Mortgage Broking Business

[Crido]

Hi all,

At the risk of being told I'm naive to even consider it and to get back in my box ... here goes.

I'm after your sage and constructive advice on the feasibility of starting a part-time finance broking business in my small home town (population ~3000 / Main Industry: Mining).

Seems to me ...
- it would be quite a rewarding gig (saving people money!);
- it is fairly straightforward to get into (Cert. IV qualifications and
not a lot of start-up or ongoing costs); and
- with some good word-of-mouth (small-town) marketing, it would be a product that I wouldn't have to "hard-sell" down peoples throats!

However, I'm also aware that some brokers (with plenty real-world experience) are better than others and so I'm wondering if my lack of experience can be offset by my honesty, enthusiasm and a fair amount of studying the industry (you've got to start somewhere, right?).

I'm also aware I would need a mentor for the first couple of years, and have been in touch with this mob:

http://www.become-a-mortgage-broker.com.au/

Your thoughts?

Much appreciated,
Crido

 

[Aaron_C]

I could say a lot here but what I'll say is that it's not really a part-time thing. Gone are the days when you could be a 'hobby-ist' of a part-timer and still make decent money. You really do have to be a specialist in order to know the niches of lender policy and differentiate from customers just going to the bank directly.

 

[K_Raheja]

hi there, you mite want to search the forum..there are probably some threads on this topic.

 

[Terry_w]

It would cost around $10k to set up a mortgage broking business.

 

[Crido]

hi there, you mite want to search the forum..there are probably some threads on this topic.

Hi and thanks for your comment.

I have searched the forum for other threads, however have found none that are recent and that apply to my situation.

Regards,
Crido

 

[Crido]

It would cost around $10k to set up a mortgage broking business.

Thanks Terry - that was the budget I was working off too.

Cheers,
Crido

 

[Aaron_C]

Given that most of the stuff you need like a computer/internet/telephone you presumably would already have - it won't cost $10k upfront. The only costly thing is the training course and MFAA membership.

 

[Crido]

I could say a lot here but what I'll say is that it's not really a part-time thing. [cut] You really do have to be a specialist in order to know the niches of lender policy and differentiate from customers just going to the bank directly.

Thanks Aaron ... exactly the advice I am after!

Considering I would be working "under" a mentor, would the mentor be able to share their "specialist" experience with me so that I could offer my customers that differentiated service, rather than them going to the bank?

It's interesting that some mentor schemes regard "part-time" as an option, others suggest it as a starting point, and yet others say PT is not an option at all under their scheme!

Cheers,
Crido

 

[Crido]

Given that most of the stuff you need like a computer/internet/telephone you presumably would already have - it won't cost $10k upfront. The only costly thing is the training course and MFAA membership.

Yes, agreed. I can make a start for as little as $3K, but my $10K includes everything for the first 12 months including developing an online presence/online marketing, as well as testing the waters around local rag advertising and a few other rather expensive marketing options (that I really don't think I'd need, as I think word-of-mouth will be the big one here!).

Cheers,
Crido

 

[Aaron_C]

Thanks Aaron ... exactly the advice I am after!

Considering I would be working "under" a mentor, would the mentor be able to share their "specialist" experience with me so that I could offer my customers that differentiated service, rather than them going to the bank?

It's interesting that some mentor schemes regard "part-time" as an option, others suggest it as a starting point, and yet others say PT is not an option at all under their scheme!

Crido,

I guess people get the notion that being a broker is something you can do part time because there doesn't need to be a lot of face-to-face contact with clients, everything is done online these days and it's just submitting forms/emails/calls. This is all true.

However, people tend to forget that it is an extremely time consuming thing - getting documents, learning about policy, running scenarios, following up on loans, chasing loans/settlements etc. I have never done broking as a part time thing but I can only imagine how difficult it would be as it tends to consume a lot of your time, leaving not much room for other stuff. Plus, while you are submitting loans you have to chase new business / clients and service existing ones which takes up your time for not much $$$ for a lot of the time spent (especially getting dud leads from telemarketers etc).

 

[Crido]

Crido,

I guess people get the notion that being a broker is something you can do part time because there doesn't need to be a lot of face-to-face contact with clients, everything is done online these days and it's just submitting forms/emails/calls. This is all true.

However, people tend to forget that it is an extremely time consuming thing - getting documents, learning about policy, running scenarios, following up on loans, chasing loans/settlements etc. I have never done broking as a part time thing but I can only imagine how difficult it would be as it tends to consume a lot of your time, leaving not much room for other stuff. Plus, while you are submitting loans you have to chase new business / clients and service existing ones which takes up your time for not much $$$ for a lot of the time spent (especially getting dud leads from telemarketers etc).

Yeah, good call. This is the feedback I'm after! Thanks!

I imagine it would be difficult to keep motivated if a fair chunk of time is spent on chasing dud leads! It's not like you can say, "Righto, I've worked x amount of hours, so x multiplied by a per hour rate minus tax equals the pay in my bank" hey?!

Food for thought - thanks again!
Crido

 

[Terry_w]

I think you may have to do the diploma now rather than the Cert IV. That is around $2000

Company set up and trust
PI Insurance
Workers Comp insurance.
FBAA/MFAA
Credit Ombudsman
Domain Name + hosting
Computer - you would have already
software - generally supplied by the aggregator
Aggregator cost is about $250 pm
Credit licence also - or authorised rep status.
etc

 

[Crido]

Thanks Terry.

Cert. IV is still the only formal study requirement.

The below costs are taken from the site I mentioned in my original post.


*****
Certificate IV$ 695.00
Compliance Certificate (AML/CTF)$ 275.00
National Police Check$ 42.00
COSL$125.00
Veda Check$ 22.00
FBAA Membership$ 410.00
PI Insurance$ 715.00
ACR Annual Fee$ 660.00
Symmetry Set-Up Fee$ 324.50
Symmetry First Monthly Fee$ 181.50
Training$ 880.00
Total$4,330.00
Sign Now Discount$1,556.00
Fee Payable$2,764.00

*****

Cheers,
Crido

 

[Aaron_C]

For MFAA the diploma is required now.

 

[Jamie M]

Considering I would be working "under" a mentor, would the mentor be able to share their "specialist" experience with me so that I could offer my customers that differentiated service, rather than them going to the bank?

Yes, that's why you need to find a good mentor - it will make a tremendous difference.

Being a mentor is a huge commitment - it takes a lot of time/effort. Therefore, most mentors will expect some sort of payment for the service.

Cheers

Jamie

 

[Peter_Tersteeg]

I think you're kidding yourself if you can start up for anything less than $10k. In my experience the figure is closer to $20k and that's without spending any money on marketing (which would likely be money wasted anyway).

The way I'm reading their post is that your costs to set up are $4,330.00 and their offering a discounted sign up fee of $2,764. This is discounted of a normal fee of $4,320. Your total initial costs in the first month would be $7,094.

There's been no consideration to office setup such as purchasing a lap top, setting up email & website, phone/fax, business registration, business cards & letterheads (plus design), etc.

If you're going to be a member of the FBAA then you only need a cert IV. The MFAA requires a diploma which would cost about $1500.

Like Aaron mentioned, it's not a part time business either. You can certainly get things rolling on a part time basis, but if you're going to be half way successful, you're going to need to treat it like a serious business.

Also keep in mind that it takes 4-5 months before you get paid for the work you do. Brokers get paid on average 6 weeks after the loan settles. It's a long time to wait to make any money.

Having a mentor is probably the most critical thing to success, without one your chances of making it through the first 12 months are negligible. Most mentor programs run for about 2 years. I'm also willing to bet that you'll be charged an additional ongoing monthly fee of $500-$1000 on top of the sign up fee.

I've mentored several other brokers myself. It's a great industry to be in if you're successful and can be very rewarding. Be warned however that there is a very high failure rate and most brokers are not particularly successful. I know quite a few of the individuals listed on the MFAA's "certified mentor" page. Only about 1 in 5 are people I'd consider to be great brokers, but that would also be true of most of the broker population.

 

[Terry_w]

Thanks Terry.

Cert. IV is still the only formal study requirement.

The below costs are taken from the site I mentioned in my original post.


*****
Certificate IV$ 695.00
Compliance Certificate (AML/CTF)$ 275.00
National Police Check$ 42.00
COSL$125.00
Veda Check$ 22.00
FBAA Membership$ 410.00
PI Insurance$ 715.00
ACR Annual Fee$ 660.00
Symmetry Set-Up Fee$ 324.50
Symmetry First Monthly Fee$ 181.50
Training$ 880.00
Total$4,330.00
Sign Now Discount$1,556.00
Fee Payable$2,764.00

*****

Cheers,
Crido

There are a few more things such as fax, phone etc. Look at using mynetfone for fax and voip phone. Get the app and answer the land line on your mobile for free.

Symetry fee is high. Who will the aggregator be? many provide free software.

Don't forget the monthly aggregator fee. Also some banks want you to pay to get accreditated these days. CBA and Westpac are a couple I think.

 

[Rolf Latham]

Having done this "gig" for 13 year plus years and having had a little input into a bunch of sensational peops having settled billions, the following would be my comments which are more slated to the operational side.

The below is generally what I toss on the table for any new prospective entrant to the industry.

The questions are DIFFERENT if you arent chasing a new franchisee or someone that will help pay for your aggs running cost.

Remember the Pareto rule and if you believe you are the 1/5 th go for it.


1. You can learn ALL the skills if you have the teachability and desire.

2. A mentor wont make you or mold you, a mentor can only improve whats already good or bad. Note that most "qualified" mentors are likely not top 5 % producers..................

3. What do you bring to the table that 30 000 revolving door people havent over the years ? Why will you succeed?

4. Systems and software are useful, but like in any network marketing system people ( ie leads = food) dont come in the application kit, you need to learn to hunt and more importantly know how to truly help people from the heart, and not the wallet.

5. If you arent thinking BIGish ,ie > 200 k a year in say 3 or 4 years, get a PAYG job or do something else instead. The industry isnt going to work well for small volume producers as consolidation and increased regulation comes in

ta
rolf

 

[Corey Batt]

You'll burn through 10k very easily in the first year.

Diploma, MFAA membership, phone line/fax/internet, subs like residex, Accounting/biz structuring/ASIC fees most likely, potentially aggregator fees/mentoring fees.

It goes on and on. Don't even think about making in the first 12 months.

Pop of 3000, maybe many high net clients, but how many already have banking connections/brokers, how many deal with their personal finance 'back home', what happens when the high nets pull up tents and head back home? Just a couple things to consider.

Broking is time intensive, and relatively money intensive for the first year. It will take you a while to learn the ropes and even get some upfront comms to break even. Then half your trail will no doubt take 12 months to come through.

But hey, it's fun in a masochistic kind of way.

 

[beachgurl]

I was broking part time for a few years, wrote my last loan about 12 months ago. It can be done part time, but those part time hours are those that suit your clients, not you. It really can't be done in conjunction with an unrelated job.

I agree with the dud leads. Many leads are created by people putting their details on a website. Usually the ones most interested in obtaining advice/loan have already seen someone else and started the ball rolling before their contact details hit your email account.

I stopped broking as it didn't work well with my life situation, having two small children. Most clients call around dinner time/after dinner which is very difficult at arsenic hour.

Re income, as PP have said, don't expect to receive an income for quite some time. I think it was 8 months before I started receiving income. I now get a reasonable trail income which pays a few bills.

Once you have qualified, self education is the key. You need to know more than your competitor down the road, particularly with tricky deals. Familiarise yourself with the types of incomes earned in your town eg contract, self-employed etc and align yourself with lenders that most support your expected client base. No point recommending a lender that won't touch short term contractors and then having to tell them that you need to take them somewhere else.

I enjoyed the work and once the kids are older I'd consider getting back into it. There is a lot more background work required than anyone will tell you. You will work many more hours on non-paid jobs than paid jobs. Good luck!