Mortgage Broking as a Business

Mortgage broking is potentially very lucrative for those that are prepared to put in the hard work. In New Zealand mortgage brokers are generally paid a commission by the banks once the mortgage is paid out to the client, and this commission averages around 0.65%.

Sabrina Perkins, mortgage broker

Sabrina Perkins really enjoys her career as a mortgage broker

The New Zealand average house price has risen inexorably over the past two decades, and in the largest city is now around 1 million dollars. Any purchaser of a 1 million dollar home will need a minimum of $200,000 deposit, and the $800,000 mortgage will be worth $5,200 to the mortgage broker. Many clients meet the bank’s criteria and are basically “slam dunks” for any mortgage brokers Hawke’s Bay, and the man-hour effort required by the broker maybe as little as 1 to 2 hours. This is indeed an enormous payday for a small amount of work.

In reality only an independent broker will get this full commission, but for most of the time these brokers are looking for and chasing up new business. Winning an $800,000 mortgage is great, but it may have required 1-2 week’s work to find that one good lead. In contrast the brokers working in large firms will be paying a high proportion of their commission to the broking firm, but the consolation for them is that they will be getting a lot more leads and work. The nature of their business is that they are more about processing work rather than chasing up for new work, and hardworking brokers in these situations can make a very large income with $300,000 pa not being unusual.

There are definite down sides for mortgage brokers working in large firms, as the work may be repetitive and feel a lot like a treadmill, and they will be constantly aware that the firm’s owners are making the real money. However on the plus side the firm has taken the huge risk to develop their winning marketing strategy, which in 2017 is basically making certain that they ranked number 1 or number 2 in any of the major Google searches for mortgage brokers Hastings. The process of gaining a high-ranking can take months or years and cost tens of thousands, and can take a great leap of faith in the early days that the major investment in the website and SEO is worth it. The owners of course who have taken this upfront risk are fully entitled to claim an outsize share of the rewards.

For every large mortgage broking firm that is ranked number one or two in Google searches there are probably 10 to 20 similar firms who have invested around the same amount of money but do not rank. This will generally be because of their lesser SEO capability, and the tragedy is that this investment is largely wasted.

The large firms that are high ranking Google search will win the total lion’s share of all new business over the Internet, and there is nothing that the remaining firms can do about it, unless they can gain access to expert SEO capability.

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Mortgage Brokers and Housing Bubbles

Mortgage brokers play a vital role in the housing economy in New Zealand, by providing an expert bridge between customers and banks and other lenders. Brokers handle about 40% of all the mortgages written in New Zealand, and most of the business they generate comes from customers who otherwise would have difficulty gaining a mortgage or at least getting a good deal.

Anna Thatcher, mortgage broker

Anna Thatcher, mortgage broker

The demand for mortgage brokers Lower Hutt rises and falls with the demand for houses, but they find a lot of new business when the housing market is booming. During normal times the housing market is driven simply by the demand from first time buyers wanting to own their first home. They are buying off existing householders who are wanting to upgrade or change their house.

In a housing boom property investors become very active, because they see that there is good money to be made if they can buy a property and hold onto it for even a short time. During the housing boom prices are rising, sometimes dramatically, and so this reflects back to the first home buyers who steadily find it more and more difficult to buy their first house. Well other factors are involved it is the property investors who are changing their behaviour, and the mortgage broking sector is vitally important. Property investors are heavy users of mortgage brokers for a number of reasons, including convenience and the focus on a good deal. However for a lot of investors it takes a good mortgage broker to actually organise a good mortgage for them, because otherwise it will be too complex and difficult.

The mortgage brokers flock to the property investment market because it is easy money if they can win business as property investment business generally results in a lot of repeat business and referrals. What tends to happen is they get very creative for their clients, and enable their clients to purchase more properties at a higher price than otherwise would be possible. This is great for the mortgage broker, who is paid by commission based on the size of the loan, but it is not necessarily good for many property investors who find that the mortgage broker has exaggerated their ability to make the loan payments.

For all that a lot of new investors get into the market during property bubbles, and for many of them their loans are based on exaggerated claims by the mortgage broker. The net effect is that property prices rise even further, and the housing bubble carries on. If mortgage brokers Upper Hutt were to stop operating then the current housing bubble would be stopped in its tracks, but of course this will never happen.

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Mortgage Broking Opportunities in New Zealand

The residential mortgage broking industry in NZ is largely divided up into two segments, a small group of large franchises and a large group of small independent operators.

Large franchises have without exception invested heavily in the marketing of their operation, including Print Media, television, radio and online marketing, with the sole aim to generate as much new business as possible. These companies rely to a large extent on new business from residential customers and on repeat business from investors, and unfortunately the new residential customers will not necessarily be treated that well because franchises understand that there was always new business coming in through the door if they have run their marketing campaign effectively.

Lizzy Tan, independent mortgage broker

In 2017 the single most effective way to generate new business has to be ranking #1 in Google search results for the main mortgage broking keywords. While this will require a very significant initial and ongoing investment in the franchise website and in the SEO necessary to gain the ranking, the return on investment can be enormous. In general for all Google searches around 33% of all Internet traffic goes to search result #1, around 18% to #2 and around 12% to #3. Any other mortgage broking website on page 2 and beyond will be sharing about 1% of the total traffic with all the remaining mortgage brokers Southland.

The decision by any new franchise to spend the money to get themselves ranked highly is a brave decision, because SEO is not an exact science and it is always very expensive. The marketplace is probably littered with many pretenders who have spent a lot of money but haven’t quite made it.

This does however present a unique opportunity or companies with specialist SEO skills to rank their own website within the top 3, and then to direct any traffic from their website to client mortgage brokers Otago who are otherwise not seeing any traffic at all from Internet. The challenge for such a company will be to deliver the leads as efficiently and as quickly as possible and to get paid for them in as simple a way as possible, but modern technology and modern applications mean that this can easily be done using online services and smartphones.

The end result is that such a company can pluck leads from under the noses of the highly ranking large franchises, and pass these on to independent mortgage brokers at a fairly healthy price. The value of these leads is very high for the mortgage broker given that the amount of time they need to process the mortgage is small.

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Drainlayers and Plumbers

Drainlayers and plumbers often need to work together on new building sites, to make sure that all of the waste and outlet fittings match up to the drains. Often plumbers find themselves doing their own drainlaying, because their preferred drainlayer is hard to come by and is often busy. This is one of the more unpleasant sides of the plumbing business, as it can often mean a lot of hard work digging a trench and even digging up an existing sewer.

Plumbers and drainlayers Dunedin who have to dig up existing sewer lines can make themselves feel a lot better about their work by reminding themselves that they are public Health Specialists. They are really the only barrier in the average home to the spread of terrible sewer born diseases.

Plumbers often find themselves working in dirty situations, and this can be under a kitchen sink or in the bathroom removing the toilet and unblocking it. Generally at the end of every day the average plumber needs to discard their work clothes into the washing machine and they need to have a good clean shower.

Similarly the drainlayer is generally going to end each day a lot dirtier than they started, and they will also need to wash their work clothes and have a good cleansing shower. For all plumbers and drainlayers the big problem can be that they need to do their paperwork once they get home, and after a long tiring day and the need for a good shower and then dinner this can be a very unattractive proposition. Nowadays the modern plumber and drainlayer will have an app on their mobile that will allow them to track all their travel and the jobs they work on, to work out the number of hours they have been on a job and then to email out the invoice to the client immediately the job is finished. Plumbers have been known to take a call while under the sink and finish the call by sending a full quote to the caller, and then sit in the van after finishing the job and send the invoice to the homeowner. This means that they have no paperwork to do when they get home, and for most plumbers and drainlayers this can be life changing.

One big advantage for plumbers and drainlayers is that any repair work they do is generally an emergency for the householder, and so the householder is only too happy to get the work done in as short a time as possible, and are prepared to pay exorbitant rates for this privilege. Plumbers and drainlayers sleep happily in the knowledge that virtually no household is a brave enough to tackle the kind of emergencies that plumbers and drainlayers deal with everyday virtually in their sleep.

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Technology and Climate Change

The World is at a tipping Point, and faces runaway global warming unless mankind can stop using fossil fuels and pouring CO2 into the atmosphere and oceans. Almost all countries on the planet have agreed to make strong cuts to their CO2 emissions, but the next problem there’s actually carrying this out, and on the surface this appears to be a very difficult challenge for the whole planet. Mankind is addicted to fossil fuels like nothing else.

The scary thing is that to prevent runaway global warming the changes in behaviour have to happen very quickly over a matter of one or two decades at the most, such is the rate of CO2 addition to the atmosphere and oceans. The reality all this change in behaviour makes for some very difficult political decisions, and in New Zealand for example real change will only come when there has been a significant cut in the methane emissions from our extremely large dairy herd. Methane as a global warming catalyst is 20 times worse than CO2. Around the rest of the planet entire populations have to massively reduce their consumption of both automobile fuel and electricity generated from coal.

Fortunately, and incredibly conveniently, a technical disruption is occurring in front of our eyes that is going to make certain that these massive reductions in climate change occur, and if current trends are right then this will happen just in time. The technology disruption there’s going to be absolute, and will happen at a pace like nothing else in the history of our civilization, and it revolves around three Technologies which are electric vehicles and the batteries that power them, fully autonomous driving and solar and wind power Plus storage batteries.

Electric vehicles such as the Tesla Model 3 are now at a price point where they are totally competitive against their petrol driven alternatives, and are ramping up the rate of manufacture to a point where they are having a real impact in the market. At the same time autonomous driving is developing incredibly rapidly, supported by the exponential development of raw computing power and the exponential development of AI software. Tesla for example will be able to upgrade their entire fleet over the air and overnight once their autonomous driving software is ready for release.

At the same time regulators around the world will be making sure that regulations are in place to allow this, because they know that are fully autonomous car will be about 10 times safer then a human driven car, and the impact on the population and economy will be extremely positive.

A fully autonomous electric vehicle fleet will have a devastating impact on the taxi industry and on the world vehicle manufacturers, simply because the fleet will be able to offer driverless taxis to the population out of fraction of the cost and the same convenience as a human-driven taxi and as the personally owned car. People will stop owning vehicles over the next 10 years, and Will instead rely on an autonomous taxi fleet to transport them everywhere, conveniently, extremely safely and at very low cost. This is called transport as a service.

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