Do you think I need a Broker?

[syahrr01]

Hi All,

I understand a good mortgage broker can help me structure my funding to better enable me to achieve my investing objectives. My question is, do you think my refinance situation below is way too simple to warrant engaging a broker?

• I have zero IP at the moment, no credit card, no car loans, no margin loan, etc.
• PPOR is due for refinance as part of it was fixed during GFC
• Current LVR is 66%
• Full doc loan with NAB, P&I, 0.8% discount from SVR
• There is a possibility that PPOR may become an IP in around 5-10 years timeframe

My simple thinking is to do the textbook refinance to an IO loan at 80% LVR (?), park extra cash on 100% offset account. Use cash in offset account to fund future IP or PPoR acquisition. The next step for me is to do the leg work of speaking to other lenders and compare their products. Rates and fees seems to be the only variables to evaluate.

What do you think? Any products I should look out for?

 

[Aaron_C]

Hi syahrr01 you certainly don't have to use a broker for all your transactions. With a low LVR like that you have some good options available but in many ways a broker offers more than just getting the loan for you. They can help advise on how much you can afford in the future and/or help plan your future IP acquisition strategy as this needs to be thought about long before you do any buying.

 

[Rolf Latham]

My simple thinking is to do the textbook refinance to an IO loan at 80% LVR (?), park extra cash on 100% offset account. Use cash in offset account to fund future IP or PPoR acquisition. The next step for me is to do the leg work of speaking to other lenders and compare their products. Rates and fees seems to be the only variables to evaluate.

A "proper" finance/ mortgage structure and plan involves a little more than that.

To a large extent youd be better served working on your middle to long term plan, and build your financing strategy around that. Worry about products features rates blah blah after all that.

We regularly inherit folks who are STUCK simply because of the financing assumptions they have made.

Most even large volume investors spend more time doing the research for an overseas trip than they will ever do on their finance structure, until the wall comes up.............

Having said all that, if your goals are one or 2 ips, one can often muddle ones way through the rates and fees model and still land on ones feet.

However those that want to maximise their resources, and get a grip on what they might be able to do may be well served by some good qaility credit structuring and planning advice...........which a bank can not do.

ta
rolf

 

[HiEquity]

Hmmm.... ask a bunch (gaggle?) of brokers whether they add any value - what response did you expect?

FWIW, my (non-broker) take would be that if all you ever wanted to do was buy 1 or 2 properties then don't bother with a broker if you want to shop around yourself for the best IRs / conditions.

But if you want to actually build a significant investment portfolio, the best way is to use up the lenders with high serviceability hurdles first and leave the easier lenders towards the end. Keep using different lenders as much as possible, don't X-coll unless you have to, etc etc. This requires using a broker who understands property investing and can cut through the cr@p from the different lenders and not let you get suckered in by talk from bank managers just to save a few basis points on your IRs in the short term and stiff you good and proper in the longer term.

IME many, many average brokers out there are just as bad as bank managers - just going for the lowest IR at the time without thought to future consequences in growing the investment portfolio at least risk. Not their fault - they just don't know what they don't know. Some of the brokers on this forum are a good place to start by comparison.

So it all really depends on your goals...

 

[michaelway]

You could do yourself a favour and have a chat to an Independent Mortgage Planner, who will rebate 100% of the commissions (upfront & trail) they would receive from any lender for any loan they write for you.

Plus may be some other neat get-out-of-debt strategies as well.

 

[Terry_w]

My simple thinking is to do the textbook refinance to an IO loan at 80% LVR (?), park extra cash on 100% offset account. Use cash in offset account to fund future IP or PPoR acquisition. The next step for me is to do the leg work of speaking to other lenders and compare their products. Rates and fees seems to be the only variables to evaluate.

What do you think? Any products I should look out for?


brokers cannot give tax advice but you would get yourself into a good tax mess doing this.

 

[syahrr01]

Sounds like the consensus is that for this particular refinance, it's pretty safe to DIY. However when I'm ready to plan my medium-long term investment plan - it pays to get proper structuring advice.

brokers cannot give tax advice but you would get yourself into a good tax mess doing this.

Please go on.

Perhaps I should have wrote: use the offset account to fund future PPoR deposit, but restructure loan to fund deposit for further IP. Don't mix tax deductable and non-deductable components?

 

[BMan]

its easier to get a broker to do it
they do all the leg work for you know the ins and outs of most banks
all you do is let the bank pay them for serving you. sounds like a win in my books

 

[Jamie M]

You could do yourself a favour and have a chat to an Independent Mortgage Planner, who will rebate 100% of the commissions (upfront & trail) they would receive from any lender for any loan they write for you.

That doesn't seem like a very effective business model. Couldn't imagine there being one broker in the country that would work for free.

Back to the OP's original question.

Sure, you could go at it yourself - call around, walk around, stay on hold for a while, wait in branch cues, etc to probably end up speaking with someone that has no idea of the basics of IP structuring.

Or you could spend 25 cents on a phone call and contact one of the guys above. Not only will they be able to advise on your current product but they'll be able to discuss your long term goals and work to your plan.

Cheers

Jamie

 

[Terry_w]

Sounds like the consensus is that for this particular refinance, it's pretty safe to DIY. However when I'm ready to plan my medium-long term investment plan - it pays to get proper structuring advice.
Please go on.

Perhaps I should have wrote: use the offset account to fund future PPoR deposit, but restructure loan to fund deposit for further IP. Don't mix tax deductable and non-deductable components?

are you saying you will borrow and park the money in an offset account?

 

[Aaron_C]

That doesn't seem like a very effective business model. Couldn't imagine there being one broker in the country that would work for free.

Yeah I call BS on that too Jamie. Just an outright lie that someone would give you a service and pay you for it.

 

[Bradsdad]

Sounds like the consensus is that for this particular refinance, it's pretty safe to DIY. However when I'm ready to plan my medium-long term investment plan - it pays to get proper structuring advice.
Please go on.

Perhaps I should have wrote: use the offset account to fund future PPoR deposit, but restructure loan to fund deposit for further IP. Don't mix tax deductable and non-deductable components?

Not meaning to be smart about it but I'm asking myself one question after reading your posts. If you don't need help why the initial question? Please don't get me wrong but it's sounds like even a bit of hand holding will give you some comfort.
As for the delectable and non-deductible portions, you are correct. Business and pleasure shouldn't be mixed how ever attractive he/she is .

 

[Bigtone]

That doesn't seem like a very effective business model. Couldn't imagine there being one broker in the country that would work for free.



Cheers

Jamie

Independent Mortgage Planner who rebates all commission but charges a fee for the advice.

Model works in theory as "planner' could give advice on every available option
in the market and there could be no thought of bias.

However in reality clients would have to pay a fee $1500-$2000? for a relatively comparable service they can get for free.

actually i just looked up his website and by the way mortgage broking in australia is dead,

it has been replaced by the 'independent planning model' that relies heavily on referring ur friends into a multi level marketing scheme where u refer ur family and friends onto a loan that is 1% above the normal rate

so yes "do yourself a favour"

 

[matto_]

Sounds like the consensus is that for this particular refinance, it's pretty safe to DIY. However when I'm ready to plan my medium-long term investment plan - it pays to get proper structuring advice.
Please go on.

This was the general advice - with the overlaying of what is your LT strategy.

If it is just 1-2 props - ALL GOOD. DIY all the way.

If more - I liked Hi-Equity's concept of using easier lenders later in the piece - and a good mortgage broker should be able to help you in the right direction. Along with the fact that they will do all the legwork for you.

 

[Jamie M]

actually i just looked up his website and by the way mortgage broking in australia is dead,

Oh - I mustn't have got the memo

Cheers

Jamie

 

[Peter_Tersteeg]

However in reality clients would have to pay a fee $1500-$2000? for a relatively comparable service they can get for free.

Happy to rebate all commissions received and charge a fee instead. There would be an upfront fee, plus there'd be an ongoing service fee (it takes time to rebate commissions on a monthly basis, which would be charged for).

In the planning world they're banning commissions at the moment. Most planners are simply charging fees to a similar schedule to how commissions were paid. The product providers are very accomidating too. They'll collect the fees as part of their service and pay the planner. Many planners who have been able to wrap their heads around how to sell it are making even more money than before.

There are quite a fee brokers out there who charge fees. They don't rebate commissions however.

 

[michaelway]

Do you think I need a Broker?

No you don't - at least not a broker that is going to pocket the commissions that could be going back into your home loan account.

And you don't need to just take my word on that.

Go read Michael Lee's book - Mortgage Free Debt Free.

Go ask Scott Pape, the Barefoot Investor, whether he would rather go to a "free" mortgage broker, or pay a fee and receive the thousands of dollars in commissions that they would get for the life of your loan for providing a "free" service.

Or go to www.matesratesmortgages.com.au who offer a similar service to an Independent Mortgage Planner. They will pay 100% of their trail commission (which is the hidden pot of gold for "free" service brokers) back into your loan account.

 

[Aaron_C]

Didn't refund home loans go into administration?

 

[dan c]

Didn't refund home loans go into administration?

Yes, they certainly did.

 

[Peter_Tersteeg]

Didn't refund home loans go into administration?

True, but to be fair, that wasn't because they were rebating customers. It was becuase the franchise management were gouging the business.

Lots of the franchisees (the people who actually pay the rebate) have been going out of business for years.

Working on cost alone isn't a particuarly good business model in any business where there's an advice requirement. Evenutally your supplier figures out that you can cut your margin, so they change their pricing to suit them. You've got no more margin to discount your service and no other reason for consumers to use you. I've met a lot of Refund brokers. They've never really impressed me with their actual industry knowledge.