortgage Broker
Corza000 on 02/08/2022 - 19:16
Comments
The cashback options typically work by giving you some of the brokerage fees, so wouldn't be able to do this through him.
That's just incorrect. My broker has had no trouble signing me up for the cashback deals that I find on Ozb. They have even given additional cashback on top. Notice a lot of the cashback posts on here are actually posted by brokers.
Well that would be my plan but wouldn’t he lose the commission he has got to date?
You need to talk to your broker about your plans. We don't know what sort of commissions he gets or how long you need to stay with your current bank for. My broker required me to stay for 18 months, which may be different to yours.
If refinancing within the first 12 months of getting your loan, the broker will typically have to pay back all their upfront commission. If you refinance between 12-24 months generally the broker will only have to pay back 50% of the upfront commission.
If you use him to help you with the refinance, he may lose all of half of his upfront commission however he will earn it again with the new bank.
If he loses all of the commission because it’s been less than 12 months since you had the loan, then it will be similar to doing twice the work but only getting paid once.
In my opinion, that’s still better than losing you as a customer, refunding his commission and probably will not get referrals from you in the future.
Definitely speak to your broker and raise the issue of your rate, if the broker really values your business, he will do all he can to reduce your rate or get you a better deal.
We were looking to refinance within the clawback period and the first thing we did was to contact the broker. They ensured us that they would not lose their clawback due to a number of conditions we were not aware of.
Don't speculate. get the facts, call the broker. It's in their interests to keep you as a return customer, not a one time customer.
Broker here.
Our commission basically works like this;
Loan discharged under 12 months = 100% loss
Loan discharged 13-24 months = 50% lossYes, you have yo do whats best for yourself, but believe me - getting paid, then getting unpaid 11 months later is the worst.
If you're planning on moving in the 1st 12 months, might be best to use a local branch.
Peace ✌️
Aidan.
Broker here.
OP, Aiden speaks the truth, but not the entire truth. He only refers to the upfront commission of ~0.65% (paid after settlement). However, lenders ALSO pay an ongoing trail commission of ~0.15% p.a. (paid monthly) which IS NOT clawed back. So OP, your broker will have made some commission on your loan, even if you refinance away from them within the first 12 months.
I believe the right thing for you to do is call your broker and tell them you've found a better offer and ask them to help you with the refinance. You get the benefit of their hand holding and they get to keep all commission. They'll be far happier if you do that then if you just refinance yourself without giving them a chance to help.
The question pertains to clawback, which is directly linked to upfront.
Trail is a whole other aspect in itself.
Wow, my broker had a clause that if we changed within the 2 years, we would have to pay him what would have been his commission. Thought that was standard until this post lol
Nice scam tactics
This is up to the broker, not all brokers would put a condition like this. However, the key is about disclosure, as long as you were aware of this then that’s what’s important. However, after the royal commission, I believe this approach to add the clause to protect the brokers claw back is not allowed anymore.
Post your loan details, or DM me your details. I'll give you a lead to pass over to your broker, you'll get the best deal and they'll get their commission. Just tell them the situation, say you're happy for them to shift you over when the first compensation or clawback cliff is met. It may already have. It really depends on lender and market, they can shit drastically pretty fast.
State, property type, loan amount, amount paid off so far (LVR), current rate/provider, number of applicants, combined income.
Keep in mind you will 100% know the dollar amount you'll be out for being nice. If you don't want to know, don't send the info. It might be a couple grand depending on the rate and amount.
Use him again for the refinancing? Just redirects the commission. If they can't get the better option for u then make the decision that benefits you. Banking is a business, not a personal favour.