The Good Mortgage Broker/The Mythical Beastie

[Mark C]

Goodmorning Everyone,

I’ve been LOE since October 2004, until recently all my financing has been on residential properties and thus has been for property between $200K – $1.5mil. I have finance / refinanced around 30 – 35 times over the last 4 years. At least 60% of this was done through a Beastie.

I have on the other hand 2 large projects underway and 1 small project. Which I have sort finance 3 times.

The majority of my experience in establishing and refinancing loans is in the realm of what most people here on the forum are doing. I am using 8 or so different lenders and don’t have any special treatment by any of them.

My experience through this time has lead me to the conclusion that I get a better deal on setting up the run of the mill loan by going direct to the financial institution.

Further learning’s:

1) Beasties do not harbor a special gift, anything they set up you can get yourself.
2) They are on general very busy people and don’t always find the time to advance your application with the priority you expect/need.
3) They will take the path of least resistance, not necessarily the right path.
4) They don’t know your plan like you do, even after you explain it to them 10 times.
5) They take no responsibility for the package you end up with, if your going to be responsible then you might as well look after it from start to finish.
6) When you have a problem (which there always are) you have to call the Beastie to sort it out, who in turn calls the bank (when they have time) who in turn calls the Beastie back, who in turn calls you back … this equates to + 2 weeks for each problem. Is this sounding familiar?
7) Beasties are paid by the bank, think about this. Who pays the bank? Ok then wouldn’t it be possible to get a better deal if you don’t use a Beastie?

The biggest piece of advice I can offer is the speed of your transactions can excel you faster then compound growth. Time is always of the essence, I have been quite sucessful over the last 18months because I have been able to act quickly.

Every time someone on the forum writes “you need a good mortgage broker” I feel as though someone else who might have only just started might think that this is the only way to do it.

I have been in some pretty tight financial times over the last couple of years, part due to the loans Beasties have set up for me.

Your thoughts and experiences are welcome, I won’t be reminding you of litigation if you do decide to disagree with me nor will I be sending you a pm to sell my services.

Mark

 

[alexlee]

It comes down to how much knowledge you have. Hiring someone who knows more about it than you is a very important step. But if you already know as much or more about the subject as the expert you're hiring, then you probably don't need to hire them.

For example, I don't really need to discuss basic strategy regarding tax and structures with an accountant because I already know the basics. I tell people to talk to their accountants about stuff, but I generally don't talk to my accountant much: I'll just go read the legislation for myself.

However, I don't know about all the products and so on out there regarding loans, so I use a mortgage broker.

Surely there are competent and incompetent mortgage brokers out there, like any other profession.

I suppose it's similar to the 'to self-manage or not to self-manage' question? I'm pretty sure if I learned about it and did it, I could manage an IP cheaper and maybe more efficiently than most PMs (since some are truly crap and I'll only be managing a small number). However, do I want to spend so much time learning about it when it might be more profitable focusing on other things?

IF you know what you're doing, it may well be better to do things yourself instead of hiring an outside professional.
Alex

 

[Simon]

Nothing wrong with what you have said. Some people lacking experience find a broker brings a lot to the table. Some people lacking time may also agree. At your level of experience it must be hard to find a broker who can make you happy. But I bet he exists somewhere.

Some brokers definately make things harder and I am not surprised by your remarks.

I am sure that if you had tried a top notch broker (not me of course) you might be happier with your experience to date. I could suggest some names to you and the older forum hands know them well.

This begs the eternal question - how do you find a decent broker? Much like any tradesman or professional you are best to seek a personal recommendation by someone you trust not just pick one from the yellow pages. And like the others the best brokers will be the busiest.

Ciao,

 

[alexlee]

I think a person needs enough basic knowledge to recognise a good professional (mortgage broker, lawyer, accountant, etc) when they see one.
Alex

 

[DavidMc]

I think a person needs enough basic knowledge to recognise a good professional (mortgage broker, lawyer, accountant, etc) when they see one.

I agree. With my car, I don't have enough knowledge, experience, time or skill to fix it myself but I know enough to reduce the chance I'll be getting ripped off.

 

[Debt Junkie]

Mark C,

Thanks for the post. You mentioned your past problems with mortgage brokers a couple of days back and I was going to ask you to elaborate on any particular problem you encountered (without naming names, of course)?

I have recently been considering whether or not it is worth my while to use a broker - at present I haven't enough debt to require it, (in spite of my self proclaimed junkie status ) and when I do have more debt, I figure the banks will be happy enough to accomodate me ...

I'm tending to agree with you though ... I prefer a high degree of control over my finances, and let's be honest, no one out there will ever care about my $$ as much as I do!

DJ

 

[Mark C]

I prefer a high degree of control over my finances, and let's be honest, no one out there will ever care about my $$ as much as I do!

DJ

DJ,

And no-one will express the same passion for getting things the way you want them as good as you can.

Unfortunately experience can be expensive, but then what is the expense of never knowing.

Mark

 

[Debt Junkie]

Unfortunately experience can be expensive ... Mark

Only if you don't learn from it!

DJ

 

[Saint]

Mark

Good on you being able to loe... to be able to do this at any age is an achievement but under 35 is a great feat.

I dont think everyone needs a broker to do everything but often having someone who can play devils advocate can come in handy.

I find it interesting however that you blame the broker for your 'tight financial times.... people seem to have a tendency to blame others before they'll take it on themselves, so I'd be interested in your thoughts to this... surely you'd have to take some of it on yourself.

Cheerio

Saint

 

[Mark C]

Mark

people seem to have a tendency to blame others before they'll take it on themselves, so I'd be interested in your thoughts to this... surely you'd have to take some of it on yourself.

Cheerio

Saint

Saint,

A few years ago my lack of experience caused me to have low doc loans set up with only enough income stated on the declaration to cover the amount I was borrowing at the time. Not enough to cover future loans. I left it up to the broker to fill out the paper work for me.

I should have paid more attention and read through it all myself, made sure what was being done was what I needed. I thought I had explained it clear enough but clearly I hadn't.

The point I make now is if I am responsible for the package I end up with and have to spend the time to go through it all anyway, then why would I use a broker?

The other reason for the financial stress over the past couple of years is simple, I've been buying more than I can afford. But that’s the fun bit.

Mark

 

[Simon]

Saint,

A few years ago my lack of experience caused me to have low doc loans set up with only enough income stated on the declaration to cover the amount I was borrowing at the time. Not enough to cover future loans. I left it up to the broker to fill out the paper work for me.Mark

So you want an exceptional broker that lacks integrity to the extent that he would fraudulently overestimate your income on a legal document in order to see that your future needs were met - without even any direction from you to do so??

No wonder you have so much trouble finding the right one. I am certainly not that broker and I doubt you will find him amongst the regulars here either.

 

[Mark C]

So you want an exceptional broker that lacks integrity to the extent that he would fraudulently overestimate your income on a legal document in order to see that your future needs were met - without even any direction from you to do so??

No wonder you have so much trouble finding the right one. I am certainly not that broker and I doubt you will find him amongst the regulars here either.

Ha ha ha, Simon we used to call this the "Are you still beating your wife" question. Guilty with a yes or a no answer.

Obviously that was not the intent, your post is just another example of how a broker can run off in the wrong direction. I think your just proving my point.

Thanks

Mark

 

[Simon]

Ha ha ha, Simon we used to call this the "Are you still beating your wife" question. Guilty with a yes or a no answer.

Obviously that was not the intent, your post is just another example of how a broker can run off in the wrong direction. I think your just proving my point.

Thanks

Mark

You reckon?

Looks clear enough to me. Your ideal broker would have calculated your income and declared it to meet your future borrowing needs.

 

[redwing]

Saint,

A few years ago my lack of experience caused me to have low doc loans set up with only enough income stated on the declaration to cover the amount I was borrowing at the time. Not enough to cover future loans. I left it up to the broker to fill out the paper work for me.

I should have paid more attention and read through it all myself, made sure what was being done was what I needed. I thought I had explained it clear enough but clearly I hadn't.

The point I make now is if I am responsible for the package I end up with and have to spend the time to go through it all anyway, then why would I use a broker?

The other reason for the financial stress over the past couple of years is simple, I've been buying more than I can afford. But that’s the fun bit.

Mark

I'm sure the devils in the detail there Mark, are you able to expand on that as I'm sure there's a lesson in there?


If your borrowing more than you can afford and with a number of large (to me) projects then safety buffers must be a big factor as well?

 

[alexlee]

A few years ago my lack of experience caused me to have low doc loans set up with only enough income stated on the declaration to cover the amount I was borrowing at the time. Not enough to cover future loans. I left it up to the broker to fill out the paper work for me.

I should have paid more attention and read through it all myself, made sure what was being done was what I needed. I thought I had explained it clear enough but clearly I hadn't.

so in that instance, Mark, does that mean you expected the broker to know enough to put in enough income to cover future loans as well? Presumably you told him you would want / need to borrow more money in the future? Was this higher income actually justified by what you were making at the time?
Alex

 

[Saint]

I would think that much of it could be on low or no-doc which might not have to be substantiated... and some of the brokers on the forum do bring this up as alternatives. So I dont necessarily think this is out of bounds.

What I was looking more for was a 'why' Mark was anti-broker (for lack of better words) but this seems to be more his cup of tea and with PERHAPS - only perhaps - hes acting within the same frames we deal with as investors or financiers - but just a bit differently.

Where my issue was... was more so in not taking repsonsibility for his actions which has now been overcome.

So in Marks case he has "apparently" gained sufficient experience to go on his own but at the same time... I wouldnt be doing this myself.

Cheerio
Saint.

 

[Simon]

I would think that much of it could be on low or no-doc which might not have to be substantiated... and some of the brokers on the forum do bring this up as alternatives. So I dont necessarily think this is out of bounds.
Cheerio
Saint.

NODOC doesn't need a figure and is OK.

LODOC needs the borrower to certify a figure. To create a figure on the basis of serviceability is fraudulent. As far as the law goes this is out of bounds.

 

[TheAnalyst]

I think a person needs enough basic knowledge to recognise a good professional (mortgage broker, lawyer, accountant, etc) when they see one.
Alex

I agree and I also agree that a GOOOOOD broker is also part of your winning team --- that is my experience. I deal with a lot of brokers and found few are good and some do not have amount of knowledge I have.

 

[Mark C]

I'm sure the devils in the detail there Mark, are you able to expand on that as I'm sure there's a lesson in there?


If your borrowing more than you can afford and with a number of large (to me) projects then safety buffers must be a big factor as well?

Buffers, plans, finance, approvals and backup strategies etc.

I don't borrow more than I can afford. I borrow as much as I can cover, for the time needed.

It's not as simple as I working 9 - 5 and earning $x which will pay for $x loan repayments.

Using debt to cover debt for periods of time can help move you to the next level.

I could be financing a "Green" site (no approvals), the interest payments could be 7 - 8K per week (as in one project I'm doing). I have borrowed enough funds to cover 12 months worth of repayments. I am expecting that within this period I will have a DA issued. This will increase the value of the site and allow me to draw down more funds to cover the construction. Or I might sell the site with DA.

I could put a contract on a piece of land with settlement subject to DA approval, I'll borrow enough to pay for the DA process from other land and capilise the repayments of this with other debt. When the DA is approved I'll settle the property and draw down enough cash to pay off the DA and the interest incurred.

Should any of these deals fall over I could loose money, maybe everything I've spent on them. I have exit plans such as considering and less favourable DA, sell the site and cut the losses. Sometime just holding the site over a boom period will cover the costs of interest. They all have exits.

Having access to my equity restricted dose not help my cause. Now try explaining this to a MB....

To accomplish each step the best thing I have in my arsenal is speed, I move quickly to lock up a contract and I do this because I can get funds in a hurry. Using a MB will slow my progress and success.

Mark

 

[JIT]

Mark C,

Have you used 'equity lending', which grossreal talked about in some old threads, and which very few people here understood, including a few MB's?

And, can we start calling MB's 'beasties' from now on?

GSJ