How to make a mortgage broker business plan

Before starting a mortgage broker business, it’s important to reflect on your key values, technical skills and natural aptitudes, in addition to your personality type and interests. As a mortgage broker, you’ll be helping consumers navigate life-changing decisions, providing informed guidance in what can often be stressful times. It’s a challenging role requiring a unique blend of soft and hard skills.

It might seem basic but the first step in any business plan for mortgage brokers is asking yourself the right questions. A SWOT analysis will help you weigh up the pros and cons of a mortgage broking career, and provide clarity on your target market, business size, and long term growth plan. This can go a long way to prematurely jumping into any bold decision.

The first and foremost quality that defines a good broker is an authentic desire to help customers find the ideal solutions. Successful mortgage brokers are customer-oriented, have a knack with numbers, and can set long-term goals. Planning is everything, because the nature of mortgage broking means that you’ll be solving complex problems whilst also managing long-term relationships. To succeed, you’ll need the foresight to set long-term results-focused goals, and that means a mortgage broker business plan that extends to the next 3 years and beyond is vital.

It is worth noting, mortgage brokers are not alone in this journey and are also able to look for help outside their organisation to support their business practices. For this reason, it is worthwhile considering how you can engage with a company such as MBW to handle your marketing needs including logo design, website design and even mortgage broker lead generation.

Creating a mortgage broker marketing plan to complement your business plan before beginning your life as a broker is also useful to consider how you can develop a sustainable pipeline of leads. In particular, it will inform you of the costs associated with generating new opportunities and prospects on an ongoing basis.

Many aspiring mortgage brokers are taken by surprise when faced with setup costs, and it’s crucial not to overlook any expenses when writing a mortgage broker business plan. Independent mortgage brokers undoubtedly pay the largest setup and ongoing costs, but this is not the only way to become a mortgage broker and the right decisions on business structure and aggregator can save you money over the long run.

If you join an existing brokerage you’ll have some support to cover the costs of getting started such as branding and marketing, but more significantly, existing firms usually cover many overheads should you join the right one. It is for this reason that mortgage brokers can save thousands with the right partners and aggregator groups.

If however, you are looking to become your own boss, then starting your own mortgage broking business has its benefits too. Investing in your own brand can lay the foundation for financial independence over the long-run as your brand will eventually do the work for you.

Start your mortgage broker business with this setup checklist

Whether you’re new-to-industry or starting a mortgage broking business, it’s worth familiarising yourself with the various certifications, licensing and membership and insurance fees required. Calculating setup costs is an important step in any mortgage broker business plan.

This checklist covers some of the start-up essentials you won’t want to overlook.

• Aggregator joining fee: $0 to $50,000 for a franchise
• Monthly aggregator fee: approximately $500 per month taken from your commission
• Credit history check: $79.95
• Police history check: $42
• Credit licence (for independent brokers): up to $10,000
• External dispute resolution membership: $350 upfront fee + $140 annual fee
• Professional indemnity insurance: approximately $1,000
• Certificate IV or Diploma in Mortgage Broking Management : $440 to $1090
• Industry association membership: $420+
• Mentoring: between $2,500 to $10,000 per annum

On top of this, you should also consider the costs associated with marketing your brokerage. While these costs can vary significantly, it is worth noting that spending on marketing and lead generation can help you to attract new customers on an ongoing basis.

A key decision when making your mortgage broker business plan is whether you’ll be working for a brokerage as a contractor, on a PAYG basis (employee), or striking out as a sole trader. With the right brokerage agreement, PAYG mortgage brokers have the potential to save thousands on operating costs, training, support staff and systems, in addition to guaranteed leads each month. For this reason, researching existing brokerage firms to join should be high on the list for a successful mortgage broker business plan. As a contractor or PAYG employee, a good brokerage will help you maximise your profits.

As a self-employed broker on the other hand, you get to decide your own fortune through your own efforts. This means flexible work hours, control over your earnings and commission, and complete autonomy on marketing and business decisions. There are however, a number of additional expenses to factor into your mortgage broker business plan if you are planning to operate your broker business under your own banner.

Failing to plan ahead for these running costs is what leads most new Australian businesses to fail in the first few years. As a self-employed broker, having a thorough mortgage broker business plan could be what makes or breaks your business. For independent mortgage brokers for example, some basic running costs may include:

• Whether or not your mortgage broker business will be operating from an office space
• Deciding on your phone and IT system
• Mortgage broker marketing for branding and lead generation
• Subscriptions for market data and industry insights
• Travel costs and client entertaining
• Your expected salary
• Cash on standby for liquidity

To become a certified mortgage broker, you’ll first need to complete a Certificate IV in Finance and Mortgage Broking (FNS40815) as a minimum requirement. Next, depending on the aggregator and industry body you join, you may be required to complete a Diploma in Finance and Mortgage Broking Management (FNS50315). Each course takes about 6 months to complete, and you can complete both in a year via distance education so you may want to consider your options when you make your business plan for mortgage broking.

Rather than engaging solely in an online course, which can feel sterile and un-motivating, many experienced mortgage brokers recommend workshops designed to streamline the study process by guiding you through the learning material. For the Cert IV, workshops are typically 3 days depending on the training provider, and Diploma workshops are an additional 2 days.

For credit officers and other finance industry professionals looking to gain formal qualifications, Recognition of Prior Learning (RPL) discounts may be available, so it’s worth researching this when you’re choosing a Registered Training Provider (RTO) to study with. Different RTOs have varying fees, and it’s worth researching the reputation of an RTO before committing to a mortgage broking business plan. A Certificate IV in Finance and Mortgage Broking (FNS40815) can be up to $585, and a Diploma in Finance and Mortgage Broking Management (FNS50315) can be as high as $1090. Fortunately for new-to-industry mortgage brokers, brokerages often partner with RTOs to provide discounts for their employees.

An aggregator, also called a ‘franchisor’, effectively serves as a middleman between the banks and the mortgage broker. In addition to providing access to their panel of lenders, aggregators also provide software and commission processing functions. Some aggregators also offer branding, leads and training amongst other things. Starting a mortgage broker business by aligning with the right aggregator can save you time and money.

On average, aggregators have between fifteen to forty lenders on their panel, and it’s helpful to note that the top mortgage brokers in Australia all have access to at least ten lenders at any one time. Some of the biggest aggregators in Australia include:

• AFG
• Choice Aggregation Services
• Connective Group
• eChoice Home Loans
• Finconnect (Australia)
• Finsure
• Loan Market
• PLAN Australia
• Vow Financial Group

Choosing an aggregator shouldn’t be seen as just another regulatory requirement to meet when writing your mortgage broker business plan. It’s essential for your success as a mortgage broker that the aggregator fee structure and their panel of lenders are the right fit for your business.

How do aggregator fee structures work?

Aggregator fees fall into two basic categories: commission split, and the fee-based model. To help you weigh the options and determine which model is the most beneficial for your mortgage broker business plan, read more about each structure below or get in touch and we’ll connect you with an aggregator that can help.

Commission split

This model involves the mortgage broker giving the aggregator a percentage of the commission payment, typically 90% to the broker and the remaining 10% to the aggregator, and a percentage of the trail commission. Because the aggregators only take a cut of commission once the payment is received, this model is preferable for brokers who are just starting their mortgage broking business.

Fee-based model

This model involves a monthly capped fee paid to the aggregator in exchange for access to lenders, being a flat-rate trail fee based on the loan amount. This means the more loans you write, the more you earn – because you won’t have to pay out commissions on each individual mortgage. However, this model is only beneficial if you’re writing enough loans to justify the monthly fee. As part of any business plan for mortgage brokers you should examine your expectations around leads and sales to decide on the best model for you.