What a Mortgage Broker does and How We Get Paid


Many people probably aren’t sure as to what a Mortgage Broker actually does, so below is an outline of what most, if not all, Mortgage Brokers do.

The Client Interaction

In essence we assist clients in finding a suitable lender that will loan them the funds they require to fulfil their goals and objectives.  In an ever-changing lending policy environment, we help people navigate the myriad of obstacles that preclude them from having all the available options.  That is, we work hard to provide them a solution from a selection available based on their scenario. We ask them many questions to fully understand their existing situation (legal requirement under the Corporations Act) before we can give advice.

We often see clients in the evenings or on weekends when it’s most suitable to them.  We usually drive to their homes sometimes up to an hour away.  Despite being separated from our own families at these times, we show our clients great enthusiasm when assisting them with their dreams and aspirations.  We usually have robust conversations that can initially take a good 1 to 2 hours, at the same time completing all the necessary questionnaires and client profiles to get as much information as possible about them.

We also usually ask for a heap of verification documents such as payslips, PAYG summaries, employment contracts, existing liability statements, bank transaction account and credit card history, superannuation statements and details of existing insurances that the lender will also require.

Some of the things we discuss are their plans for the purchase property (i.e. convert to investment in the future, whether to hold it or look to sell at some point and if so what’s the timeline), future plans for other large expenses such as a motor vehicle, holiday, future school education costs as this may impact on ability to make repayments.  We discuss their general knowledge of and feelings about the following options: -

·         Fixed rate vs variable

·         Interest only vs principle and interest

·         Redraw option

·         Full and partial offset accounts

·         Access to branch networks

·         Access to ATM networks

·         Lender package benefits

·         Extra repayment options

·         Early repayment options and penalties

·         Rate lock

·         Internet banking

·         Interim securities

·         Family pledge/guarantees

·         Debt consolidation to minimize interest repayments

·         Bridging Finance

·         ….as well as a range of other factors


We then go back and complete a diary note of the conversation as soon as possible and in as much detail as possible so as that we have a good understanding of their situation which is critical in determining the final product selection for them.

We now go away and research and investigate the options available to them.

Lender Research

Each lender’s policy is different and so we need to navigate our way through our lenders policies to find solutions to the following scenarios: -

·         The casually employed or those employed on temporary contract

·         Newly self-employed

·         Low income self-employed using add-backs

·         Lo Doc lending

·         Low deposit using FHOG and/or rental statement as evidence of 5% genuine savings

·         No deposit using family pledge/family guarantee

·         Servicing by using a combination of employment income/Centrelink/Child Support

·         Use of overtime, bonuses and/or allowances for servicing

·         Servicing by fully maintained motor vehicle add-back where possible

·         Complex lending where companies and trusts are involved

·         Security limitations based on postcode/location, property type (vacant land, rural vs urban, duplexes, strata/community/group title vs freehold, 99-year leases), property size (less than/ greater than 10ha with/without sealed roads and electricity supply), hobby farms vs commercial/Agri-lending etc.

·         Non-conforming options for the credit impaired

·         Construction lending usually encompassing two parts – the vacant land purchase and then the build process. We also help out to fund construction after it has already commenced

·         First home buyer’s assistance.

·         SMSF lending.

Our Obligations

Under Law, we also need to fulfil our other mandatory lending obligations and keep a record on file of the following: -

1.       Provide clients with an up-to-date copy of our Credit Guide containing important information about our services, our obligations under law and their rights as consumers.


2.       Anti-money laundering/counter-terrorism financing identification collection requirements.


3.       If borrower is a company or a trust, we need to conduct a search to determine directors/trustees/beneficial owners.


 4.       Conduct a full living expense assessment from their transaction account/credit card statements averaged over the past 3 months, and sort spending into around ten categories in line with the lender’s requirements.

5.       Researching from a panel of lenders to develop a shortlist of options.  This is achieved by calling the lenders policy and scenario lines, speaking to and emailing the lender’s business development managers, and by analyzing and researching downloaded copies or online versions of lender’s policy manuals.


6.       Conduct a Funding Position calculation showing all the expenses associated with the purchase (i.e. stamp/transfer duty, registration fees, solicitor’s costs and other general expenses).


7.       Conduct a Borrowing Capacity calculation showing the approximate upper limit of borrowing.


8.       Conduct a number of servicing calculations with different lenders to ensure we only recommend lenders that it will work with.


9.       Prepare a Product Comparison comparing different loan products.


10.   Produce a Preliminary Assessment – a summary of everything and the basis for decisioning (and forward to client if requested).


11.   Create a Credit Proposal Disclosure (after the loan product is chosen)

With the exception of point 11 above, once we have all the above on file we then communicate back to the client what our recommendations are and demonstrate this with a comprehensive document that compares products side-by-side and provides a comparison of the savings from one lender to another over any given period up to 30 years, taking into consideration all of the fees and interest costs over that period.  It also contains detailed information about the loan product features which should align with the client’s objectives stated in the previous questionnaires/client profile which we can further detail to our clients the benefits of these features in how they relate to the client’s stated objectives.

At that point, a lender and products are chosen – usually decided by the client but with our guidance and taking into consideration all factors including the lender’s service level time frames to pick up and assess the application against the time frame allowed to settlement.  We then conduct a final servicing assessment based on the lender’s servicing calculator to make sure it would not fail servicing and create the required Credit Proposal Disclosure document mentioned in point 12 above, which outlines all the details of the loan chosen, the upfront fees payable and interest rates, the monthly repayment & the commission payable to the broker in dollars. The client needs to sign this document and we must provide them with a signed copy and a record of that date it was provided.  We then need to create a new diary note with the details of the discussion and the reasons that led to the clients choosing that particular lender and how the choice aligns to their stated objectives (i.e. articulate why the chosen lender/loan product is “not unsuitable” under the National Consumer Credit Protection Act).

Finally, we can then commence putting together the loan application by entering the data into an online platform, a process which usually takes around 3 – 4 hours including uploading and appending supporting documentation to the application, as well as importing emails into our CRM system, for our own compliance records.  Before populating the application, we need to make numerous file notes for the assessor assessing the application, so that he/she can understand aspects of the application that may be unclear or ambiguous.  We also may need to order an upfront valuation via the lender’s portal.

We then need to get the loan application signed & collect any last items required to support the application. Once we have everything, we can then upload the signed application and the remaining documents and proceed to lodge the application to the lender.


Once approved, we liaise with the lender regarding the issuing of loan documents and then meet up with our clients a final time to get everything signed and witnessed.  But our job is not finished there.  We need to facilitate any further requests from the lender/ assessor (and there are usually a few) with the applicants and liaise with the solicitors/conveyancers (or the outgoing lender in the case of refinances) every step of the way up until settlement.  We are usually the main point of contact in coordinating whatever is necessary to ensure a smooth and timely settlement.

Where there is an accountant or financial planner referrer involved, we bring him/her up to date with everything along the journey as well to ensure we are following any specific requirements on their side from an accounting/tax perspective.



Brokers are paid in two ways: Up-front and Trail commissions

Upfront Commission

I would estimate that 98% to 99% of Mortgage Brokers do not charge an up-front fee for their service. The overwhelming majority rely on the lender to pay the up-front commission which is generally between 0.6% to 0.66% of the loan amount (plus GST). This means the consumer gets a free service. So, on a $500,000 loan the upfront would be between $3,000 and $3,300 (+ GST). In the Royal Commission it was recommended that this fee should be paid by the borrower and not the lender. It was also suggested that the lenders charge the same fee so as to try and make it a ‘level playing field’.


Trail Commission

Now let me start by saying that Trail commission is a deferred payment of upfront commission. In the late 1990s lenders initially paid brokers a larger percentage of upfront commission. There was no trail commission. This was later split into two payments with a lower upfront commission being paid and an ongoing monthly payment based on the current balance of the loan (Typically 0.15% + GST) There were two main reasons for this: -

1.       To spread their cost of acquiring the business over a period of time and


2.       To stop brokers from churning loans every 12 - 24 months to obtain a new upfront commission

It is worthy to note that whilst we receive trail for the life of a loan (reducing over time as the balance reduces) doesn’t mean that we get paid trail on a loan for 30 years. The average lifespan of a home loan is around 3-7 years before the loan is either refinanced or the property sold, and the debt extinguished.

If we assume a loan balance of $500,000.00; the trail commission on this loan is $62.50 p.m. + GST before we pay a split to the Aggregator. Also note that this is not the brokers personal income.  It is the businesses turnover.

There are several functions performed by a broker that we are not paid for directly by anybody.  These functions include but are not limited to the following: -

1.       Call clients after a month to ensure that the first payment has gone through successfully and ensure that there are no issues.  Deal with any issues that arise.


2.       Contact clients after 12 months to ensure they are happy and there are still no issues.  Deal with any issues that arise.


3.       Contact clients at fixed rate/interest only expiry to explore changes in their circumstances and arrange restructure/re-fixing/refinance of existing facilities.


4.       Regularly email clients with property/debt/market ideas, concepts, strategies and tips to help them manage their affairs better.


5.       Regularly email clients to educate them on regulatory/market changes which may or may not affect them.  Contact those that are personally affected and explain how the changes affect them.


6.       Periodically reprice loan accounts and advise clients of new discounts applied to their loans.



7.       Help with Initial set up of repayment account, set up of redraw, internet banking/offset account linkages etc.


8.       Full or partial security releases and swaps due to sale, divorce or release of guarantor.


9.       Loan restructure or refinance due to sale, divorce, marriage or restructure of finances for tax reasons.


10.   Co-ordinate signed invoices and lender paperwork for progressive draw-downs for construction loans as required at every stage of the construction process.

Except for refinancing to another lender, we do not get paid extra from the lender to perform the above functions.  That is what the trail is designed to cover.  It also ensures that we put the clients best interest front and centre, to keep the trail coming in and to discourage refinancing (“churning”) to another lender at the first opportunity.  To the contrary, removing the trail and/or going to a fee-paying model would have a dramatic effect on the churn rate, with brokers able to justify such a change reasonably easily despite a “best interest duty” requirement being imposed on the industry.

There this is also a sting in the tail for Brokers, with what is known as a Clawback.  This occurs whereby if a loan is repaid (or refinanced) within two years, the Lender will effectively “claw back”, or reclaim the commission in full or part, from the Broker depending on the age of the loan (usually 100% in the first 12 months reducing to 50% in the second year).

A client could receive an inheritance, a redundancy payment, receive an insurance payout, wins the Lottery or decides to sell and move on, and decides to payout the existing loan in full… all of which is beyond our control.  As a result, the Broker who has usually put in around 20 - 30 hours of work, plus travel costs, phone calls, used broker support staff have worked to get the loan done, has now had his income taken back by the lender without any consultation as to the reasons….it is simply deducted from our monthly commission payment.

Benefits of Trail

·         It allows us to keep our business going in good and bad times so we can continue to service our clients.

·         Pays for things such as ASIC fees (which are higher if you are a corporate credit rep employing staff), aggregator licensing/credit rep fees per credit rep, membership of complaints ombudsman service, membership of a professional association (MFAA or FBAA) and professional indemnity insurance premiums all of which are a requirement of being a Credit Representative.

·         Also pays for our business running expenses, such as motor vehicles, laptops, printers/scanners, mobile phones and internet services, as well as other office expenses and subscriptions to our aggregator software, Outlook email client, Adobe Professional, RP Data, Statements.com.au or similar, Equifax or other credit-reporting agencies.  All of which assist us to collate and verify information to make it easier for clients and lenders.

·         It pays for the cost of staffing or back office support/outsourcing of administration functions if applicable and our ever-increasing compliance costs.

·         Keep us hungry to service our clients (to retain the trail for longer)

·         Makes it a bit easier to absorb the cost associated with losses from lender upfront commission clawbacks up to 2 years after the loan settles, or loss of time in attempting to get a loan approved that has been declined, or where the client has changed their mind or had issues with the property being purchased and therefore the application is withdrawn for reasons beyond our control.

·         Collectively, it covers the cost of all the points 1 – 10 above without which we would be working at a loss as the costs would be borne by us personally.

It smooths out the peaks and troughs, without which it becomes untenable.  Without trail, we are unable to sustain our businesses.


Over the last few years, the industry has done a lot of work in removing some of the perceived conflicts as follows: -

1.       Volume-based bonuses have gone.  This was where putting more loans with a particular lender might offer some extra benefits to a broker – not always financial.


2.       Soft Dollar Bonuses, from Lenders (Entertainment/Gifts/Travel) have gone too.


3.       Commissions payments are now based on the Net Debt a person has, not the entire loan amount.  This means if a larger amount is borrowed than needed and the extra money just sits in the loan, or an offset account, it reduces the amount of debt the lender calculates the payments on.  No more over-inflated loans.

The Effect of Competition

Our competition includes all the banks and their direct channels as well as our peers – the many other mortgage broking firms who are keen to pick up a new client dissatisfied with their existing broker.  We cannot afford to sit on our hands and allow our trail base to be eroded away by our competition because we failed to service our clients efficiently.  Strong competition, an effective code of ethics and a mandatory requirement for professional development (25 – 30 hour points per annum) all of this driven by the regulators via our professional associations, aggregators and lenders is what helps maintain the integrity of the industry and keeps brokers focused on giving the best service possible and on track to operate in the best interest of our clients at all times.  The statistics speak for themselves: -

·         59.1% of borrowers now using a mortgage broker

·         96.5% satisfaction rate

·         0.5% of ombudsman complaints which is minimal

·         80% of consumers happy with the existing remuneration model

·         $2.6b contribution to the economy each year

Mortgage Brokers are small business owners.  We are entrepreneurs.  We like to innovate and embrace technology that will assist us to do our job better.  We pride ourselves on our ability to find solutions to match our client’s needs in all circumstances.  We take a chance every time we take on a new client/scenario.  We are very outcome driven as that is the only way we can get paid. 

We don’t work for free but believe in a fair payment for a fair outcome.  That’s what we have now (although some would argue we don’t get paid enough for what we do and for the risks we take).  Anything less than what we receive now is a travesty of justice. 

The Effect of No Competition

Remove or adjust any part of a broker’s commission and the rest is history.  The industry will most certainly become destabilized and retract.  New entrants to the industry will need to accept a lower level of income, thereby leading to higher volumes to compensate, and lower service levels as a result.  Generally, Australians are not willing to pay a ‘fee for service’ from mortgage brokers.  This model has failed dismally in the Netherlands and as a result there are less than half as many lenders that there was around 10 years ago.  It will make it more difficult for first home buyers to enter the market in what has become an increasingly difficult market as the current options disappear.

The banks only have their own products available and don’t understand the broader lending marketplace.  They are not solution-oriented like brokers.  This is to the detriment of the client and the property market.  If their bank cannot assist and there are no brokers to service them then it just doesn’t happen.  Economic downturn will be the inevitable result of this.  It’s not just the effect of 27,000 people employed and self-employed in the broker industry.  The flow-on effects to the real estate industry, to solicitors and conveyancers, to outsource administration businesses and to the property market in general are catastrophic.  Then there’s the smaller lenders, the aggregators, the industry bodies and third party bank channel employees that are also affected. 

On the other hand, the Big 4 banks will be the big winners.  As brokers start to disappear, they will get the lion share of all home loan enquiries back through the front door.  They will be able to charge a fee equivalent to the cost of providing the service to the clients – most likely in the thousands.  All the second and third-tier lenders that have traditionally been supplied with business via the broker channel will also start to suffer as their lifeblood is cut off.  They will start to disappear – either shutting up shop or consolidating and the big banks will be there all cashed up with the cheque book ready to pick up the pieces.  More power to the big banks.  What happens next?  Well with less competition around the big banks have the power to ratchet up their interest rates like never before and borrowers will be the biggest losers with no other available options but to accept it.  So, the big 4 banks once again continue to make the multi-billion dollar profits in a government-created downward market while the general community is hemorrhaging.  For the banks that’s what they call a win/win scenario.  For consumers it’s bad news all round.  The old adage “if it ain’t broke don’t fix it” does come to mind when talking about commission payments.  The government must leave Mortgage Broking the way it is.  It serves the industry, the general community and the broader economy well.

Brokers are also consumers. We too have home loans, so these changes affect us the most.


1.       If we don't have competition in the home loan market then clients get less choice, and big banks get back Oligopoly market power and home loan rates go up.


2.       Since Mortgage Brokers started in the 1990's, the margin the banks make on a home loan has gone down from roughly 4% pa to 2% pa due to competition.  (i.e. the bank income they make from home loans basically halved!! – that means in the past 20 years home loan rates went down compared to what they would have been, due to competition caused by mortgage broking disruption).


3.       If the Banking Royal Commission recommendations regarding brokers are implemented “as is” it could kill the mortgage broking industry because the amount of income received by a broker wouldn't be fair or viable for us to continue running a business.


4.       A broker helping a customer is NOT a 3-hour tick and flick exercise. It's at least one week’s worth of full-time work to help each settled loan customer. And the overall income for that is approx 1.25% per settlement. So say on an average $400,000 loan that comes to about $5,000 income (before costs) to the broker. And that's only for the 25% of deals that actually settle - 75% of people making finance enquiries get free advice, meetings etc. And there is a LOT of work at the startup and ongoing just to be qualified and ready to provide advice.


5.       Mortgage Brokers don’t earn unreasonable income for how hard they work. Official figures say it’s about $85,000 after costs.  The reality is that most of us earn a lot less than that.  It’s certainly less than a banker doing a similar role at a single bank offering a single product gets.


6.       For the same loan above, the bank earns (net interest margin) about 2% pa, or $8,000pa, or $32,000 income before costs over the expected average loan life of 4 years (and share $5,000 to the broker). The bank’s income is hence $27,000, and with the RC recommendations that the bank keeps the lot, and in addition receives an extra fee/payment (eg. $2,500 to write the deal) on top to make it a “fair playing field” with brokers.  This results in a massive windfall for the Big 4 banks, none of which will end up in the pockets of consumers.

7.       In the late 1990’s it suited the banks (and the brokers) for about half that commission of $5000 to be paid “upfront” which equates to $2,500 and the other half to be a ‘deferred upfront’ (known as “trail”).  It’s the trail that is the issue here – there was talk in the RC of “brokers doing nothing for trail” but the truth is, it is and was (only ever) a deferred upfront for all the reasons previously mentioned.


8.       There have been lots of other reports conducted into the broking industry (Productivity Commission and ASIC just to name a couple), and “ceasing trail” is generally NOT a recommendation once it’s understood.


9.       The actual core issue the Commissioner had with broker commissions is that it is “Conflicted Remuneration” resulting in a perceived conflict of interest if the customer has a service provided (home loan broker) which is paid by another party (the bank).  That’s it.  It’s a legal reason, not a practical one.  It’s only hypothetical.  We would have loved the RC to ask 100 customers of various brokers (even unhappy ones) did they think the broker was conflicted?  Or did the broker work for the bank or them - the customer?  We know the answer is “I trust the broker… they work for me”.  So, while in legal terms it is technically “conflicted”, prior reports and studies have seen it’s perhaps the least conflicted model available and benefits the customer.  It actually works very efficiently!  Same deal in real estate, whereby the agent is paid by to be represented by the vendor but is actually paid by the buyer.  Yet there are no calls for a Royal Commission or an inquiry to overhaul real estate agent remuneration… and they get paid 2% + GST of the sale price… much more than what a mortgage broker gets!


10.   Mortgage Broker income (Commissions) have had to be fully disclosed (by law) by brokers since 2009. I don’t believe banks disclose to customers they make $27,000 out of their average broker loan (or $32,000 for a client coming via direct channel).  We don’t mind banks earning a reasonable income, and we agree we need strong banks, but we just want that same level of fairness, competition and transparency for all who work in this industry.


11.   In The Netherlands’ payment model (suggested by the RC), the customers pay the broker or bank between $3,500 to $5,000 per loan. Since that started in 2007, the number of Netherlands banks decreased from 99 to 44, and the net interest margin increased from 0.6% to 1.6%. think it’s fair to say the consumer has lost out here! Do we want this model…oh and don’t forget the expenses associated with this extra fee are tax-deductible. Would our government allow for that?


12.   Many banks keep offering better interest rate discounts for new customers, and don’t tell existing customers – it’s like a disloyalty interest rate. The discounts have increased by 1.1% in the last 16 years.  When did anyone get a call from their bank telling them "we have reduced your interest rate on your home loan"?  To the contrary Mortgage Brokers field many complaints that their banks are increasing their rates slowly over time (rate creep).  Brokers keep competition alive, and help all lenders compete based on product and service.


13.   Big bank home loan market share for Mortgage Brokers has gone from 80% in 2002, to about 45% in 2018. That’s competition. Even lenders like ING and Macquarie – huge international banks themselves - have about 6% each in the home loan market share, relying on brokers who introduce about 90% of their loans.  These are lenders run lean businesses with low overheads, providing precisely the services some clients want.


14.   Mortgage Brokers just want a fair go, and fair pay, to help the consumer with competition.


…AND Finally

Mortgage Broking is not just a job to walk into and start doing.  It requires knowledge, great interpersonal skills and some mathematical ability, patience and integrity.  It often helps people with difficult or complicated personal situations to buy, build, renovate, travel, marry, and step through life.

Yes, there are banks you can walk into and apply for a loan but comparing loan interest rates is barely the beginning of what a Mortgage Broker does.  Anything from a simple refinance, to first home buyers, self-employed, solo parent, part time employed, recently changed jobs, changed countries, had a bad credit history, debt consolidation, investing, and many more scenarios.

Not every bank will lend to every person, and not every person suits or desires a particular bank.  Often the smaller lenders may not suit someone in business, and of course bigger businesses need the strength and reach of large banks, but for the home buyers and small businesses, the time poor, Mortgage Brokers offer guidance, support, education and confidence to borrowers, while saving them money by providing access to more lenders, many of which a large proportion of Australians would not know about.

The rates (commissions) of payments that the banks pay to Mortgage Brokers, do not vary much, and if they do, it is not something that brokers concern themselves with.  That’s because the best result for our clients helps us to build our business as they tell their friends through word of mouth. This is the best form of advertising! We are small business operators… we don't have million-dollar advertising budgets and every dollar in our pocket is as important as every dollar we can save our clients.

Regardless of what the Royal Commissioner perceives as a potential conflict, it is his perception not ours.  We stand by our claims that we cannot afford to mess with the lives and welfare of our clients. Adversely changing the commission structure from where it is today will have serious consequences for every Australian.

Factoring in the above, we appeal strongly to your good sense to resist any changes to the broker remuneration model, instead opting to work more closely with industry to ensure all members abide by a code of ethics.  We feel that a collaborative approach is the solution – not turning the industry on its head.  Nobody will benefit from that…bar the Big 4 Banks!


Best Regards,

Reuben Brown

Principal- Horizon Mortgages

(I wish to acknowledge Mario Camerlengo for his amazing input in helping get this article put together. I have simply made my own additions and revisions to it)

Top 3 Interest Rates for Variable and Fixed Loans for August 2018

Top 3 Interest Rates for August 2018!

In the past 6 months we have seen a small amount of movement in interest rates. Tables below illustrate the current top 3 Variable and Fixed rates (2 & 3 Years) for home owners and investors from our panel of over 30 lenders.

(Rates correct as of the 23rd August  2018 and are based on a minimum loan size of $250k with P&I repayments & an LVR of 80% or less. T&C’s do apply for all lenders.)

Top 3 Owner Occupied Loans

1st Rate
3.59% (offered by 1 lender) 100% Variable
3.69% (offered by 2 lenders) 2 Year Fixed
3.74% (offered by 1 lender) 3 Year Fixed

2nd Rate
3.64% (3 lenders) 100% Variable
3.72% (1 lender) 2 Year Fixed
3.79% (3 lenders) 3 Year Fixed

3rd Rate
3.65% (4 lenders) 100% Variable
3.75% (3 lenders) 2 Year Fixed
3.83% (2 lenders) 3 Year Fixed

Top 3 Investment Loans

1st Rate
3.87% (offered by 1 lender) 100% Variable
3.89% (offered by 1 lender) 2 Year Fixed
3.99% (offered by 4 lender) 3 Year Fixed

2nd Rate
3.92% (1 lender) 100% Variable
3.95% (2 lenders) 2 Year Fixed
4.09% (5 lenders) 3 Year Fixed

3rd Rate
3.95% (1 lender) 100% Variable
3.98% (1 lender) 2 Year Fixed
4.14% (3 lenders) 3 Year Fixed

If you wish to find out more about these deals or have us run a comparison report on your current loan compared to some of these rates, please contact us at ‘reuben@horizonmortgages.com.au’ or on 0488 798 787.

……and please remember we offer a free service and we’re mobile so we can come to you at a time and place that suits.

Top 5 Interest Rates for Feb 2018!

Well it's been a little while since I posted here as I was spending more time posting on the Facebook site...but anyway here's the latest on interest rates!

So since the beginning of 2018 there have been some exciting moves in interest rates for home owners and investors (with Principal & Interest Repayments). Chances are that if you haven’t had your loan reviewed in the past 3 to 6 months there may be a better deal out there for you.

Please see the tables below for the current top 5 Variable and Fixed rates (2 & 3 Years) for home owners and investors from our panel of over 30 lenders.

Top 5 Owner Occupied Loans

1st Rate
3.59% (offered by 4 lenders) 100% Variable
3.69% (offered by 2 lenders) 2 Year Fixed
3.74% (offered by 1 lender) 3 Year Fixed

2nd Rate
3.64% (2 lenders) 100% Variable
3.78% (3 lenders) 2 Year Fixed
3.79% (3 lenders) 3 Year Fixed

3rd Rate
3.65% (3 lenders) 100% Variable
3.79% (2 lenders) 2 Year Fixed
3.83% (1 lender) 3 Year Fixed

4th Rate
3.68% (1 lender) 100% Variable
3.84% (1 lender) 2 Year Fixed
3.84% (1 lender) 3 Year Fixed

5th Rate
3.69% (1 lender) 100% Variable
3.85% (1 lender) 2 Year Fixed
3.87% (2 lender) 3 Year Fixed

(Rates correct as of the 6th Feb 2018 and are based on a minimum loan size of $250k & an LVR of 80% or less. T&C’s do apply for all lenders.)

Top 5 Investment Loans

1st Rate
3.89% (offered by 4 lenders) 100% Variable
3.74% (offered by 1 lender) 2 Year Fixed
3.89% (offered by 1 lender) 3 Year Fixed

2nd Rate
3.97% (1 lender) 100% Variable
3.89% (2 lenders) 2 Year Fixed
3.99% (3 lenders) 3 Year Fixed

3rd Rate
3.99% (4 lenders) 100% Variable
3.94% (1 lender) 2 Year Fixed
4.09% (2 lenders) 3 Year Fixed

4th Rate
4.09% (4 lenders) 100% Variable
3.95% (1 lender) 2 Year Fixed
4.14% (1 lender) 3 Year Fixed

5th Rate
4.14% (1 lender) 100% Variable
3.98% (1 lender) 2 Year Fixed
4.19% (3 lenders) 3 Year Fixed

If you wish to find out more about these deals or have us run a comparison report on your current loan compared to some of these rates, please contact us at ‘reuben@horizonmortgages.com.au’ or on 0488 798 787.

……and please remember we offer a free service and we’re mobile so we can come to you at a time and place that suits.

6 Reasons Why You Should Use a Mortgage Broker

Firstly.....What is a mortgage broker?

So what is a mortgage broker? Basically a mortgage broker is a loan expert who assesses different loans and helps pick out the one best suited for yourself. Considering that a loan or mortgage is going to be your biggest expense, it pays to have a professional assist you through the process. In fact over 52% of all home/ investment loans are now written by mortgage brokers. Here are some of the reasons why people should use them as opposed to going directly to a bank.

1: A mortgage broker can save you time

The choices now available in the mortgage market can seem limitless and completely overwhelming. There are now over 100 banks/lenders in Australia. To try and research even a few lenders’ products and compare them together can take a considerable amount of time. Mortgage brokers do it for a profession and thus have a very good understanding of what is available in the market place and should also have computer software to compare current loan products so as that you are comparing ‘apples with apples’ (so to speak!)

2: Mortgage brokers give you choice

All mortgage brokers will have a panel of Lenders from which they recommend a loan. Most will have anywhere from 20 to 30 lenders on their panel. Before they can offer a loan product a broker must be accredited with every lender on their panel, and are required to keep up-to-date with their latest offers.

3: A mortgage broker can help find the right loan

The best deal is not necessarily the cheapest rate. A good mortgage broker will examine your circumstances and future plans to recommend a loan that is right for you. Having an appropriate loan which works for you can help you build wealth the right way.

4: Most mortgage brokers don't charge you

Most mortgage brokers don't charge a fee for their service as the lenders pay them a commission for the loans they write. Most lenders offer the same rate via the mortgage broker as they would if you went directly to the bank. In some cases the broker may be able to secure a better rate than if an individual applied directly to some lenders as the broker does have the ability to request discretionary discounts on rates over and above what is being offered to the general public.

5: Mortgage brokers can help you avoid certain loan pitfalls

Many products seem to offer a great deal but they could have penalties, fees and charges you may not be aware of. Or, they may not offer the flexibility you require in the future. A mortgage broker can help you avoid taking out a loan you might later regret.

6: Mortgage brokers do all the legwork

A broker will be the one who will collect the relevant documents and information from you and then do all the work in regards to researching the loan products that will be appropriate/ putting the deal together/ following up with the lender’s assessment team and back office staff/ communicating with your lawyer and generally taking care of you as well (for many people, buying property can be a very stressful experience, but with the right broker helping you, it shouldn’t be!)

The only finance broker to deal with: MFAA members

A good mortgage broker can save you time and money, and give you peace of mind. But, remember, only work with mortgage brokers who are members of MFAA - they are the Essentials of Borrowing.

How Can Credit Card Limits Affect Your Borrowing Capacity?

How Banks Look at Credit Cards

Reduce your credit card limits

It seems like a no brainer. You are buying a home, so you’ll pay off your credit cards to reduce your debt, but then keep them active so you can buy some furniture or deal with emergencies even when you have a mortgage to pay. Right…Wrong!

When a bank looks at your liabilities it’s obvious that a lender will consider your credit card debts and the monthly repayments on those when you apply for a mortgage. However, what many people do not realise is that credit cards with nothing owing on them can still impact a lender’s assessment of what you can afford to borrow.

Quite often I will sit down with clients and they will tell me that they have a credit card limit of say $10,000 - $20,000 (and sometimes much higher!) and that they pay it off every month so in their mind they’re thinking “why should the bank consider that as it’s always paid off in full every month”. Well  the logic from the bank’s perspective is that there is no stopping you from racking up debt on your credit card to the max. the day after your loan is approved….say, on lovely furniture to fill that new house!

Most lenders take into account three per cent of the total credit card limit, regardless of what the applicant owes so if you had a $10,000 limit but only owe $1000, then the bank will still have to expense your credit card out at $300 a month and for some people that can reduce their borrowing capacity by a considerable amount.

To ensure you can increase your borrowing capacity a good plan is to lower your credit limit or cancel your credit account altogether. End of the day, the larger amount of liabilities you have will lower your ability to borrow the monies you need to purchase that dream property…whether it be in the Northern Beaches or any other part of Sydney

At HORIZON MORTGAGES we’ll sit down with you and work on the best strategy to get you into your next property!

What is an LVR and how does it affect my ability to purchase different property types??

For prospective buyers of property many understand that they require at least a 5 to 10 % deposit to purchase a property. However, what I generally find upon sitting down with a new client is that most aren’t aware that ALL lenders look at the various types of property (also referred to as ‘security’) and rate them with different LVRs. Now what exactly is an LVR? It stands for ‘Loan to Value Ratio’. In a nutshell the way you get a LVR rating is to divide the loan amount by the property’s value. So for example if you have a loan for $800,000 secured by a property worth $1,000,000, then the LVR is 80%.

For most standard residential suburban homes/ apartments, banks will generally lend on LVRs anywhere from 90 to 97% (inclusive of any Lenders Mortgage insurance). However, there are many properties that are regarded as being more risker to the bank and are referred to as non-standard securities. Consequently, the maximum LVR the bank wants to be exposed to is less. Below is an example of just some of the restrictions on LVRs for different property types:

Small Apartments/ Bedsit/ Studio

An apartment greater than 40 sqm but less than 50sqm of internal space (and this excludes the balcony and car spot), will see many lenders refuse to lend on these properties altogether. However, those that do, range diversely in the maximum LVR they’ll go to. Some will go to a maximum of 60% whereas there are few that will go up to 95%. If you do find a property that has less than 40 sqm, there are only a handful that will consider the deal and often it is assessed on a ‘case by case’ basis with a low LVR applied.

Serviced Apartments/ Student Accommodation

Of the lenders that will consider these securities, the maximum is normally around an LVR of 60% to 70% regardless of the size of the property.

Over-55 Complexes

At the moment, it’s hard to find lenders out there that will consider these properties due to the fact that if the bank had to sell the property because of a borrower’s default on repayments, then the bank is heavily restricted in who they can sell it to recoup their money. Areas such as the Northern Beaches of Sydney are getting more and more of these complexes so it will be interesting to see if banks change their thinking on this form of security as the Australian populace ages.

Rural Properties

Lenders have varying LVRs when it comes to the assortment of property types available in rural/regional areas. For example if the residential property is 10 hectares or less, is located in a serviced rural/ country town, is connected to power, a landline, sewage, and road access then you can possibly go up to an LVR of 95%. If you are looking at a hobby farm that is between 10 to 50 hectares then some lenders will go to LVRs between 60 to 90%. Over 50 hectares and less than 200 hectares is limited to only a few lenders who may go as low as 50% on the LVR. In most, if not all cases, the rural property cannot be used for commercial income purposes other than renting out the residence to a tenant.


These forms of title are generally restricted to older styled apartments which predate 1961 when strata title was introduced. Since 1961 most apartments have been registered as strata title. It’s in Sydney’s eastern suburbs where the majority of company titled properties are located in NSW. Whilst many lenders won’t lend to these sorts of properties, those that normally do, lend to a maximum LVR between 70 and 85%.

In Conclusion!

When it comes to financing a property purchase it is always best to engage the services of a qualified mortgage broker who is able to help advise you on what you need to know when it comes to selecting a non-standard security.

Conveyancers versus Solicitors

A conveyancer is a solicitor, but just deals with property, right? Wrong. The two are different, and it is important to have the right one on your team, in order to avoid paying too much while still getting the advice you need.

Whether you're buying property in Perth, Melbourne or the Northern Beaches of Sydney, it's bound to be one of the biggest decisions you will make in your lifetime – so it’s something you want to get right. Every Australian state and territory has different laws, regulations, forms and taxes associated with purchasing property, so having either a solicitor or a conveyancer will help the whole process run smoothly.

For a straightforward property purchase, a conveyancer can do the job. Their main responsibilities include giving advice and information about the sale of property, preparing documentation and conducting any settlement processes.

Although there is a licensing process for conveyancers, they do not have to be legal professionals. As a result, they are generally cheaper to hire than solicitors. However, they can only provide information relating to property, so if you do have additional legal questions, then you will need to consider a solicitor.

While conveyancers are limited to advising on your property purchase, solicitors can provide you with a wide range of legal advice in addition to your conveyancing needs, and this may be necessary if your property transaction isn’t straightforward. For example if there are other matters that affect the transaction like family law, asset protection, asset structuring, tax law or estate planning, you normally will not be able to receive this sort of advice from a conveyancer.

In a nutshell, if you simply need an expert to guide you through your purchase and require nothing else, then a conveyancer may be a cheaper option, whereas if you need them to do extra legal ‘leg work’ associated with the transaction, you’re probably best off with a solicitor.

If you’re unsure, you can always ask your mortgage broker who can steer you in the right direction and should be able to recommend either a good conveyancer or solicitor

How Do Lenders Look At Loan Applications?

Here Are Some Pointers!!


So what exactly do lenders look for when it comes to giving pre-approval/ approval to a loan application. Well in order to decide whether or not to provide you with a loan, lenders will generally assess you against four qualities.

 1: Your capability to repay the loan. This is pretty straight forward! To establish your capacity the lender will look at your employment history and salary to evaluate whether you have enough cash coming in reliably to pay the loan over the agreed loan term.

2:  What deposit will you be contributing if you are purchasing a property. Assessing your ability to put down a percentage of the value of the property being purchased up front is standard. The percentage varies though, and some specialist lenders may approve a five per cent deposit. However, many lenders will require you to put down at least a 10% deposit plus cover the associated costs too (ie. stamp duty etc). A mortgage broker is best suited to letting you know what a lender requires in this area.

3: The property valuation. Since the property is used as collateral the lender will want to ensure the property is an appropriate security. In regards to a purchase some lenders will accept the Contract of Sale as being good enough, however, if the property is over a certain amount then the lender may request a valuation be undertaken (normally at the bank's expense)

4:Your financial history. Your credit rating, expenses and debts will help the lender assess your reliability as a borrower and whether you are worth the risk.

  In helping clients all over the Northern Beaches, Inner West and the North Shore areas of Sydney, at Horizon Mortgages we ensure through appropriate consultation with you that we match you with the right loan choice at the best possible interest rate! What's even better is that you don't pay for our services as the banks pay us a commission to introduce you to them.

Fixed Versus Variable Loans Fees

Horizon Mortgages Sydney Northern Beaches Fixed Verses Variable Home Loans Fees

Loan Penalty Fees

A common question I'm always asked by clients from all over the Northern Beaches, Inner West and North Shore area is what bank penalties will I be exposed to if I pay out my loan early. Well in a nutshell, it depends on what type of loan you take out. It's basically a case of Variable vs Fixed loans.

Variable Home/Investment Loans

Let's firstly look at variable loans. Prior to 2011 many banks charged customers a penalty fee if they paid out their variable loan generally within a four year period of settlement. So if you had taken out a loan in 2007 and paid it out in 2010 because you sold the property or refinanced it to another lender, then the bank would probably have charged you a potentially high fee to leave them. Fortunately, since 2011 government reforms have seen this practice change so now you can take out a variable loan and pay it off without being hit with a large penalty fee....even a month after settlement if you were lucky enough to win the lottery!! However, keep in mind that the lender will still charge a basic fee to have you leave them, regardless of the amount of time the loan has been open, and this is referred to as a Discharge Fee and these are normally in the $150-$350 range.

Fixed Home/Investment Loans

Now in regards to fixed loans whereby a customer wants to lock in an interest rate for one to five years, the rules are different. Since the bank has sourced out the money to fund your loan at a set price, they expect you to honor the fixed repayment agreement so they can meet their obligations as well. To pay off the loan entirely within the fixed loan term will incur what they call "Break Costs" and these fees can be potentially large and prohibitive for some people. There is no set Break Cost fee as every lender uses different mathematical formulas to calculate what the fee will be. Some of the information that will be taken into consideration to work out the fee includes the loan amount, how much time is left on the fixed rate period and how different is the fixed rate on offer now compared to when you took it out.

Also when it comes to making extra repayments on top of the minimum amount required on a fixed loan, lenders vary as to what they will permit on an annual basis. For example some lenders will allow you to pay off either an extra $5000 annually or 5% of the loan balance - whichever is the smaller amount. On the other hand there are some lenders that, no matter what the loan balance, will permit $10,000 to $20,000 extra to be paid off annually. So what happens if you pay off more than you’re entitled to. Yes that’s right….they’ll hit you with a penalty fee. So it always pays to check with the lender as to what you can and can’t do with a fixed loan.

So when deciding between a variable vs fixed loan make sure you consider your future goals. Do you have plans to move city or change your job? Sell the property in the next few years? Are there any foreseeable disruptions to your financial circumstance likely to take place during the space of your fixed-term rate? Are you about to come into money in the near future which you wish to throw on the loan? Maybe splitting the loan amount into a variable loan and fixed loan is more appropriate?

So to avoid being caught out by extra bank charges, it always pays to sit down with a mortgage broker (HORIZON MORTGAGES is a great place to start!) who can advise you properly on all your options and the pros and cons of every loan scenario. 



You Know You've Earned It


New Car Loans With Horizon Mortgages — You Know You've Earned It

With another busy week rapidly concluding, I still had too many thoughts fighting for attention in my mind, though one seemed to be winning — TGIF. Hmmm, can I say TGIF on a professional Mortgage Broker Business Blog? Too late, the phone started to ring again, back to work.

Finished that call, only now I have another thought. That was a car loan enquiry which got me thinking Car Loans. Interestingly, when I do stop and think about it, many of our local Sydney Northern Beaches / Inner West / North Shore clients have become repeat clients. All those loans we have arranged over the years, First Home Buyer loans and new Home Loans, yet most of our Car Loans are new clients. Why is that? Perhaps it was time I posted about Car Loans on our blog to ensure our clients actually know we do them.

Private Car Loans, Business Car Loans, the bottom line is you're no doubt working hard, so if it's time to replace your car, make sure we talk. We work with the leading lenders to ensure we match the best lender to your needs and financial situation, the one that really works for you.


If it’s time for a new car give us a call, even if its Friday afternoon, we'll still pick up that ringing phone and help — Reuben



Help Is At Hand For First Home Buyers Of Sydney


Help Is At Hand For First Home Buyers Of Sydney

We recently had an uptick in First Home Buyers looking for help to enter the housing market. Yep, time for a short post to help clear the muddy waters around first home buying and show that with some good guidance from your friendly Mobile Mortgage Broker [HORIZON MORTGAGES for example] it can be fine sailing.

So your are ready to buy your first home! It’s exciting, but there’s a lot to get your head around. How would you feel if you had someone who would arrange your home loan, answer your questions and be there to help – from start to settlement and beyond?


Starting out in the property market can feel overwhelming. HORIZON is there at every step providing the expert guidance and answers you need to feel confident about your decisions.


We'll walk you through different scenarios and clearly explain how much you can borrow, all the costs involved, and what to expect at every step towards buying your home.


If you're still hunting for your dream home, HORIZON can help you organise pre-approval so you know exactly how much you can spend.


We listen to your needs and future plans then compare options from the leading lenders and negotiate on the one that really works for you – so you never lose sleep wondering if you missed out on something better.


If you're eligible for the First Home Owner Grant [FHOG] we can lodge the application and all supporting documents for you.


That's right. You don’t pay us anything for our expert service and running around because lenders pay us a commission when a mortgage is settled.

We have been helping young families, couples and individuals around Sydney Northern Beaches, Inner West and North Shore find the best home loans. If you are looking to buy your first home why not give us a call and let us help you too — Reuben




It Pays To Wipe Out Debt


It Pays To Wipe Out Debt

As a passionate [yes I actually enjoy helping people with home loans :] Mobile Finance Broker who has helped hundreds of families around Sydney Northern Beaches, Inner West and North Shore find the best home loans, I was a little surprised this week when I had an enquiry for a Low Doc [low documentation] loan. Obviously not simply because it was a Low Doc Loan enquiry, but the conversation that transpired. It was screaming to be my next Home Loan Information blog post. The conversation started with "We want to borrow about $80,000 to renovate our family home".

With just a few questions I discovered the [pending] new client and his wife had more to consider. They have a home loan of $470,000 and an $17,000 credit card debt. When I asked how they wanted to restructure their existing loans [house and credit card] they said they didn't, they simply wanted to borrow the money for the renovations and had heard about Low Doc Loans. With no disrespect intended, I must say I was rather surprised.

While each persons situation is different, so no one solution fits all, we would still typically suggest it pays to wipe out credit card debt first. With some credit card interest rates over 20% it is far better to pay them out first before making additional home loan repayments. If that is not an option for you, perhaps its time to look at refinancing your home loan. There are many different loan options available and we are only too happy to sit with you, review your needs and plans and then negotiate the best loan with the banks, on your behalf — Reuben



Mortgage Reducing Tips for First Home Buyers


There's More To a Home Loan Than Interest Rates

I guess as a Mobile Mortgage Broker it's not so strange I found myself thinking about home loans this morning. Contemplating our local Sydney Northern Beaches, Inner West and even North Shore real estate market and the hard-working Australian who just wants a good loan deal, perhaps even as a first home buyer.

As everyone with even the slightest interest in securing a home loan would know, the interest rate significantly impacts how much total interest you pay over the term of your loan. So what else could really make that much difference? Quite a few aspects actually!

For those of you who initially went with a 30 year loan term, there are still big savings to be made on your home loan if you can accelerate your repayments. By accelerating your repayments on a home loan by just 8 percent or $220 extra each month, you can save around $70,000 in the long run and repay your loan by as much as 6 years earlier! Does a $70,000 saving sound worth considering? Now perhaps the word "budget" is rushing to the forefront of your mind. Don't stress your budget too much, but if you do have the extra funds, or can adjust your budget somewhat, putting it towards paying off your home loan sooner will greatly benefit your financial future.

There are many aspects to consider other than just the obvious interest rates when applying for your first home loan, which is why many home buyers now seek out an experienced finance broker. An independent mobile broker [HORIZON MORTGAGES for example] to guide them through the process and negotiate the best possible loan suited to their personal circumstances.

If you have questions or are considering a new home loan or refinancing your existing home loan, why not give me a call as I would love to help — Reuben




First Home Buyer Home Loan Maze

First Home Buyer Home Loan Maze

Home Loan Information — Clarifying Banking Terms

I recently had a request to clarify LVR. As a finance broker who has been helping buyers in the Home Loan and First Home Buyers market from Sydney Northern Beaches to Inner West to Sydney North Shore, it's easy to forget some buyers may feel a little lost in the maze of banking terms. This lead me to thinking perhaps a quick post on typical home loan terms may be helpful, particularly to those in the First Home Buyers category.


The LVR refers to the size of your home loan expressed as a percentage of your property's value. For example, if you borrow $100,000 to fund an asset worth $125,000, the loan is said to have an LVR of 80% ($100,000 is 80% of $125,000).


The difference between the amount owed on your home loan and your home's value.


Allows you to use extra cash to reduce the outstanding principal and interest on your home loan. This is a great way to pay off your loan faster.


An interest rate that allows you to lock in to a specified rate of interest, with fixed monthly repayments, for a given period of time.


A type of loan that requires repayments on the interest only and, as such, leaves the loan principal untouched.


Increasing the amount of money in your home loan. Note that stamp duty applies.


Some lenders offer an 'offset' account, which is a savings account linked to your home loan. It can be a great way to save on interest costs because interest charged on the home loan is calculated on the difference between the balance of your loan amount owing and the balance in your savings account. For example, if your balance on your home loan is $250,000, and you have $10,000 in your savings offset account. Instead of being charged interest on the full value of your home loan, interest will be charged on a balance of $240,000 - being the difference between the balance of your loan and the money in your offset account.


A type of loan where each repayment is comprised of interest plus a reduction in the loan principal.


This loan feature lets you withdraw any additional repayments you have made on your home loan. It is a useful way to reduce your interest while providing access to your funds.


Changing from a variable loan to a fixed rate loan. Can be useful if you are concerned about a possible rate rise.


A loan that combines a fixed rate portion and a variable rate portion.


An interest rate that will vary in line with changes to official interest rates.


A change to the home loan agreement.

If you are thinking about a loan, we would love to help — Reuben