Does it cost to see a Mortgage Broker?

The short answer is yes and no.

Now let me elaborate.

A Mortgage Broker is a service based business, just like any other service based business such as an Accountant, a Lawyer or a Doctor. When you see a Mortgage Broker you are mostly using their intellectual knowledge, something they have studied long and hard to acquire, and their expert experience within the industry.

A Mortgage Broker gets paid via a commission. That is when they settle a loan the lender they have selected, based on the clients goals, needs, and objectives, pays the Mortgage Broker a commission. This is called an upfront commission which is a %percentage of the loan amount settled, plus we also get a monthly ongoing trail commission for each month the loan is in place.

But what happens if a Mortgage Broker spends a heap of time with a client, and the client never takes out a loan with the Mortgage Broker? Well here is where it becomes tricky, because the answer is that it means that the Mortgage Broker has invested time with the client and will not be paid for it, essentially we have worked for free. So this is where we as Mortgage Broker’s may introduce the upfront fee conception. An upfront fee is charged to the client by a Mortgage Broker in lieu of services provided, or work done. Now remember, Accountants and Lawyers WILL NOT provide any services free of charge so it seems only fair that a Mortgage Broker be able to do the same. (Please note an upfront fee is separate from an upfront commission).

Then there becomes the challenge of commission clawbacks as well for a Mortgage Broker. If a client closes their loan or refinances their loan to another bank within a certain amount of time, anywhere between 0-24 months depending on the lender, the lender will take the upfront commission back off the Mortgage Broker. This ultimately means that the Mortgage Broker has worked for FREE. This is a very frustrating and depressing event to occur to a Mortgage Broker. It is a real kick in the guts!

So please, next time you engage with a Mortgage Broker please be respectful and considerate of their time, as we have families to feed too, and if there is a fee applicable please know it is because the Mortgage Broker is trying to cover their time and not work for nothing. After all if we as Mortgage Broker’s continue to give away free advice there we won’t be in business for very long.

Did you know that over 75% of home loans are written through a Mortgage Broker? So we play a very important part in the industry.