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How Do Brokers Work?

How do brokers work?

Mortgage brokers in Australia are professionals who act as intermediaries between borrowers (homebuyers/property owners) and lenders (banks and financial institutions) to help individuals secure home loans or mortgages.

The primary role of a broker is to assist clients in finding the most suitable mortgage product that meets their financial needs and objectives.

A brief description on the process for obtaining a loan through Smyth Loan Co:

1

Initial Consultation:

Upon contacting Smyth Loan Co, Jason and his team will conduct an initial consultation to understand your financial situation, borrowing needs, preferences, & objectives.

2

Research & Comparison:

After gathering the necessary information from you including basic personal details, employment history, assets, liabilities & living expenses, the Smyth Loan Co Team will research and compare mortgage products from various lenders in our panel or network. 
We have access to a wide range of lenders, including major banks, credit unions, and non-bank lenders such as mortgage funds.

3

Recommendations:

With our user-friendly online platform, you can access our services anytime, anywhere. No need to schedule in-person meetings or visit multiple banks; everything can be done from the comfort of your home.

 

4

Application Submission:

Once you have decided on a particular loan or mortgage product, we will complete the application and compile the necessary documentation for lodgement. 
There can be quite a few items a bank asks for on this step.

5

Liaising with Lenders:

Smyth Loan Co will then submit your application to the lender of your choosing, liaising an as intermediary between yourself and the lender during the assessment process.
There may be several phone calls or emails during this process. We are generally pretty thorough and in some cases don’t have any issues raised by a bank at all from submission to approval.

6

Approval & Settlement:

As soon the lender approves your application, Jason & his team will notify you immediately. We will then assist in finalising the signing of loan documentation and any requirements such as insurance, guiding you through the settlement process and funding of your loan.

Remuneration of Mortgage Brokers in Australia:

Mortgage brokers in Australia typically receive remuneration in the form of commissions paid by banks or lenders for the writing of a loan, after settlement.

These commission payments are not paid directly by you as a borrower to a broker, but are paid by the bank as a referral of your business. 
Banks generally have large margins, or make lots of money on any given loan (i.e. the difference in what it costs them to provide the money, & the rate they charge you to repay it), which is where these commission payments are generally paid from.

There are two main sources of commission generally paid:

1. Upfront Commission: When a mortgage broker successfully settles a home loan for a borrower, the lender pays them an upfront commission. This commission is usually a percentage of the loan amount. The percentage can vary depending on the lender and the specific mortgage product, with payments made by a bank 2 x months proceeding settlement.
These commissions are fully repayable by a broker-to-a-bank should the loan be repaid within a certain timeframe – In most cases it is within 2 years from settlement. Keep this in mind and contact us if thinking about making any changes to your loan within the first 1-2 years.

2. Trail Commission: In addition to the upfront commission, mortgage brokers may also receive a trail commission, which is an ongoing payment. The trail commission is calculated based on the outstanding loan balance and is paid to the broker for the duration of the loan.

Remember to always speak with us beforehand should you be looking to do anything that may affect your loan.

 

What will it cost me if I do a loan through Smyth Loan Co?

It all depends on what you need us to do and how much work is involved.

Our initial consultations are free however we normally do have a $300+ GST Administration Fee should we proceed with an application to a lender. This fee covers the time and cost for us to prepare your loan application with the bank and submit. Every application is different and normally takes us up to a day to prepare from when we hold all of your information. Lending requirements and compliance obligations since the banking royal commission and best interest duties are substantial.

We try to provide banks with as much relevant information as possible from the get go, in return for a quick decision and approval.
We hate wasting time on unnecessary phone calls or emails.
As per the picture – we ‘get s#~t done.’

For complex borrowing situations i.e. self-employed, trusts, multiple investment properties or income streams, SMSF, or Government Schemes we may apply a higher upfront charge and/or brokerage due to the added requirements in vetting the situation and subsequent time required to process this information as thoroughly as possible for a quick response from a lender.

We will always disclose any fees prior to undertaking work on your behalf & disclose in a written credit quote.

One last thing:

It’s important to note that the Australian Securities and Investments Commission (ASIC) regulates mortgage brokers to ensure that they act in the best interests of their clients and provide appropriate advice.

Since the remuneration structure involves commission-based earnings, there have been discussions about potential conflicts of interest. As a result, regulations have been introduced to promote transparency and ensure brokers prioritise the client’s interests when recommending mortgage products.

Smyth Loan Co most certainly agrees with these rules & will always put your interests above everything else.

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Ready to discover the keys to increasing your borrowing capacity? We’re sharing our best tips to help you improve your borrowing power! 🔑📈

Tip 2: Income — Higher income translates to a higher borrowing capacity.

If you’re able to, explore opportunities to increase your earnings: take on extra work, negotiate a raise, or tap into alternative income streams.

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