How to become a Mortgage Broker? Can this be a good career choice? A mortgage banker is employed by the bank where you draw a fixed salary, on top of that, still earn commission on sales. It is easily the best of both worlds of safety in fixed salary with bonus upside. Bankers also tend to acquire enquiries much more easily because of the bank you work for.
A mortgage broker is someone who helps you comb through the entire market for all the mortgage choices available and help you to find the best fit packages.
Difference between Mortgage Banker and Mortgage Broker
A Mortgage banker helps to process mortgage loans and is basically a sales staff of a particular single bank.
A Mortgage Broker is an individual or a brokerage company that has access to a vast choice of home loan or financing packages from many banks.
In short, it is like walking into a single-brand shop versus a supermarket that carries many brands.
Imagine it is a loan supermarket that allows you to browse, compare, analyse and select loan packages best suited to your needs.
How to Become a Mortgage Broker
A mortgage broker however is like an “out-sourced” banker. In this case, the mortgage broker needs to build a relationship and sign contracts with all the banks for home loan referral. There are also many administrative tasks that a Mortgage broker has to endure.
Updating and Maintaining Mortgage Rates
Mortgage brokers have to update 100s of housing loan packages consistently. Updating and maintaining loan packages takes up easily 50% to 60% of a Mortgage broker’s time.
Update Latest Forms and Paperwork
Making sure that the various application forms and declaration forms are up to date. There are some 70 to 100+ forms from various banks. A wrong form used will mean a wasted trip and extra costs. Banks change these forms without giving notice, hence it is very often a broker gets caught off guard.
Acquire Customers and Enquiries
Many bankers often feel that they are hampered by their bank’s packages being not attractive enough and hence their bonuses are impacted.
Hence the thinking that it is easier to become a Mortgage broker as a broker can offer packages from all the banks.
While being able to offer a vast choice of packages is true, but acquiring customers and enquiries is a totally different story.
Customer acquisition is very costly for the mortgage broker, while the cost of customer acquisition is equally costly for the bank, the cost of acquiring enquiries for bankers is relatively easy and at less cost to the bankers.
Bankers go out to drink and entertain to build channel relationships to bring in the loan deals. Mortgage brokers do not focus on channels but rather on individual customers, so the drinking in pubs and entertainment is out.
Some of the channels available for acquiring customers are: –
- Call centres – Calling the phone book.
- Search Engine Marketing (SEM) – Generally referred to as advertising search engines such as Google, Yahoo, Bing, Baidu, etc.
- Advertising on Social Media, Facebook, Yahoo, Linkedin and other digital media.
- Advertising on Print Media such as SPH and mediacorp.
- Advertising on Radio and TV.
- Advertise on Taxis and Buses.
- Creating knowledge through editorial.
- Creating a platform and using platform to generate enquiries.
- Giving talks and seminars.
- Electronic Digital Media (commonly known as eDM, which is basically a email newsletter blast)
- Distributing flyers.
Consulting and serving the mortgage enquiries
Consulting with and serving mortgage enquiries will require a good understand of finance and investment, how banks work, macro global economy such as currency rates, inter-country interest rates and funds flows, MAS rules and regulations, loan-to-value rules, TDSR rules, HDB rules, IRAS rules on buyer stamp duties and ABSD, and many home loan and financing terminology.
And of course the common question, is now a good time to buy? What kind of properties are good for investment? Or where would you buy? So a good mortgage broker will need to have a very wide base of knowledge.
How much does an enquiry cost?
Many bankers who left the bank may not be aware of how costly it is to acquire customers. Let us just go through the more common channels of acquiring leads.
Search Engine Marketing (Google) – Pay per click
A typical cost of a click can vary across different industries. It could range from 20 cents to $50 dollars. Yes, $50 dollars. But generally $2 to $10 dollars is the norm for moderately competitive keywords.
That means, even if someone accidentally click on your advertisement, you will pay Google $2 to $10 for a click. Generally if the keyword is well researched, every 30 to 50 clicks will result in an enquiry.
- $2 to $10 per click
- 30 to 50 clicks for an enquiry
- Cost to set up a landing page, around $500.
If we work on 100 enquiries a month. The cost will run up to: –
- Low range = $500 + ($60 x 100) = $6,500 per month ($65 per lead)
- Mid range = $500 + ($100 x 100) = $10,500 per month ($105 per lead)
- High range = $500 + ($500 x 100) = $50,500 per month ($505 per lead)
The mid range is the most likely scenario. If you obtain 100 enquiries for home loans, hopefully you will be able to help all 20 of these customers find their home loans, then you would have spent around $10,500.
Facebook Marketing – Pay-per-click
Facebook marketing is very similar to Google, but instead of targeting keywords, you are targeting demographic groups.
If you know how to set up a campaign with the copywriting, graphics and so on, that will be free. If you do not know how to do so, expect to engage someone and spend $500 – $1000 at least to set up a campaign. This is excluding advertising fees.
Facebook advertising is very temperamental. Generally things associated with food, free vouchers, free e-books and things related to lifestyle will tend to perform better. Cost per click could range from 20 cents to $3 to 4 dollars. (Do note, these are indicative, market forces will change the way the pricing behaves)
- Expect around 30 to 200 clicks to get an enquiry.
Overall cost per enquiry basing on 100 enquiries would easily come to $50 to $150 dollars per lead.
This aged old method of distributing flyers still work. On average, distributing 50,000 flyers using 80 grams paper will cost around $600.
- Enquiry rate is 0.01% to 0.05% of enquiries.
- That works out to be 5 to 15 enquiries per 50,000 flyers.
- Cost to distribute flyers (around HDB only) is around $100 per 10,000 pieces, therefore you will end up at $500 per 50,000 pieces.
- Total cost is $500 + $600 = $1,100 to receive around 5 to 15 leads. This works out to a cost of $73 to $200 per enquiry.
Call Centres and cold calls still works.
- Response rate is around 1%.
- Call Centre for 10 hours = $100
- Per appointment set up = $25
- Number of calls per hour = 30 to 40
- 10 hours = 300 to 400 calls and you should get around 3 to 4 appointments and the total cost would be around $175 to $200.
- This works out to a $50 to $57 per lead, excluding phone bills and excluding DNC scrubbing and preparation costs as well as Call centre staff training.
We could go on exploring each of the different methods, but I think you get the idea. Cost of customer enquiry is not cheap and the various different methods all come to within a similar price ball-park range.
If you want to build your own website, you will need to have IT help to constantly update the system with rates. If you do not wish to constantly update rates, you can check out Home Loan plugins that can help you automatically update the rates on your website, so you do not have to worry about updating the IT system.
Serving Mortgage enquiries with Professionalism
Customers want to compare home loan, understand their TDSR from multiple properties and want to find out their loan quantum, down-payment, Monthly progressive payment, interest cost and savings for switching for refinancing, etc. You cannot deny customers this detailed and professional service. People who are more “relationship based” have to complement their people skills with data and analysis. Things are increasingly getting more technical and analysis based. Each of these requests from the customers will easily take hours to prepare.
Many professional property agents, financial advisors as well as mortgage brokers are using home loan reports to generate mortgage planning and analysis for their customers. This cuts down the time from spending hours to just a few minutes for each report, so ex-bankers can enhance their survival rate in the mortgage broker industry.
Figure 1: Home Loan Report – Property Buyer Report, www.iCompareLoan.com/consultant
You can Download a sample Property Buyer Home Loan Report Analysis.
For ex-bankers who are serious and passionate about Mortgage, it is not an easy business, but there is a way. For new comers or mid-career people who wants to get into banking, becoming a mortgage broker will open the doors to an eventual banking career as mortgage brokers are sought after to become bankers and vice-versa.