How much can you earn running a Mortgage Broking business?

The earning potential in Mortgage Broking is genuinely massive! But that’s the sizzle, what’s the steak really like?


How much can you earn running a Mortgage Broking business?

The earning potential in Mortgage Broking is genuinely massive! But that’s the sizzle, what’s the steak really like?

Well to give you a proper taste, let’s start by overviewing business establishment costs. These figures and requirements are reasonable estimates if you were joining Loans Only as an independent sub-broker:

*There are variations in these costings depending on the service provider you chose. Most brokers start off operating as sole traders. When their business grows, they restructure into a company. No right or wrong with this one, just personal preference.

Once you have fulfilled these mandatory requirements to become a Credit Representative you will pay monthly aggregation fees. Loans Only operate under Finsure Finance & Insurance aggregation. Finsure provides compliance and software (among other things), and the cost is $357 per month inclusive of GST.

In your first year you should budget for:

Realistically, you will get change out of $10,000. This would also include obtaining the tools of the trade i.e. phone and computer. Everything else would be in addition, like marketing costs. And the sky becomes the limit.

Loans Only do not charge any fixed fees, even for mentoring. Everything is based on a split of upfront and trailing commissions. This split is 80/ 20 (in your favour) during your mentoring period. However, it is ‘capped’ at $15m in annual paid settlements. Meaning once you settle $15m in loans, in a year, the commission reverts to 100%. For example, if you settle $25m in loans, the first $15m is paid at 80% and the next $10m would be paid at 100%. This is on the upfront and trail commission.

This structure is in place during mentoring for the first two years. Thereafter, it reverts to a 90/10 split and the $15m annual cap remains reverting to 100%.

Now down to the nitty-gritty…

  • How much commission do you receive for a home loan?

The average upfront commission paid by the lender is 0.65% of the loan amount. By way of example, the settled loan amount is $500,000 X 0.65% = $3,250. The industry average trail commission is 0.15%. Therefore, assuming the loan balance does not change trail paid in the year would be $500,000 X 0.15% equating to $750 per annum. Or just over $60 per month. Your trail is annual recurring revenue and the real value in the business. 

  • How do you receive the payment and what are the terms?

Expect payment 30 to 60 days post-settlement. Usually, whatever you settle in a month will be paid at the end of the following month. For example, you settle a loan on the 15th of March which would mean commissions would be paid at the end of April. Trail payments are processed each month as well.

There are a couple of Ts & Cs of noteworthy mention relating to broker commissions. These being:

  1. Clawback – lenders apply a condition focused on the time a loan is held on their book. If the loan leaves the book within 18 months (up to 24 months in some cases) the lender will apply ‘clawback’ on the commission that has been paid to you as a broker. Generally, this is tiered in that, a 100% clawback would apply for < 12 months and a 50% clawback would apply for < 18 months in duration. Every lender has a different way of applying this, however, these stated figures are generally the norm.
  2. Net of offset and/ or redraw – any funds held in a client’s account offset and/ or redraw will be deducted. For example, you settle the $500,000 loan and shortly after settlement, the clients place $25,000 in offset. In this instance, upfront and trail commission would be paid $475,000. Again, all lenders will treat this differently as to when they calculate commissions based on the loan balance.
  • How long does the revenue generation process take?

I always outline to any new prospective Mortgage Broker to expect revenue generation to be slow. It is a pipeline business, and it takes time to prospect, build/ nurture relationships and the lending application process can also be slow.

The best suggestion is to pick up initial wins through vehicle and personal finance. This helps with initial cash flow and the turnover is quick.

If you intend to focus on residential lending and you are starting from scratch don’t expect a lot of income in your first four to six months. Having mentored/ coached lots of brokers most will have at least a couple of decent settlement months in their first year. It takes about 18 months to start achieving consistency. At the two-year mark, you should know enough to be dangerous, have matured initial business systems, established networks, and have a growing business. The next milestone for headaches starts around your third year. At this point, you have new business rolling in plus maintenance work for your existing clients. Things start getting very busy (which is a problem you want!) and most brokers will seek outside administrative assistance.

  • What is required to achieve success?

To get started you need to establish and execute your own marketing strategy. Developing your own method for generating leads is important for two reasons. Firstly, talking to people and gaining exposure to scenarios builds your technical knowledge. The faster you gain this knowledge, via training and practical day-to-day application, the better your conversion will be.

Secondly, revenue generation starts by having a conversation. So, if you are determined to achieve success you must put yourself out there. Be bold. Be brave. Get out there and ask for the business.

You need to allow for time. Building a Mortgage Broking business is a lot like a rocket ship taking off. It’s slow, heavy, and takes a tremendous amount of energy to lift off. However, once you get going your momentum propels you faster and ever higher.

A good mentor to show you the ropes also makes a world of difference.

Each person’s journey into the industry is different. At Loans Only, we support brokers nationally and have a work-from-anywhere approach. All our systems are cloud-based. And you can access all the support you need to shape your ideal outcome.

If you would like to have time to thrash out an initial plan and revenue generation model, before you make the leap, please click HERE to book a suitable time. Happy to take time out to see if and how Loans Only could help.

#mentoring #brokers in their #bestbusinessinterests