Something for nothing: our bias to 'free' is costing us money


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Mortgage commissions


Many mortgage brokers do a fantastic job of helping their clients navigate the sometimes complicated process of securing a loan. With no direct payment from the consumer to the broker, many borrowers can mistakenly interpret this service as free.


However, the service is in fact paid for by commissions paid by lenders to the broker and is factored into the interest rate that borrowers pay. If this commission is rebated to the client, the annual interest will reduce materially, saving tens or even hundreds of thousands of dollars over the life of a loan.


As it is the bank paying the broker rather than the client, there is an alignment of interest between the broker and the bank. Furthermore, as the commission is generally calculated as a percentage of the loan amount, there is a financial incentive for brokers to encourage greater lending.


Look for a mortgage broker who is very transparent about the value their service creates and the remuneration they receive as a result. Better still, look for a broker who is willing to charge you a fee directly for their time and expertise and rebate the commission that they would otherwise receive.


Article source: https://www.smh.com.au/sport/racing/shazee-lee-at-home-at-hawkesbury-and-hopes-the-crown-fits-20180426-p4zbse.html?utm_medium=rss&utm_source=rss_feed

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