BEWARE OF THE MARKETING TRICKS & TRAPS

Watch out for this bloke                         dressed up like this guy

Ever since we launched Australia's first independent mortgage broking service - which includes 100% commission rebates (or cash backs) - we have seen a growing number of mortgage brokers claiming to be "cash back mortgage brokers" or "commission rebate mortgage brokers".
 
At first glance it may appear that all cash back mortgage brokers are the same - but like all things in life "the devil is in the detail".
 
Our goal is to assist you to save money on your mortgage by reducing the amount of interest and charges you pay on your home loan.  There is much more to that than just commission rebates - especially when they're just partial cash backs used as marketing gimmicks.
 
Obviously it's better to get some of the commission rebated to your home loan rather than having it line your mortgage broker's pockets or inflate the Bank's profits - but all commission rebate mortgage brokers are not created equal.
 
As stated elsewhere on this site - your focus should be on solid analysis of your unique circumstances by an independent mortgage broker.  But for now let's just look at some simple facts about cash back mortgage brokers:
 
  • Partial commission rebates will not make up for poor advice or you being placed into a more expensive mortgage in the first place.
     
  • Most cash back mortgage brokers only give you back a portion of the commission - and usually want you to focus only on trailing commission (for the effect of only getting trailing commission refer to our Trailing Commission Rebates Page)
     
  • On top of the fact that they only pay partial rebates - many cash back companies only pay rebates once a year.  That means the money is sitting in their bank account and earning them interest instead of sitting off your mortgage and saving you interest.  It also means you are taking a massive leap of faith that they won't go broke or that they're not operating a phoenix scheme.  (For detail on the steps we take to protect your commission rebates please refer to our FAQ Page.)
     
  • Most commission rebate mortgage brokers 'pay themselves' by keeping the upfront commission - this includes a couple of prominent ones who claim to rebate 100% of commissions but then in the next breath claim that they are a "free" service by offering to drop their fee in exchange for retaining the upfront commission.  Apart from the obvious misleading marketing this type of offer has three major problems:
     
  1. If a mortgage broker is rebating the trailing commission and making their living off the upfront commission only - there is an increased likelihood of a conflict of interest.  Lenders pay varying commission rates.  Those that pay the highest upfront commissions tend to pay lower trailing commissions.  Therefore, not only could you end up being placed in a mortgage that is not in your best interests - you could be giving away the greater amount of commission.  This problem is even worse where the mortgage broker is "in bed with" the Lender.  Many lenders will allow mortgage brokers to manipulate commission rates - meaning a mortgage broker could dramatically increase the upfront commission while "dialling down" trailing commission to almost nothing.
     
  2. Where the mortgage broker has claimed to be rebating 100% of commissions - but then offers a free service on the basis of keeping the upfront commission - you are giving away a really significant part of the benefit they projected as part of their marketing or as part of their supposed analysis of your situation.  For the effect of this see our Trailing Commission Rebates Page.
     
  3. These type of mortgage brokers know that most people refinance their loans every 3 or 4 years.  So, while they make a big deal about trailing commission being for the life of the loan and want you to focus on that as being the real "prize" they know that upfront commission is generally a much greater amount and more predictable.
     
  • We are constantly seeing tricky marketing and false and misleading claims made by cash back mortgage brokers (just like the false and misleading claims made by traditional mortgage brokers).  Some examples:
     
    • There is one company that claims it has "the highest level of commission rebates on home loans".  That company pays 70% of the trailing commission and 0% of the upfront commission.  It's hard to see how this is higher than 100%.
       
    • There is a prominent cash back company that claims to be the number one cash back provider for 8 years running - but even its name tells you that it pays back only a share of commission and not 100%.
       
    • Yet another claimed to be independent - until the new laws put a stop to that false claim.  You cannot be independent if you are keeping any part of the commission paid by the Lender.  Now they’ve simply reworded their website and used some different “power adjectives”.  Nothing else has changed and the marketing angle remains the same.
       
    • As outlined above - one of the most cynical practices we're seeing is companies that provide savings projections based on (supposedly) paying 100% of commission rebates.  In other words they attempt to look "just like Independent Mortgage Planners".  They then offer to remove their fee for service on the basis that you forego the upfront commission.  This not only makes a mockery of the savings projections they have held out as an inducement to win your business - it appears to be a form of "bait and switch" marketing (and therefore a potential breach of Australian Consumer Law).
 
CUT THROUGH THE HYPE - ASK THE MORTGAGE BROKER IF THEY ARE INDEPENDENT - AND GET IT IN WRITING!!