Latest / That Home Loan Hub / How do mortgage broker commissions work in New Zealand?

Transcript

How do mortgage broker commissions work in New Zealand? · That Home Loan Hub

• 0:10
  SPEAKER_01: If you were wondering how do mortgage brokers get paid, stay tuned.
• 0:14
  SPEAKER_01: This is the episode for you.
• 0:15
  SPEAKER_01: Hello, James.
• 0:16
  SPEAKER_01: Hello.
• 0:17
  SPEAKER_01: So we had a frequently asked question.
• 0:20
  SPEAKER_01: Often people come to us and they go, but how do you get paid?
• 0:23
  SPEAKER_01: How much do we need to pay you?
• 0:25
  SPEAKER_01: What do we say to that?
• 0:26
  SPEAKER_00: Well, this is my favorite part of the part of the whole thing.
• 0:29
  SPEAKER_00: Well, unusually we don't get paid, you know, you don't we don't get paid until if if we're working with a first home buyer, for example, we don't actually get paid until you've received, you draw down that that mortgage from the bank.
• 0:42
  SPEAKER_00: So that could be two or three months away.
• 0:44
  SPEAKER_00: So we can be, we're working with you right throughout that process.
• 0:48
  SPEAKER_00: But yes, we don't, we will not charge you anything.
• 0:52
  SPEAKER_01: So in simple terms, when people come to use our services, we engage them as their advisor and they engage us as their mortgage advisor, client relationship, and we don't charge them a fee, usually, until they get a home loan, and the home loan settles.
• 1:12
  SPEAKER_01: This is the interesting part because this is our point of difference.
• 1:16
  SPEAKER_01: There are mortgage advisors that actually do charge fees, they might charge hourly fees, they might charge consultancy fees that might get refunded upon settlement.
• 1:26
  SPEAKER_01: But also sometimes people decide not to proceed for various reasons, right?
• 1:29
  SPEAKER_01: Sometimes relationships break up and people don't want to buy a house together anymore.
• 1:33
  SPEAKER_01: Sometimes they just decided to get cold feet and not buy the house in that particular market space.
• 1:39
  SPEAKER_01: But the mortgage advisors might still charge them a fee for the time that they've spent doing the application.
• 1:44
  SPEAKER_01: When it comes to us, if any of those scenarios do happen, we do not charge a fee.
• 1:50
  SPEAKER_01: We just hope that we were awesome enough for those clients to go, hey, my mate John might need a mortgage advisor.
• 1:57
  SPEAKER_01: I've recommended you.
• 1:58
  SPEAKER_01: Yeah.
• 1:59
  SPEAKER_01: And then eventually we might get paid a fee.
• 2:01
  SPEAKER_00: Yeah, it's a very it's so I think it's great.
• 2:03
  SPEAKER_00: It's good for developing relationships, right, with the clients.
• 2:06
  SPEAKER_00: So we're very motivated to see the thing right through.
• 2:09
  SPEAKER_00: And even once it's settled, we still need to maintain that relationship.
• 2:14
  SPEAKER_00: Because what happens if we we get a deal across the line for a client and it gets settled, and then in a year's time, that client decides to go to a different bank with a different broker.
• 2:25
  SPEAKER_01: We actually lose that commission.
• 2:27
  SPEAKER_01: So I don't think a lot of clients realize that we get our commission clawed back as well.
• 2:33
  SPEAKER_01: Just like the banks claw back your cash back, we actually get our commission clawed back as well.
• 2:40
  SPEAKER_01: So it's three years, yep, and it's proportionate to the year, how long you've been with them.
• 2:45
  SPEAKER_01: So if you pay off your loan within six months, we actually lose the whole commission.
• 2:49
  SPEAKER_00: People are really surprised when I tell them that.
• 2:51
  SPEAKER_00: They're horrified because we do it, you know, we do a lot of work.
• 2:55
  SPEAKER_00: For free.
• 2:56
  SPEAKER_00: Pretty much, yeah.
• 2:58
  SPEAKER_00: And so it's once clients sort of know, firstly, that we don't charge them anything until until settlement.
• 3:05
  SPEAKER_00: And then secondly, that we can we can well, sorry, the bank pays us upon settlement, not the client.
• 3:11
  SPEAKER_00: And then secondly, we can lose that commission if if the client goes to somebody else.
• 3:17
  SPEAKER_01: Yeah, yeah, exactly.
• 3:19
  SPEAKER_01: So um the only times we do charge a fee if it's let's say it's a developer and they want to quickly buy a house, renovate, and sell.
• 3:29
  SPEAKER_01: And I can hear my dog in the background.
• 3:31
  SPEAKER_00: So can I?
• 3:33
  SPEAKER_01: If it's a developer, they want to buy a house, quickly renovate and sell.
• 3:36
  SPEAKER_01: We usually charge a fee because in that scenario we know 100% that the client will repay the loan within three years.
• 3:42
  SPEAKER_01: Normally it's within six months.
• 3:44
  SPEAKER_01: And this is where we go up front and we go, hey, we have to charge you a fee because otherwise it's not fair.
• 3:49
  SPEAKER_01: And to be honest, most of the time, those guys are okay to pay that fee because it's part of that cost to buy and flip and renovate.
• 3:58
  SPEAKER_01: The other times we might charge a fee if it's a deal where we don't get paid commission.
• 4:03
  SPEAKER_00: Yep.
• 4:03
  SPEAKER_01: So like a second tier lender and they don't pay commission, so we have to charge a client a fee.
• 4:08
  SPEAKER_01: But again, it's one of those situations where if no one can help you and we found your solution, surely you would want us to get paid for the amount of hours we've put into this.
• 4:19
  SPEAKER_00: Exactly.
• 4:19
  SPEAKER_00: And that just can I mean that can be added to the it's not ideal, but that can it often needs to be added to the loan when they draw down the loan.
• 4:26
  SPEAKER_00: Yeah.
• 4:26
  SPEAKER_00: That that broker commission.
• 4:28
  SPEAKER_00: Yeah.
• 4:28
  SPEAKER_00: The other one that I've had a few of as well is construction people that are building a new house.
• 4:34
  SPEAKER_00: And so, you know, you you you you do all the work to get them to the new loan, get the lending, but that loan's gonna be paid back as soon as they sell their existing house.
• 4:45
  SPEAKER_00: So you've only you know, they've only gonna have a loan for six to nine months.
• 4:49
  SPEAKER_00: Yeah.
• 4:50
  SPEAKER_00: So there's you've just got a plan for that kind of thing.
• 4:53
  SPEAKER_00: I know we haven't been charging people for that.
• 4:55
  SPEAKER_01: Yeah.
• 4:56
  SPEAKER_00: Um, but yeah, there's quite a bit of work that goes into those construction loans.
• 5:00
  SPEAKER_01: Oh, it's like triple triple amount of work that goes into construction loans.
• 5:04
  SPEAKER_01: Absolutely.
• 5:05
  SPEAKER_01: But you're right, like we usually don't charge fees for that.
• 5:08
  SPEAKER_01: And again, through the years of me being a mortgage advisor, it's always been my motto of hey, if they liked me enough, all this free work, eventually it will bounce back.
• 5:17
  SPEAKER_01: I know it's not a really good business plan.
• 5:19
  SPEAKER_00: I think this is a good this is what I'm doing, pretty much.
• 5:22
  SPEAKER_00: It's because in in and everybody I talk to that's been successful, right?
• 5:26
  SPEAKER_00: You don't you're not gonna start off where you want to be.
• 5:29
  SPEAKER_00: It's gonna, it's a long-term, medium to long-term game, you know, and you want to build really good relationships.
• 5:35
  SPEAKER_00: And you know, these people that we're helping in these construction lines, they're all, you know, pretty got really good networks, and they are very supportive.
• 5:43
  SPEAKER_00: They've got kids, they've got parents, and we we support, we've got services that we can do for all those different markets.
• 5:52
  SPEAKER_01: Yeah, exactly.
• 5:53
  SPEAKER_01: The other one I usually get asked as well is um in terms of the fees that we've just uh spoken about, is is there a you know a certain bank we'll go with versus another bank if we get paid more here or there?
• 6:09
  SPEAKER_01: Yeah.
• 6:09
  SPEAKER_01: So how do we determine the bank for the clients?
• 6:11
  SPEAKER_01: Is it because where we get paid the most?
• 6:13
  SPEAKER_00: Yeah, well, I I guess I haven't really ever thought of about it like that.
• 6:18
  SPEAKER_01: Never.
• 6:19
  SPEAKER_01: Neither.
• 6:20
  SPEAKER_01: Like that's what I mean.
• 6:20
  SPEAKER_01: Like for us, it's never about where we get paid most.
• 6:23
  SPEAKER_01: Because every bank does it for the client.
• 6:25
  SPEAKER_01: Exactly.
• 6:26
  SPEAKER_01: We are driven by what's best for the client.
• 6:28
  SPEAKER_01: But yes, there are banks that pay different commission levels across different banks.
• 6:33
  SPEAKER_01: You know, some we get more, some we get less.
• 6:35
  SPEAKER_01: But for us, it's never been about where we get paid the most.
• 6:39
  SPEAKER_01: Yeah, it's about where the client gets the most outcome.
• 6:42
  SPEAKER_00: And we've got to maintain the relationships with all the lenders because sometimes, you know, the lender that might have the best commission won't provide the the loan product for that client.
• 6:54
  SPEAKER_00: So it's quite interesting.
• 6:56
  SPEAKER_00: I often don't think about the the commission until I actually get paid, and then I go back and work it out.
• 7:01
  SPEAKER_00: Oh, okay.
• 7:03
  SPEAKER_00: It takes a little bit of time because they are all different.
• 7:06
  SPEAKER_01: Yeah, but it's a good way to look at it, right?
• 7:08
  SPEAKER_01: I always say to my clients, I never look at you as a dollar sign.
• 7:10
  SPEAKER_01: And I think clients can feel that.
• 7:12
  SPEAKER_01: They can feel when you're treating them as a dollar sign of hey, I'll get paid through you, you know, it's more about hey, you're a person in front of me, you've got a problem.
• 7:19
  SPEAKER_01: How do we solve your problem?
• 7:21
  SPEAKER_00: Yeah, exactly.
• 7:22
  SPEAKER_00: And I I quite like the way that we go about it, which is quality, you know, doing a quality, a quality relationship rather than the, you know, uh rush, rush, rush type thing.
• 7:31
  SPEAKER_01: So yeah, beautiful.
• 7:32
  SPEAKER_01: Awesome, James.
• 7:33
  SPEAKER_01: Thank you so much for this.
• 7:34
  SPEAKER_01: And for those that have questions that are brewing in your head, but you were too scared to ask, don't feel scared.
• 7:41
  SPEAKER_01: Do reach out and would love to answer your questions for you.
• 7:43
  SPEAKER_01: Thank you and goodbye.
• 7:44
  SPEAKER_01: Bye.