Mortgage Brokers and Retainers

[Joma]

I have never used a Mortgage broker and am new to property investing.

How common is it for Mortgage Brokers to request a retainer? A retainer is a sum of money that is paid in advanced and is refunded on completion of finance and payment of brokers commission from the lender.

The only reasons I can see for demanding a retainer is that:
1.It limits shopping around. You are making a financial commitment to that broker.
2.They have a history of not going through with the “sale” so it limits their loss if the customer is not happy with their service.

I find this retainer demand unusual as many businesses invest in building the relationship and work hard for the sale.

Is it more important to shop around for a compatible mortgage broker than finding one who offers the best deal?

Is it common to compare brokers like you would with banks?

Your feedback on retainers and mortgage brokers would be helpful.

Jeremy

[BusyLizzy]

Hi Joma,

Firstly, welcome to the forum!

I have never heard of a broker asking for a retainer!

I am sure some of the more experienced forumites will pass on their comments, but I would suggest you forget about this broker, and look for a more reasonable one.

Your question reminded me of a similar thread not so long ago where I thought this question had been asked before. Turns out, it was a different question, but you may find the thread of interest anyhow.

http://www.propertytalk.com/forum/showthread.php?t=6109

Good luck!

[ActionMan]

Hi Jeremy

I've used a few brokers and none of them have asked for such a payment.

Look around - one broker I contacted once only dealt with Sovereign - so I ditched her. There are some odd ones around. I've heard of Mortgage People but never personally used them

[krispedersen]

Hi Joma,

I work for a non-bank and deal with a couple of hundred brokers around the country and i've never heard of a retainer before. You'd want your broker to be an investor themself as they can then see things from you side of the fence and also teach you a few things a long the way. If you're after a good one, give Daniel Feller from Financial Pictures a call.

Cheers

[whitt]

NZ have not heard of it.

Retainer/ broker payment on drawdown does Occur occasionally in Australia.I know of Kiwis who have been caught out. Move to OZ buy a house they are used to it not existing in NZ and get convinced it is normal.

Also as mentioned if you are planning to purchase investment property find a broker who is an expert in this field ( Hint: Search these forums )

[wildwest]

Depends on your definition of a retainer. I am aware of brokers who charge an upfront fee as well as receive commission on the deal. These brokers believe they are offering financial advice, over and above the deal itself, and chose to apply a fee as well.

There is a wide range of variance in the type of advice and experience a broker can offer, some chose to be almost transactional about the deal, and some believe they are now the new financial relationship manager for the customer.

A fee may be appropriate if the service offered is over and above the "usual" experience the average mortgage broker offers.

[Laurie]

Retainer Nonsense

Certainly dump this company... unless they can prove some extraordinary added value. Mortgages by Design in Auckland are certainly tops in my book.. you get a no nonsense approach that gets results fast( 09 9147555 http://www.mortgagesbydesign.co.nz/ ). Of course you could take the direct approach and talk with the nice people at NZ Finance ((09) 379 9090 www.nzf.co.nz).. they have the full range of products including low doc and have been great for me.

cheers.... Laurie

[Monkeyboy]

Hi Joma

I am a mortgage broker and do not charge a retainer or any upfront payment. I also do not no of any other broker's that charge an upfront fee and in fact there is generally no charge at all. There can be a charge from some non bank lenders, who don't pay a fee to the broker so the broker charges the client and then it gets capitalised into the loan. These lenders are my lenders of last resort. However you should be told exactly how the broker is being paid, especially if you are paying it. There is also a charge if you are looking at commercial finance as this is a specialised field, requires a lot of work and the banks don't pay a commission for that. Property investing doesn't usually fit into the commercial basket, unless it's a commercial building. And as for the above it is most important to find a broker that invests in property so that you can get the best advice for your needs.

[wildwest]

I agree, there should be justification for charging the fee, and as there are many brokers who do not charge, it would be advisable to talk to other brokers

[kieran]

If You Think An Experts Expensive... Just wait until you hire an amatuer!

I probably have a different view than most on this topic. It's true I am still a mortgage broker (I don't write any mortgages personally these days but still own a mortgage broking company - Hybrid Mortgages).

Back in the early days of the mortgage broking industry (early 1990's) most brokers charged fees and today most still do for Commercial loans. Some also do for specialised, complex, difficult, or non-complying loan requests.

I think a paradigm shift may be appropriate here.

There is an issue of quality to be considered here, of service and of the end result. If you think cheap is best then go for cheap... But if you always had that mentality then you would always do all of your shopping at the Warehouse! So why don't you?

Surely the 1st question should be "what could the broker achieve for me?", not "what will this cost me?"
Some brokers dont even know what LAQC stands for...
Would you want one of them arranging your next $300,000 mortgage for free or pay an expert $500?
As property investors you should be seeking out expert mortgage brokers who understand property investment inside and out, not focusing on the cheapest option.

Some brokers charge a refundable retainer. This is refunded when the broker receives their commission.

It may help if you understood whats involved for a broker to 'get your mortgage'.
Heres a brief overview of some of what they need to do:

Spend years upskilling themselves on the finance industry and financial products.
Spend time with you 'selling' themselves to you and discussing your needs.
Review your existing mortgage structures/terms etc to help you minimise your lending risk.
Recommend appropriate solutions and structure for your mortgage/s and decide on appropriate lenders.
Write up the application so that it is presented in an appropriate manner to the lender.
Collate all of the supporting documentation.
Send to lender/s.
Follow up lenders for quick response (some lenders can take days to give feedback!)

You should also be dealing with NZMBA accredited mortgage brokers ONLY. NZMBA is the governing industry body but it's not compulsory to belong.

NZMBA members must:
A) Maintain a PI cover policy at a cost of @$2k p.a
B) Attend ongoing training and upskilling courses on a regular basis.
C) Adhere to the ethics and guidelines of the NZMBA

The overall cost per NZMBA broker is somewhere around $10,000 per annum just to maintian their membership status!

If you also want them to spend their precious time working for you then you should respect their time is actually worth something.

Good brokers wont waste their time on tyre-kickers or shoppers. You may get lucky enough for them to employ their very specialised skills initially for a few hours without any payment but once you have 'shopped them' and get your mortgage elsewhere, the broker will quickly tire of your efforts to secure their skills without any cash flow for their efforts!

Don't be so busy trying to save the cents, that you miss out on the dollars...

Your broker should also be reviewing your entire portfolio and mortgage structures, terms, rates etc,etc every time they arrange a mortgage for you.

Of course not every broker can command a retainer but I believe there is a case for some to.

[wildwest]

Thanks Kieran.

This has clarified the point I was trying to make. There are "brokers" who in fact are really working more in the financial advice space, and as such can justify charging a fee for their advice and service.

[Joma]

Money for nothing extra

Thank you for your feedback.

For a person who has no experience with brokers what services are standard and what would you pay extra for?

If a “retainer” is actually an “addition service fee” what should I expect more for that fee?

The Mortgage Broker that has demanded a retainer says they are specialist in Property Investment market and they have given me a list of their services. I’m happy to pay for something that is extraordinary but I do not want to pay for something that is standard to another Specialist Property Investment Mortgage Broker.

Any more thoughts on comparing Mortgage brokers and finding the correct fit. Any standard questions I should ask before working with a broker? I.e. do they deal with Property Investors? Do you know what a LAQC is?