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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