Brokers that refund trail commission

Xap said:
I see what you are saying about opportunity cost. If instead of paying an upfront of $3K to a mb or bank I invested $3K. Assuming a 8% return or a 5% real return (removing 3% for inflation so a gross return of 5% pa) I would have the equivilant of $4886 in ten years time; a real return of $1886. So by paying the brokerage I am losing the opportunity to earn $1886.

However, this needs to be compared to the cost of paying the trail to the mb or bank. Based on a loan of $500000, trail of 1.5% over ten years the cost of this is $750 pa or $7500 over ten years. I would still rather pay the brokerage especially since there'll multiple loans in place.
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I haven't followed this thread, so my assumptions may not be correct.

Xap, you mean you want to pay $3,000 a MB so that you will receive $750 per year over 10 years? You mean you gonna keep the same loan with same bank for 10 years?

If so best of luck for your investments journey. You need lots of luck.
 
I've had a home loan for more than ten years .. no probs. Anyway my purpose is to rob mb from money , i know they have to make a living . (If I could do that to banks I would but not mb.) Anyway, What is wrong with paying a 3 yrs ongoing brokerage upfront with nil ongoing. seems like a win win to me especially if it makes my investments cash flow positive faster and can theoritially borrow more
 
Can you imagine the administrative hassle of a MB having to transfer $23.45 per month to you for 10 years - varing amounts each month too.
 
No, why i am saying is pay the equivlant of the three years ongoing trail as an upfront brokerage payment in exchange for .15 % (brokers ongoing commission) deducted from the interest rate. If that makes sense
 
Xap said:
No, why i am saying is pay the equivlant of the three years ongoing trail as an upfront brokerage payment in exchange for .15 % (brokers ongoing commission) deducted from the interest rate. If that makes sense
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And what happens if the loan you entered into isn't as competitive three years down the track and you can save 0.5% with a switch to another lender?

There's a reason why loans don't last that long these days, they're quite actively refinanced, paid off, switched etc.
 
Xap said:
I see what you are saying about opportunity cost. If instead of paying an upfront of $3K to a mb or bank I invested $3K. Assuming a 8% return or a 5% real return (removing 3% for inflation so a gross return of 5% pa) I would have the equivilant of $4886 in ten years time; a real return of $1886. So by paying the brokerage I am losing the opportunity to earn $1886.

However, this needs to be compared to the cost of paying the trail to the mb or bank. Based on a loan of $500000, trail of 1.5% over ten years the cost of this is $750 pa or $7500 over ten years. I would still rather pay the brokerage especially since there'll multiple loans in place.
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Its not the opportunity cost of a 5 or 8% return, its the opportunity cost of structuring your loans correctly to take advantage of the most suitable lender to meet your goals (stated goals, and the ones you didnt even know about till you met a good broker). Its the opportunity cost of making an extra purchase, of refinancing to cashflow neutral, of structuring finance so as to avoid issues with the lender etc etc

If your interested in rebating the commission, simply use ubank or an online lender, you will get much the same result, if not better.
 
To the OP at the end of the day you have to ask yourself. If you were asked in your job to refund all the salary you earned to your customers how would you feel?

MB make their money from their up fronts and the ongoing commissions help fund the cash flow of the business continuation. I think people forget that MB have to work hard for the business and no one else is going to feed them when times are quiet. Remember at any time a customers can refinance and its game over.

You have banks/ lenders who are squeezing the MB margins and you have a more competitive markets. If you expected MB to charge an upfront most people would go to the banks direct because the banks build the cost of the process into the rates. And yes people do think banks dont charge fees... yea right its all factored in.

Most people think oh I will go the banks because they can give me a better rate. Yes that is true but remember they want all of your business and so overall they make more money off you. Then at a certain point when they have all your business they can say ok time to squeeze you and start to increase the fees till it hurts. The sad part is you want to move but you cant because you have everything with them and its too late. By then the MB's are out of business and there is no competition (i.e. other lenders).

True you want to get a good deal and its good to ask but you have to think about the wider implications. People need to make some margin on their products/ services otherwise they will go out of business.
 
It's all good....different models and all that.

I personally find that the more established my business gets the more my fixed costs go up (at near the same rate as the trail goes up) so I am not sure it's sustainable to refund trail in the long run.
 
Aaron_C said:
They're not supposed to go lower than the broker channel as per lender policy but you would be surprised. NAB are the biggest culprits for circumventing this.
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Very true Aaron, I worked for NAB for a very long time and I know their tactics well. Its good that we can beat them at their own game now though by offering one of their own brands, Homeside, which in most cases smack NAB products out of the water..
 
I am not saying I wouldn't pay anything and the analogy of asking an employee to repay salary is not accurate .. I am just saying I would rather pay an upfront (whether the loan settles of not) and no ongoing trail. Anyway, what are borrowers getting for the trail ' mortgage advice for the life of the loan?'.

I think if borrowers, instead of paying a trail through their loan repayments had to write a cheque at the end of each year to pay for the bank/mb trail out of their hard earned cash they would be wondering where the value is. I would. Any, why commissions? doctors don't get paid a trail commission on the drugs they prescribe. Why shouldn't it be the same for lending or at least be offered as an option to people?
 
Xap said:
I am not saying I wouldn't pay anything and the analogy of asking an employee to repay salary is not accurate .. I am just saying I would rather pay an upfront (whether the loan settles of not) and no ongoing trail. Anyway, what are borrowers getting for the trail ' mortgage advice for the life of the loan?'.

I think if borrowers, instead of paying a trail through their loan repayments had to write a cheque at the end of each year to pay for the bank/mb trail out of their hard earned cash they would be wondering where the value is. I would. Any, why commissions? doctors don't get paid a trail commission on the drugs they prescribe. Why shouldn't it be the same for lending or at least be offered as an option to people?
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I am not saying I wouldn't pay anything and the analogy of asking an employee to repay salary is not accurate .. I am just saying I would rather pay an upfront (whether the loan settles of not) and no ongoing trail. Anyway, what are borrowers getting for the trail ' mortgage advice for the life of the loan?'.

I think if borrowers, instead of paying a trail through their loan repayments had to write a cheque at the end of each year to pay for the bank/mb trail out of their hard earned cash they would be wondering where the value is. I would. Any, why commissions? doctors don't get paid a trail commission on the drugs they prescribe. Why shouldn't it be the same for lending or at least be offered as an option to people?
 
Xap said:
I am not saying I wouldn't pay anything and the analogy of asking an employee to repay salary is not accurate .. I am just saying I would rather pay an upfront (whether the loan settles of not) and no ongoing trail. Anyway, what are borrowers getting for the trail ' mortgage advice for the life of the loan?'.

I think if borrowers, instead of paying a trail through their loan repayments had to write a cheque at the end of each year to pay for the bank/mb trail out of their hard earned cash they would be wondering where the value is. I would. Any, why commissions? doctors don't get paid a trail commission on the drugs they prescribe. Why shouldn't it be the same for lending or at least be offered as an option to people?
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Sigh.

The trail isn't coming out of your repayment, as the repayment figure is the same whether broker or branch originated.

The idea behind a trailing commission is that the client has the ongoing relationship with the broker, not the bank. Post settlement support is heavily time consuming and costly, minor top-ups, switching, rate reductions are a cost exercise, hence the need for trails, otherwise any loan written would become an ongoing liability, or a zero support structure.

The commission payments are compensation for the value provided to the lender, in that their client find, loan processing and data entry is completed by a broker, reducing their staffing requirements. Why do you think banks SHOULDN'T pay for receiving this financial benefit?

In the end this is a market economy, if there is a market for the product, it will be provided. There are providers out there who provide similar options, feel free to take them instead of using the services of brokers who gain their businesses through their extensive structuring knowledge and advice, not paying you $14.26 per month.
 
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