As much as you may love the idea of being a finance broker to exist you need income and to get income you need to settle loans. You should also realise that being a broker is not easy and does require real focus and dedication and a commitment to on-going training and education.
Having said that Finance Brokers get income from 3 areas:
1. Upfront commission: This is a fee that is paid by the lender to the broker when a loan settles. For example for a $250,000 loan with a .7% upfront commission the broker would receive a on off fee of $1750 less any aggregration fees if applicable.
2. Trailing Commission: This is a fee that is paid by the lender to the broker each month provided the borrower has paid their mortgage on time. For example for a $250,000 loan with a .25% training commission the broker would receive a monthly fee of approximatley $52 provided the borrower paid their mortgage on time, less any aggregration fees if applicable.
3. Brokerage fee: Some lenders don’t pay up front commissions so broker charge the borrower a brokerage fee which is paid at settlement.
CLAW BACK
Most conforming lenders have a claw-back policy in place. For example, when a loan is refinanced within a certain time frame which can be up to 18 months after settlement the lender will “claw-back” all or part of the up-front fee paid to the broker.
This claw-back policy applies regardless of the reason the borrower may have refinanced with another lender.
All brokers need to aware of any claw-back policies and budget for them. The lender’s argument for the claw-backs is that they stop what is called “churining” which is where a broker will keep refinancing a borrower to get the up front commission.
Check out these articles on Churning and Claw back.
Mortgage Professional Australia
Choice Magazine
If you are looking at becoming a Finance or Mortgage Broker check out the web site which has a wide range of companies who are actively looking for brokers right now:
Becoming a Mortgage Broker