We have been researching websites like RateCity and Finder where they saw home loan rates can be as low as 3.44%. Our rate is 3.99% and we contacted our broker and they said because we have only had the loan for a year we shouldn’t refinance. They said we could refinance but it would cost them money if we did and we would have to pay the fees on their behalf. Is this normal for brokers?
To answer your questing in a couple of parts.
Is it normal to have fees - yes this is normal all banks charge a recoup fee for commissions paid out to a broker when your loan was established.
Is it normal for a broker to stop you refinancing - there may be some brokers out there who’d prefer you don’t do that they don’t loose some
of their original commission.
However in my opinion and how we run our business we will always do what is in the best interest of the customer regardless of how that impacts is financially.
If you would like to ask any further questions or have someone look into options for you fee free to give me a call.
As Jacqui said, this shouldn’t happen.
First part, the bank will “clawback” some or all of the broker commission if you refinance within the first two years. This happens with all lenders so that brokers don’t keep churning loans.
Some brokers have previously written into their client agreements that if this happens, the client reimburses the fee to the broker so that the broker hasn’t done all of their work for nothing. This will be stopped from January 1st.
The customer has the right to change to a more suitable loan whenever they would like and the broker should be assisting them to do that research and help them through the process.
In our business, it is our responsibility to ensure that the customer is always given the information and the opportunity to change to a more suitable loan and we NEVER charge a client for any service
I hope that helps
here is my two bobs worth:
you used the broker to start with, and I guess you paid him nothing up front, and he was compensated by way of commission?
and the rate at 3.99 doesn't sound outrageous to me....in fact its probably a pretty good rate....
and now you want to refinance to get a lower rate?
so the mortgage broker has to do all that work again, get the commission (again) but also lose the original commission in clawback.........
so in effect the second loan is for zero fees for the broker for the same amount of work
is this fair to the broker?
on a $1m loan, you are looking at saving around $5k pa
the commission on a $1m loan is around $5k (not per annum, just once)
soooooo.........and forgive me for playing the devils advocate here........you want to save $5k, every year, and the person you want to to help you do this is going to pay the bank $5k for you to benefit from the lower rate........
the whole problem with the broker commission system is that because the borrower never gets an invoice, they place little or no value on the service.
Can I suggest that you talk to your broker about this before you refinance.....for example, if the loan is more than 12 months old the clawback might be only 50% of the commission (ie only a $2500 hiding).
If the first anniversary is not far off, perhaps you can help the mortgage broker to limit the pain???? Perhaps also the broker might be in a position to come to an arrangement with a view to getting you the lower rate, and not taking a $5k hiding just before Christmas????
communication is the key here.
PS I have to say counting beans for a living is perhaps not the most exhilerating profession, but I dont have deal with any of this clawback malarkey either!!!! I do the work, issue an invoice, and the vast majority of my clients pay with a smile on their face, because they know up front what they are paying for, and can choose to pay it because they see value in it, or they can choose to go somewhere else. I would hate to have to rely on a third party to pay me for services I provide to my clients, especially when my clients for the most part dont know what the service is worth.......so I take my hat off to brokers....its a tough gig, and they can keep it:)
Also the rates being advertised on these sites are a hook into driving enquiries and in most cases are not the final rates you can receive based on your personal loan application and circumstances.I get the temptation of trying to refinance after seeing lower rates that what you’re currently on.
I would be interested in finding out what you would like to do after knowing what your mortgage broker will experience. He /she will most likely lose 50% of his initial income that he earnt from you and make 100% of it back from another lender. It's not that bad but I suppose he/she does not not want to go through the hassle. Sadly, the market is the market. There is lots of competition and consumers have a right to move to a product that suits their interest. Happy to assist you with a lower rate but your mortgage repayments need to have been on time for the last twelve months and no other missed payments on credit cards, pay day loans, car loans, personal loans or any other utilities or that fancy rate is not available. It's only available for extremely good behaviour.
Let me know if I can be of assistance. 0434.528.186