Brokers Ain't Brokers?

[Giuseppe]

I have been using a broker for several years and I have been happy with him. However, it seems we have hit a wall in trying to obtain finance as I am LoDoc. I have lots of equity, but my income isn't great. I can get a loan to fund purchase of $275k but will be paying through the nose for it with a smaller non-bank lender at 7%. I assume mortgage insurance as well...

A friend has suggested a different broker who is "fantastic" and who could probably help at securing funds *at much lower rate. My question is: how can this "new" broker do what my broker can't?*

 

[DaveM]

Not all brokers are as imaginitive/driven to get deals done as others. For example they may just put every deal through Westpac/ANZ/CBA/whatever and then give up when serviceability is reached and say "oh well thats all".

A good broker will map out your future plans and then put loans with lenders depending on their credit policies, leaving least restrictive lenders till last as opposed to using them up early in the piece

 

[Mick C]

The new broker might have a larger varieties of lenders on his panel ( Private, non banks, insurance trust and international) + may be more experienced in the low doc range.

After the NCCP laws kick in a few years back, a lot of brokers exit the "low doc " market as the major players ( Lenders/banks) pulled back from their low doc funding or have introduced a lot restrictions/roadblocks.

Generally speaking if your LVR is over 60% than your rate will be more expensive compared to a standard home loan UNLESS you have 12 month BAS or 6 month trading statements. With 12 month bas/6 month trading statement up to 80% LVR you can still get rates under 6% depending on lender.

Accountants letter only, >60.1% -- rates will start from 5.50% - 9.40% ( up to 90% LVR)

 

[Mick C]

For example they may just put every deal through Westpac/ANZ/CBA/whatever and then give up when serviceability is reached and say "oh well thats all".

^ Yes that's common as well- dealing exclusively with 1-3 banks....or should i say getting too "comfortable" with a smaller number of banks.

As a consumers and under the NCCP laws the broker should be providing you with their credit guide and disclosure statement that outlines where they have placed most of their deals through in the last 12 month in terms of volume and the commision breakdown.

 

[Jamie M]

My question is: how can this "new" broker do what my broker can't?*

Not all brokers are the same. Like any profession - you'll have some that perform better/worse than others.

Having said that - in this scenario, if you haven't got the income to support the servicing and you need to go the lo-doc path then you might find some brokers unwilling to take on the business.

Cheers

Jamie

 

[Terry_w]

Any profession has those that are good and those that don't really know much but get away with it.

 

[nhg]

TerryW above has given / continues to give me really good advice as a broker and legal advice to boot.

Aaron C also on this forum acted fast for me a year ago securing a loan other brokers were scrambling to get organised for me.

The difference between good and bad brokers is as mentioned previously. Confidence and ability to get loans when you need them with good contracts. An ability to look ahead and map out an adequate lending plan that doesn't box you in. I chose my first broker because she was the best one available nearby. I am still getting out of the mess she created.

I no longer care about location. I just want the best.

 

[tobe]

Rams are a lender that do a fair bit of Low doc. Pricing is reasonable. However a lot of brokers dont recomend, or know about Rams as they exited the wider broker market a couple of years ago.

Id recomend going carefully through your finances with a broker or two, and confirm that you do in faact need Low Doc. In the past many brokers recomended low doc for ease of use rather than being the best fit for a client.

 

[Giuseppe]

Thanks, Tobe.

We have had business with Rams for about a year and then refinanced with someone else. It gets to the point where it's difficult to keep track of who is doing what, finance wise.
Is it common for brokers to "churn" clients, ie: keep changing banks etc, as to keep getting commissions? Someone mentioned this to me the other day.
Giuseppe

 

[Terry_w]

Thanks, Tobe.

We have had business with Rams for about a year and then refinanced with someone else. It gets to the point where it's difficult to keep track of who is doing what, finance wise.
Is it common for brokers to "churn" clients, ie: keep changing banks etc, as to keep getting commissions? Someone mentioned this to me the other day.
Giuseppe

It can be in some cases. But brokers will suffer a clawback of commission already receive if the loan is paid out in the first 18months or so (3 years with one lender).

Also there has to be a good reason to change lenders - or there should be a good reason.

 

[Peter_Tersteeg]

Is it common for brokers to "churn" clients, ie: keep changing banks etc, as to keep getting commissions? Someone mentioned this to me the other day.

It does happen, but it's not common. As Terry mentioned there are penalties in place to prevent this. With quite a few lenders if the broker were to churn clients in a 12 month period they wouldn't make a cent from the transaction (if fact they'd make a significant $$$ loss).

Ultimately an broker should be able to justify their recommendation to you. I've no problem with refinancing to a different lender, but there's got to be a reasonable justification in your favor. In many cases the easiest and cost effective solution is to simply work with your existing lender to renegotiate a better or more suitable deal.

 

[Giuseppe]

Thank you. Very good advice.

G.

 

[Colin Rice]

I heard someone say in regards to professions that 60% are competent to a level to get by, 20% are incompetent and do more harm than good and 20% are very to highly competent.

Also heard a stat from a mentor that 3% of the population are highly ambitious and the 3% is in flux with people entering and exiting due to various circumstances.

Find someone in the last 20% and you may stumble across a 3%er! I think there is a few around this neighborhood

 

[peaches]

Let's not overlook the possibility that the original broker conducted his own calculations ( as required under NCCP ) and concluded that you could not afford the loan.

Just because a lender says it is ok does not remove this responsibility from the broker.

I for one would not risk my licence or the $200,000 fine if my computer said "No".

 

[Terry_w]

Let's not overlook the possibility that the original broker conducted his own calculations ( as required under NCCP ) and concluded that you could not afford the loan.

Just because a lender says it is ok does not remove this responsibility from the broker.

I for one would not risk my licence or the $200,000 fine if my computer said "No".

Good point!

 

[Spectre]

spot on peaches.

 

[Jamie M]

I for one would not risk my licence or the $200,000 fine if my computer said "No".

Yep, agree 100% kudos.

Cheers

Jamie