Becoming a mortgage broker can come with many benefits. For starters, you do not need a degree to become a broker, which can save you a lot of money in tuition fees. Once you are underway in the industry, there is also plenty of room to progress. While the amount of money you can make as a mortgage broker will vary, the potential to earn high wages is there. Here are a few things you should know before entering the industry.
Mortgage brokers make money in various different ways. In some instances, brokers are paid a salary when working for lenders and are offered a variable bonus structure. Other brokers are paid by finance and mortgage broking practices, or licensees, solely for commissions on the transactions they have settled. In the latter case, mortgage brokers could also get a trail, which is a commission throughout the lifetime of a loan.
Another way brokers get paid is to help a single client multiple times throughout a lifetime. For instance: when the loan-to-value ratio, or LVR, has changed, mortgage brokers could help clients secure a more favourable mortgage deal after a couple years. By contrast, administrators who work on files for clients, as well as other employees in the mortgage industry, are typically paid a flat salary.
It is important to note that mortgage brokers in Australia are paid by lenders on a commission basis—and not by the customer. This is for introducing clients to home loans. That form of payment is known as an up-front commission. A trail commission is when a broker is paid throughout the duration of the loan. It could also be thought of as a deferred payment. Since the trail commission is based on the loan’s overall balance, you will get a commission each month that your client has the loan.
The earning potential for mortgage brokers can be summed up like this: the sky is the limit. But there can be down times. For example, when you are receiving solid leads, you will also receive a lot of repeat and referral business. On the other hand, the amount you’re able to earn could ebb and flow since you may not always have good months. This is simply the nature of sales and the nature of the business. Market conditions as well as the time of year could impact your ability to get a steady stream of strong leads. And you should know that repeat and referral business will likely take a year in the business to start picking up steam.
The variables you can control, however, include your level of customer service, which directly impacts the trail income you can get. If customers are unhappy with your customer service, you could very well end up losing that trail income after they leave. A good approach could be to cross-sell other products like car loans, financial planning, insurance, and conveyancing. In that case, customers are likely to stick around, and your trail income will last for a longer term.
The short answer is, yes, in some cases. Some brokerages offer mortgage brokers a decent base salary to provide them with stability—and a safety net. If you are looking for employment as a mortgage broker, it is a good idea to negotiate a base salary with a brokerage prior to getting hired, since base salaries are not always offered. And the range of base salaries within mortgage broking also vary widely, from as little as $45,000 to as high as $130,000. Base salaries on the higher end, as a general rule, have higher targets and do not have a trail income. In this case, if you fail to reach your targets, you will not earn essential up-front commissions and may even lose your job. Lower base salaries, by contrast, have lower targets and higher trailing commissions.
The base salary you earn will depend on the brokerage and how the remuneration fits into their business model. But remember: you can always negotiate the terms with any brokerage prior to taking the job, especially if you are experienced and have specialist skills.
Some brokers do not earn a commission from the lender but simply charge a fee for their services. In this case, all upfront commissions are repaid to you and trail commissions are repaid every month in the form of cash back payments or mortgage rebates. While this arrangement seems like the best-case scenario, the truth is this business model is not often financially viable; the costs of processing and compliance are so high that it can strain already slim profit margins.
