Saturday, 8 December 2012

Cash back mortgage brokers

As I’ve discussed previously, using a cash back mortgage broker can be one of the best ways to save on your mortgage.  Banks pay upfront (typically 0.5%-0.7% of the loan amount) and trailing (typically 0.15%-0.2% of the loan amount) commissions to mortgage brokers for sourcing your loan.  If you don’t use a broker, you don’t save on the commission – the bank takes it.  And if you use an ordinary broker, they keep all the commission to themselves.  Cash back mortgage brokers offer to rebate a percentage of the upfront or trailing commissions or both.

The following website provides an indication of what the typical upfront and trailing commissions are across the major financial institutions:

Now I say “can be” because first and foremost the broker has to be a good broker – the cash back is then a bonus.  If the broker does not have good relationships with the banks’ business development managers or is not able to negotiate better discounts than you could as a retail customer, you could actually end up worse off with their services.  These brokers may also be suited better to more basic property transactions.