Clawbacks can have a significant impact on mortgage brokers.
If a borrower repays or refinances their loan within a certain period of time (typically within first 12 to 24 months), the lender may require the broker to repay some or all of the commission that they earned on the loan (dependent on time period).
The amount of fee to be repaid varies from lender to lender.
This can be a significant financial burden for brokers, especially if the broker has had a quite few months or if they have a large number of loans refinanced in a short period of time.
As a client, you can help your mortgage broker avoid clawback:
- Understanding the risk and impact of clawbacks- Clients should be aware that if they refinance their loan within a certain period, the broker may be required to repay some or all of the commission that they earned on the loan.
- Only refinancing if it is in your best interest – Clients should not refinance their loans simply because they are offered a lower interest rate or a cashback incentive. They should carefully consider their individual circumstances, the fees, and charges to switch and whether the new loan offers the same features.
- Communicating with your broker regularly. Clients should keep their broker informed of any changes in their circumstances, such as a job loss or a change in income. This will help the broker to identify any potential risks to the loan and take steps to mitigate them.
- Being honest and upfront with your broker about your financial situation and future plans- Clients should provide their broker with all of the relevant information so that they can recommend the best loan product and structure for their needs.
- Working with a reputable broker – Clients should choose a broker who has a good reputation and who is experienced in structuring loans
To find out more, speak with the team at Trusted Financial Choice.