Mortgage Broker Business Plan

Mortgage Broker Business Plan

A Mortgage Broker advises on and sell mortgages as well as related products such as insurance, endowments and pensions. There are thousands of mortgage products available which can be complex and confusing for the customer. Therefore your Mortgage Broker Business will help by examining their personal and financial circumstances and objectives before looking at the products available and finding the most suitable.

The term “mortgage” or “mortgage loan” is used loosely to refer both to the lien and to the loan. In most cases, they are defined in two separate documents:

  • a mortgage and
  • a note.

Mortgage brokers do not lend. They counsel borrowers on any problems involved in qualifying for a loan, including credit problems. Brokers also help borrowers select the loan that best meets their needs and shop for the best deal among the lenders offering that type of loan. Brokers take applications from borrowers and lock the rate and other terms with lenders. They also provide borrowers with the many disclosures required by the federal and state governments. In addition, brokers compile all the documents required for transactions, including the credit report, property appraisal, verification of employment and assets, and so on. Not until a file is complete is it handed off to the lender, who approves and funds the loan.

The lenders that mortgage brokers deal with quote a “wholesale” price to the broker, leaving it to the broker to add a markup in order to derive the “retail” price offered the consumer. For example, the wholesale price on a particular program
might be 7% and zero points, to which the broker adds a markup of one point, resulting in an offer to the customer of 7% and one point. But if the broker adds a two-point markup, the customer would pay 7% and two points.

As a mortgage broker you must gather background information about your clients in order to recommend the most suitable repayment method and mortgage product. You should have access to a full range of mortgage sources and be dedicated to finding the right loan, with the best rates, terms and costs, to meet your clients' unique needs.

As a mortgage broker you can also offer advice in corporate finance and other investment activities e.g. planning for school fees.

What should a client expect from a mortgage broker:

  • A comprehensive assessment of their current financial situation;
  • Assistance in helping them determine their financial needs and goals;
  • An explanation of the available financial products including their full costs and any associated risks;
  • Development of a written plan and assistance in its implementation;
  • Creation of a timetable for implementing the plan and helping them periodically review the progress.

Some simple rules for clients

  • Never write a check made payable to your broker, other than for his fee. Your checks should be made payable only to finance or mortgage companies or insurance companies. No legitimate broker would ever allow a client to write a check for investments or insurance payable to him personally or to his firm.
  • Never allow your broker to list himself as a joint owner or beneficiary on your accounts. The only place your advisor's name should appear on documents is as the advisor of record.
  • Never lend money to your broker.
  • Never give commission-based brokers discretionary authority. When you establish a discretionary account, you’re giving the advisor permission to buy and sell investments on your behalf without obtaining your consent prior to each transaction. This is generally not a problem when the advisor is compensated by fees (of whatever type), because such advisors are not paid to execute trades (and thus, they have no incentive to do so). But granting discretionary authority to a broker who earns commissions can be dangerous, because such an advisor will earn money every time he executes a trade. If you give him permission to trade at his discretion, he could earn a lot of commissions while your account falls in value.
  • Never let your broker sign your name to any document.
  • Never let your broker allow you to sign a blank form or contract. Cross out sections that do not apply.
  • Never let your broker use his address on account statements instead of yours. You should receive periodic statements directly from the mutual fund, brokerage firm, or insurance company. Never allow your broker to have such documents go to his office instead of to you.
  • Never let your broker sell you an investment that isn't available from others. Advisors who want you to buy proprietary products usually earn additional compensation for doing so.
  • Never let your broker share in your profits. I'd never let an advisor share in my profits unless he was willing to reimburse me for my losses.
  • Never let your broker assign any agreement with you to another advisor. If your broker retires or sells his practice, you immediately are relieved of any and all contractual obligations you may have had with your broker.

A mortgage broker (also known as mortgage adviser, intermediary or consultant) will advise on and sell mortgages as well as related products such as insurance, endowments, and pensions, etc. There are thousands of mortgage products available which can be complex and confusing for the customer. Therefore the consultant will help by examining their personal and financial circumstances and objectives before looking at the products available and finding the most suitable. The consultant will help with the application process and explain the financial implications involved. He/she must gather background information about the client in order to recommend the most suitable repayment method and mortgage product.

Different firms provide different levels of service. They must tell the customer at the outset which level they provide. There are three types of service: advice and recommendation, where information and advice is provided on a wide range of mortgage products; information on different types of mortgages; and information on a single mortgage product only. The latter two services do not include advice on mortgage selection and in effect the customer must make their own decision. Where recommendations are given, reasons should be provided to the client before the mortgage is completed and must be confirmed in writing. Some consultants will give advice on a selection of products based on their own research of the market while others will select from the market as a whole.

Some mortgage advisers will be completely independent, able to offer advice and information on a wide range of mortgages. Others will be tied to perhaps one or several mortgage lenders and so will advise on their products only. Mortgage consultants may charge a fee for services or may receive a commission on products sold. Payments will vary according to the type of product sold. Details of any fees charged or gained by the consultant must be confirmed at the outset in writing.

The market for mortgage advice will be greatly affected by the state of the housing market. When the market is buoyant, more people will be seeking to buy property for the first time or move from their existing house. Therefore there may be more people seeking mortgages or re-mortgages and advice. During 2008 the housing market experienced a dramatic collapse. However, dramatic changes in the market, such as those seen in the early 1990s are not anticipated and the market for mortgage lending is expected to grow steadily over the next five years.

Recent adverse publicity may make potential customers wary. One small survey discovered that many advisers were not giving the correct advice and consultants have also been criticised for selling unnecessary plans and policies and of having a greater interest in maximising commission rather than advising clients on the best deal. The mis-selling of endowment mortgages has been a further problem highlighted by the media. However, the industry is eager to be seen as responsible and regulated.

Market conditions are subject to change and thorough up to date market research should be carried out before any business decisions are made.

A mortgage broker provides comprehensive mortgage planning and investment advisory services to individuals and small businesses. You work solely for the client to help attain their financial goals. Whether a client needs an advisor depends on a persons own comfort level with making mortgage decisions, keeping up with the market, and just plain doing their homework.

As a mortgage broker you will be generating new clients through a combination of networking and monthly public seminars that introduces otherwise unreachable segments of the population. Besides the seminars developing new business, it is also a way that mortgage brokers can give back to the community.

Your objectives should be to offer comprehensive mortgage broker services.

As a mortgage broker you should focus on providing personal and specialized services to meet each client's specific needs.

The primary objectives of your firm should be:

  • Become profitable serving the real estate investment opportunities of the city.
  • Develop a solid, corporate identity in your specified target market area.
  • Become one of the top brokerage firms in the area by your third year of operation, or before.
  • Realize a positive return on investment within the first 12 months.

Your mission will be to provide your customers with fair mortgage rates at reasonable prices, while keeping your clients informed and educated throughout the process.

You will become friends and mentors to your customers as well as quality service providers.

You should create an excellent place to work, a professional environment that is challenging, rewarding, creative, and respectful of ideas and individuals.

Your Mortgage Broker Business should ultimately provide excellent value to its customers and fair reward to its owners and employees.

Sole proprietors going into business on their own are often less likely than bigger companies to take the time to write a detailed business plan. But they really have as much or more to gain.

Writing A Mortgage Broker Business Plan

Writing A Mortgage Broker Business Plan

Writing A Mortgage Broker Business Plan

Writing a Mortgage Broker Business Plan — particularly creating a detailed set of goals and objectives — gives you a simple framework to think about where to begin and how to follow through. If you’re going into a Mortgage Broker Business on your own for the first time, a Mortgage Broker Business Plan can help you sidestep problems and focus clearly on what you do best. Most important of all, a detailed and well-thought-out Mortgage Broker Business Plan gives you the confidence you need to go out and start your own Mortgage Broker Business in the first place.

Part of the Mortgage Broker Business Planning process involves an analysis of your own strengths and weaknesses as well as a recognition of the opportunities and threats in your business environment.

Establishing specific goals and objectives as part of a coherent, overall Mortgage Broker Business Plan is especially important when your Mortgage Broker Business is in trouble. An effective Mortgage Broker Business Plan ensures that all your employees are focused on the same goals when you most need them to be.

A strong and inspiring Mortgage Broker Business Plan can bring your employees back together and boost morale. Two key parts of a good Mortgage Broker Business Plan— the mission statement and the vision statement — help make clear to employees not only what the company does, but also why it’s in business. The two statements express both your purpose and what the Mortgage Broker Business wants to become in the future. Many Mortgage Broker Businesses use their mission and vision statements to inspire their people, boost productivity, and sharpen their competitive edge.

You have two good reasons to write a Mortgage Broker Business Plan. One of the purposes of your Mortgage Broker Business Plan will be to get the part of the Mortgage Broker Business you are creating.

The other purpose of your Mortgage Broker Business Plan will be to help you set out goals and objectives for the remaining part of the Mortgage Broker Business, allowing you to focus your efforts on what you do best. Whenever a Mortgage Broker Business undergoes the kind of sweeping change you describe, it really becomes a new business.

That’s why writing a new Mortgage Broker Business Plan in this situation is so important.

What could go wrong, and what will you do if the worst happens? Your Mortgage Broker Business Plan should include an honest assessment of the risks involved in your Mortgage Broker Business, as well as how you will minimize them. This is important because you need to have considered all possible outcomes so you can plan for and deal with all eventualities. Investors will also want you to show that you have not just approached the project wearing 'rose-tinted spectacles' but have looked at the realities of the situation. Consider which of the following risks are relevant to your Mortgage Broker Business:

  • Lack of management experience (address this risk by getting advice or mentoring from your business adviser, accountant or solicitor).
  • Little trading history (this will make it difficult to borrow money or receive credit, so you might need to make other plans to finance the business initially).
  • Economic uncertainties (if you are borrowing money and paying interest, for instance, make contingencies for interest rate increases).
  • Over-reliance on key staff.
  • Over-reliance on a few suppliers.
  • Over-reliance on a small customer base.
  • Customer bad debts leading to cash flow problems.
  • Partnership difficulties.
  • A sudden increase in competition.
  • Security issues.
  • Failure to meet your sales targets.
  • Lack of resources at key stages of development.

When you are looking for people to invest in your Mortgage Broker Business, only family, friends and existing business associates who trust you are likely to put their money your way. Unless, that is, you go to a first class commercial lawyer who can devise a scheme for giving your minority shareholders protection.

Venture capital companies do exist, and some of them deserve the name. Such companies can be divided up, variously, as follows:

  • those that will invest in new start-ups;
  • those that will not;
  • those that will help, indeed insist on helping, in management;
  • those that have a ‘hands-off’ approach;
  • those that genuinely offer ‘risk’ money;
  • those that are purely money lenders.

What virtually all of them have in common, however, is an inability to help the Mortgage Broker Business which needs anything less than $150,000.

There are two very good reasons for this. The first is the cost of investigating your proposition. The venture capital company does not know you. It is unlikely to know much, of itself, about the sort of Mortgage Broker Business you are proposing. All it knows is that you have written a good Mortgage Broker Business Plan. So now experts have to be paid to check out your proposal. Their investigation may cost $7,500 or more. On an investment of $150,000 over five years, that £7,500 represents only 1 per cent per annum. But on a loan of merely $20,000, it comes to 5 per cent per annum. There is a further point to be taken into consideration: that these costs are incurred even if the venture capital company should decide against advancing the money. The successful loans have to cover such costs too. It is easy to see why these
companies are not willing to lend sums of less than $150,000.

The second reason is that a small start-up Mortgage Broker Business is deemed unlikely to have sufficient all-round management skills. The only venture capital company likely to be interested is one that has a definite ‘hands-on’ approach and will expect to have a say in the management. This is not necessarily a bad deal for a new company, but the costs are too great to make an investment of less than $150,000 by the venture capital company worthwhile.

Mortgage Broker Business Plan

Mortgage Broker Business Plan

Mortgage Broker Business Plan

Being authentic requires truth and hard work. It requires an acknowledgment of who you really are in terms of what you believe in, how you behave, and what you expect. If yours is a lethargic organization, don’t claim high performance. Being authentic means identifying all the problems in your system, communicating to employees that you know the problems, and finally telling them how you intend to fix those problems. Everyone must share this hard work across the range of business activities and down the management structure. Everyone must participate in careful organizational analysis and the required actions to fix the problems.

Being congruent requires constant vigilance on the part of the whole management team. This means you must do what you say— every single time. There are situations where you will slip. Honest mistakes are okay. Employees do not expect their management to be perfect. They do expect them to live up to their word and match word and deed.

Reaching a state where you and your management team are believed is a journey with history working against you. A mismanagement example made public doesn’t help your case. Building trust to counter this history is not an overnight event. After your story is completed, communicated, and demonstrated you will experience hesitance and resistance from employees. They won’t be quick to jump on your train. There will be a test period to see if you really meant what you said or if this was simply an annual pep talk from upper management.

Remember that we have all heard it all before, and actions speak louder than words.

Great Mortgage Brokers do not just happen.

They were planned that way.

Sites Worth Finding

Sites Worth Finding is a simple way of searching for free information on a wide range of subjects; simply enter your search below: