It might sound too good to be true but the fact is it is true. Some mortgage brokers pay you a small amount of money at regular intervals. This money is called ‘Mortgage Rebate’.

Mortgage Brokers guide you and help you find a loan that is most suitable to your needs and requirements. They do all the leg work for you. Most of the brokers don’t actually charge you anything for this service. They are paid by the lender. The lenders pay them an upfront commission and monthly ongoing commission (for the entire loan term). This monthly commission is called the trailing commission (similar to what the financial planners get).

Like financial planners, some mortgage brokers have now started paying the end customer, a part or the full amount of the trailing commission that they receive from the lender - the amount that they pay back is the mortgage rebate.

Here are a few points you need to keep in mind about mortgage rebates:

Account It Gets Credited Into

The mortgage rebate is paid back into your account of choice. To make best use of the rebate, you should get it credited into your home loan. Once it hits your savings account, you will surely find a way to spend it on daily expenses. You will make the most out of it only if the rebate is out of sight and goes straight into the home loan.

Choosing A Mortgage Broker

Don’t sign up with a mortgage broker just because he offers a rebate - make sure he meets the right criteria. Read my ten point check list that can help you pick the right mortgage broker.

Don’t Let Rebate Amount Influence You

Different lenders offer different commissions. The higher the commission they get, the more your rebate will be. However this does not mean that you should choose the lender that offers the most commission to your broker. This loan can be totally unsuitable to you and in the long run might end up costing you more (even with the rebate). When choosing the loan, you and your broker should keep the rebate out of your minds. And to ensure this happens, make sure you ask the right questions.

Frequency Of Payment

Find out how often you will be paid…And also check if in future this rebate amount might change and if yes, find out what factors might cause it to change.

If You Refinance

Read the fine print and understand what will happen if you switch lenders. Some brokers make you pay back the rebate. Be aware of what you have signed up for so that there are no surprises in the future.

Visit MFAA website and use their online database to find a broker…Some of the brokers (who offer mortgage rebates) who have been receiving media coverage lately are the Mates Rates and Peach Home Loans.

If you have dealt with mortgage brokers who offer mortgage rebates, I would love to hear from you. Please leave you comments below.

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