What do you say when someone starts quoting the latest cheap % from an online lender

Every so often when I share my investment journey with friends, one of the topics of contention that comes up is using a broker.

My unsophisticated investor friends would quote the latest hot interest rate offer from a DIY online lender like ubank or homloans.com. Here I would proceed to rattle off a few things like re-financing options, serviceability model etc... but since I am no broker I could never articulate my argument and probably don't come across very convincing..

So question to all you established brokers out there: what do you say to a client when they start quoting you the latest % from an online lender?
(lets assume the client is a property investor with a goal to accumulate)
 
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I say "I've got a fixed rate of just 4.06%" ;)

The fact is that a (good) broker can guide you through a range of loans, over a period of time and a number of properties, where an online lender will do nothing more than give you the single loan you ask for, without any consideration as to how it fits in with future goals.

Using a broker is really a completely different thing - it's service/relationship based and completely tailored which you simply don't get online.

However, there are plenty of transactional brokers out there who probably don't offer a great deal more than an online lender in terms of service proposition.
 
You could point out to your friends that sometimes having access to the money on your terms with the right lender, product and features, is a better outcome than simply having a cheap rate. Odds are you can't execute an extended investment strategy with an online lender, or any single lender. You will eventually run afoul of the mortgage insurers or other road blocks.

You might also point out that under certain circumstances we can actually get BETTER rates than the online lenders. :eek:

I'm waiting for the seagull and sheep photos now...
 
I'm waiting for the seagull and sheep photos now...

Haha.

For set and forgets, I don't mind the online lenders. I can't comment on their individual policies as brokers don't deal with them - but good on them for making the market more competitive and driving down the cost of funding.

Most of my clients are investors - so the discussion doesn't come up very often. However, if a first time buyer came to me and was looking into an online cheapie and didn't want anything with bells and whistles or doesn't want to grow a portfolio, I don't see the harm in online cheapies.

Its not as though if you go to an online cheapie, when you come to invest you are completely stuck. Some of them have cash out options similar to other lenders - albeit not the best. You're effectively trading in flexibility/service for price. Some people don't need flexibility and don't care for service.

Furthermore, when that investor decides to go to NAB - its not as though they have some greater penalty for those using loans.com.au over Firstmac (pretty sure on this!).

In terms of broker v online lenders - I don't see it as a real threat to the industry as I consider the profession as a service/relationship. The vast majority of loans in Australia are originated by the big4, who'll likely always rely on brokers as a key vehicle for distribution.

Cheers,
Redom
 
Had one this morning! Started to say all the things mentioned above then when digging a bit deeper discovered the borrower was on contract which had just started after returning form overseas where he had been for 7 years and was also looking to invest in 18 months or so time.

So clearly not a good candidate for Ubank et al because he wouldn't be able to get a loan with them! And it would shorty become unsuitable even if he could.

Its an upside down way of thinking chasing rate first.
 
Theres yor problem.
I am not sure if I understand this? Are you saying I shouldn't?

I think alot of my peers are genuinely interested in investing, but they just don't have the know how. You can just see their eyes open when you start going into the finer details of how much borrowing power someone on an average income has...

I know when I first started and a friend told me he invests in properties in QLD, "What, you can do that? Where? How?"
 
Thanks guys for your feedback.
It makes sense, being a broker is really about offering a service, the industry knowledge, the intangibles that an automated online application cannot ever provide.
 
Hey Jamez

I wouldn't either bother defending yourself when discussing this stuff with mates.

Comparing rates is a mugs game. Some people take a lot of pride in having the lowest rate - but rarely do they understand the true costs (opportunity and financial) involved.

Cheers

Jamie
 
Every so often when I share my investment journey with friends, one of the topics of contention that comes up is using a broker.

If they are the type that want to compare rates like its a big deal they are indeed unsophisticated. Share the investment journey less with them and more with people who actually own a few properties and you will be fine.

I don't tell some friends about my properties at all. They just don't get it.
 
Every so often when I share my investment journey with friends, one of the topics of contention that comes up is using a broker.
In my latest refinance my broker got me a better deal than I could find. He even got a better deal than he was expecting. He outperformed his own expectations :D

But really, it is no one elses business that I use a broker. Everyone I know uses a broker anyway.
 
I don't tell some friends about my properties at all. They just don't get it.

That can often be the best thing to do. It's hard to come off like having a few IP's is no big deal when some groups of people obviously think a) You're going to come unstuck because you have $x million of debt b) You're greedy c) You're rich and shoving their face in it. d) That you're a drug dealer (cos how else could you afford it?)

In reality, it's (hopefully) none of those things but you're wasting your breath trying to explain that. People's money scripts are very interesting...but that's a whole nother post :)
 
but since I am no broker I could never articulate my argument and probably don't come across very convincing..

People only hear you when they're ready. I usually just say
"There are several things you need to consider other than rates. Have a chat with a good broker, they can help you structure the loans to accommodate for future buyings. Here's some contacts."
And leave it at that. It's their responsibility to take actions.

That can often be the best thing to do. It's hard to come off like having a few IP's is no big deal when some groups of people obviously think a) You're going to come unstuck because you have $x million of debt b) You're greedy c) You're rich and shoving their face in it. d) That you're a drug dealer (cos how else could you afford it?)

I don't really have friends or anyone to share those details or have discussions :rolleyes:
a. is my parents

b, c, d. they're no friends. so never happen.

the rest
e. they're not interested and rather not hear about things that only you have interest on
f. I feel uncomfortable to think that they might perceive me to be in a lot better financial position while they're still 'just' paying off their PPOR
 
Absolutely nothing wrong with the cheap online lenders, i can see a good fit for the downsizers with low LVR and non-investors who only have an PPOR or max 1 IP etc...

Diff market diff appeal.

over 90% of my client base are investors, so this topic hardly comes up and when it does it's a personal choice - Rate VS property investing opportunities.
 
My unsophisticated investor friends would quote the latest hot interest rate offer from a DIY online lender like ubank or homloans.com. Here I would proceed to rattle off a few things like re-financing options, serviceability model etc... but since I am no broker I could never articulate my argument and probably don't come across very convincing..

I appreciate that it's difficult to articulate, it's difficult for me too. It does beg the question, why do you use a broker?
 
If ones investment journey is well spaced, I cannot see a problem with online cheapies. Just refinance to a suitable lender whenever you are ready with IP1/2/3. The admin costs will probably need to be lesser than the savings one made off an online cheapie. Atm, I am not experienced with this, but doesn't look too bad to me. What could go wrong with this approach ?
 
Agree with this, there's little to be gained and it could be taken the wrong way as boasting when lots of people are struggling to get by week to week

Also agree.

Another reason is perceived wealth. I stopped talking about my portfolio after I was invited to lunch by someone and at the end they said to me "you've got lots of houses, you're rich so you can pay". Uh, I don't think so...

I only discuss property now (outside of biz) if someone asks me and even then I'm sometimes vague. If I learn that the other person and I share a common mindset then I will open up a bit more.
 
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