Why I’m not doing refinances anymore

Home Mortgage Refinance

A few years ago I made the decision not to go after refinances. I mean, sure I still do them if an opportunity falls in my lap, but these days I just don’t get caught up with the whole, “a reduction in your interest rate by just 0.2% can save you thousands over the life of your loan” game.

I’ve just found that people who are after a cheap rate are he worst type of customers – full stop!

You see, rate shoppers are never satisfied with their rate as they’re constantly searching for the ‘best rate in the market.’ As such, as soon as they’ve found a better rate then yours they’re gone.

Far more often then not, I’ve found that this happens within the first two years of you settling their loan, which means you’ll be getting a clawback notification from your aggregator so all that work you put in was for nothing.

Apart from all that, the main issue that I’ve got with refinances is that whole experience just cheapens what I think my value add as a mortgage broker is.

So if you are in fact one of those brokers who aggressively goes after new business via finding cheap rates, I want to offer you an alternative and a different direction for your business to focus on.

In my business, the main type of transactions I focus on are what I call the ‘grey zone’ where price is not as much of a question. Examples include:

  • Bridging finance for people who are nervous about selling their home before they begin looking for their new property.
  • Investment lending for those that have never bought an investment property before.
  • SMSF lending, in particular working with accountants who advise on the structure of their client’s SMSF.
  • Commercial lending, see here and development finance.
  • Regional transactions i.e. agri lending.
  • Buying a property if your self employed and have been in business for less than two years.
  • Consolidating personal debt where late payments or defaults have been involved.
  • Cash out loans for people who don’t want to jump through hoops when disclosing reasons for why they need the money

I could go on but I think you get the idea.

When thinking of you and your business, you’ve got to look at yourself as a solutions provider, not a transaction.

And it’s vital that you clearly articulate this message when you’re dealing with clients, referral partners and in your marketing message.

How to articulate your message

Of course, this all sounds well and good but how do you actually get this message across to your network? Well, let’s break down each of those three areas to get some clarity on the issue:

1. Clients

We all know that referrals from existing clients are the golden ticket for new business. But how do you get your clients to referrer their friends and family to you without asking them to do so? I’ve covered how to do this previously and it’s starts with having an amazing process. However, how do you communicate to your clients after you have settled their loan?

The best way to do this is to have a weekly, fortnightly or monthly communication that goes out to your client base. This can be a newsletter, blog, podcast, letter, magazine, whatever you want. The point is you’ve got to try and stay top of mind in your client’s mind and train them over time so that if they hear about an opportunity in their network, they’ll think of you.

You do this by making sure that every time you communicate to your clients, you discuss how to solve a potential problem. This is often referred to as ‘helpful marketing.’

If you do this correctly, when your clients hear their friend or family complaining about for example, how they have no idea how to buy an investment property, you’ll immediately come to mind as someone who can help them.

2. Referrers

The tricky thing about dealing with referrers such as accountants, financial planners, buyers agents or real estate agents is that it’s often hard for us to win them over in our value offering until we’ve settled a loan of one of their clients. If you haven’t read my Referral Generation Formula Ebook, I cover how to raise your perceived level of value so it’s worth a read. However, the process to articulating your message is similar for your referrers as it is with your clients.

Every time you meet your referrers, litter them with stories about how you’ve helped clients solve solutions to their problems. As time goes on, through a combination of them experiencing you do this for their clients and you training them through your meetings, they will slowly start to see you as ‘Mr Fix It.’

3. Marketing

Our industry is going through a real disruption via social media and online marketing at the moment. However, the vast majority of communication from banks and brokers has been about advertising a headline low interest rate in an attempt to win a refinance.

However, once again, when thinking about people online there a definitely those who are looking for a cheap rate. However, there’s also a bunch of people who are trying to find answers to their problems via the internet. If you focus your online marketing to trying to solve these problems for people and over time building a relationship with them so that you become their trusted advisor, when they eventually become a client of yours they’re far more valuable to you then someone who is only doing business with you because you found them a cheap rate.

I’m working on a new product for you which shows you how to do this and I’ll be releasing more details about this later in the year but in the meantime, if you want to get a greater understanding about how online marketing works, check out this video here.

There is so much more a mortgage broker can offer someone other than a cheap rate. I’m not saying there’s anything wrong a refinance but try and take a more sophisticated approach to your business if you want to ensure of your longevity.

Committed to your success,

Tim Russell