Many people go directly to their own banks or to the nearest bank to apply for a home loan. There is nothing wrong with going directly to a bank, but you may miss out on some considerable benefits by avoiding a mortgage broker.
If you are looking for a manageable home loan, contacting a local mortgage broker will help you as they have ample knowledge and industry experience. A mortgage broker can also aid you in finding the right home loan by providing you access to many lenders they know.
Moreover, a mortgage broker can arrange a competitive product for you, help you choose the best from among a range of home loan products, and help you understand the procedures involved. Mostly, mortgage brokers don’t earn a fixed salary and typically acquire their incomes from commissions they get from lenders.
How do mortgage brokers get paid?
Generally, most mortgage brokers provide their services to borrowers free of charge and also don’t earn salary. Then how do they earn?
Many work as contractors or small businesses and earn from the commissions given by the lenders. The commissions or fees they get from them will differ depending on the lender. The commissions are typically based on a percentage of the loan amount.
Upfront commission
The largest part of a mortgage broker’s earnings is in the type of an upfront commission. This is generally between 0.3% to 0.5% of the loan value. For example, for an 850,000 AUD mortgage, a 0.3% commission means the broker will earn around $2,550. Once the loan is finalised, the broker gets the upfront commission and the borrower gets the loan.
Recurring commission
A recurring commission, also called “trailing commission”, is the second part of the broker’s compensation. It is evaluated each year taking the remaining loan amount as the basis, and is paid on a monthly basis to them. A few lenders provide no recurring commissions, while others provide a recurring commission of 0.1% to 0.2% taking remaining value of the property as a basis.
Lenders will continue to pay the recurring commission to the broker as long as the borrower still has the mortgage and does not get into arrears. Arrears indicate that the borrower was late paying back the mortgage, and this can be considered as default if the pay back hasn't been made within 60 days.
The recurring commission is ceased if an account stays in default for 60 days or more. If the loan is in default, some banks will cut the trail after 30 days, while some others will cut after 15 days
What is the average mortgage broker earnings?
Brokers are paid well for their efforts they put into these relationships. The average mortgage broker earns 2,009.10 AUD in a week. That’s relatively more than the full-time national average income of $1,288.70 a week. A few mortgage brokers, like practice owners and senior practitioners, earn even more than this.
Benefits of becoming a mortgage broker
As opposed to many career paths available, you don’t require a degree to become a mortgage broker. The minimum requirement is just to have a Certificate IV. This will save you from spending thousands of dollars on tuition fees, and will allow you to advance into a job quickly.
After becoming a mortgage broker, you will need to fulfil Continuing Professional Development (CPD) requirements. By doing so, you will be able to keep up to date with industry trends and regulations. This will help you to remain on top throughout your career.
Being a mortgage broker, you have the flexibility to choose to work for a brokerage or work independently. Your choice can also change based on what stage of life you are in.
Working independently means you are in charge of your time, enabling you to have a good work-life balance. In the beginning, it may need lots of hard work to create a good reputation and client base, but once you are established the rewards you will get have no limits.
However, if you choose to work for a brokerage, you will not have to establish a client base yourself, as the company will probably have its existing clients. Moreover, you will also have a constant income, offering you more financial security. Your employer may also aid you with your education and development, to advance in your career.
Become a mortgage broker with us. You can be assured you will train with a trustworthy, smart, and incredible company having over 60 years of experience. We train mortgage brokers from scratch and assure you to guide you step-by-step through the complete process of becoming a mortgage broker.