How do you recommend lenders to your clients?

decisionss

Have you ever heard of the phase ‘paralysis by analysis?’

My trusted source Wikipedia defines it as, ‘an anti-pattern, the state of over-analyzing (or over-thinking) a situation so that a decision or action never taken, in effect paralyzing the outcome.’

For the mortgage industry, due to the technology disruption we have experienced during recent years, there is now more information than ever out there which can be both a positive and hindrance for your clients.

For instance, when it comes to finding a home loan, clients have any number of options available to them such as:

  • Mortgage comparison sites such as Rate City, Mozo, iSelect, WhistleOut, Finder
  • Dealing direct with the banks
  • Credit unions and building societies
  • Peer-to-peer lending
  • Flat fee offerings such as Flongle
  • Dealing with brokers

As a mortgage broker, you need to be aware of this and work hard on creating a clear offering that is based on creating an outcome for your clients other than an interest rate. I discussed this in my last post which you can read here.

However, at the end of the day, rate does play a factor in your lender recommendations so how can you address this effectively and still come away with a positive outcome for you and your client?



How to make your client dictate what interest rate they end up with

First off, it’s very important that right from the start you move the conversation away from talking about rate. This is done by having a structured fact find meeting. I’ve got a great training video which breaks down exactly how to do this but essentially it comes down to four steps:



Step 1 - Address the issue at hand

Unless you’re completing a review for your clients or you’ve got a marketing campaign targeted for refinancing, new business you receive will rarely be just a rate driven conversation. There’s usually a specific need attached to your clients such as buying a home or investment property, obtaining cash out, bridging finance etc.

Once you’ve identified what their need is, your job is to spend at least 20 minutes educating them about this need. If you do this correctly you will be able to easily steer the conversation away from interest rates.

For instance, let’s say that they’re looking to purchase an investment property. What I am doing at the moment is educating my clients about the APRA changes, which were implemented late last year. Once my clients understand that an investment loan carries a higher interest rate they are no longer thinking about that 3.69% rate that they heard Mortgage House offering on the radio (come on, I’m sure you’ve heard it!).



Step 2 - Discuss Offset vs Basic Home Loans

Explain to them the true benefits of an offset account and talk about how there is a cost to the bank in order to manage these type of accounts. Educate them on how some providers do not have offset accounts therefore have a lower cost of running their business so have an ability to offer cheaper rates.

Let them make a decision as to whether or not an offset account is important to them.



Step 3 - Talk about P&I vs IO Repayments

Again, spend time on outlining the benefits associated with structuring their home loan with either option. Repeat the affects APRA has had on the market in relation to these repayments.

Let them make a decision as to whether or not they want P&I or IO repayments.



Step 4 - Discuss fixed vs variable loans

Educate your client as to why someone would fix their rate. Outline to them how fixed rates are priced by the banks i.e. off bond markets not where they think rates will be in 1, 2 or 3 years.

Let them make a decision as to whether or not they want a fixed or variable loan.

By having a structured fact find meeting, and making them make a decision as to what is important to them in a home loan you will allow your client to dictate what sort of interest rate they end up with.

To use the investment property example, if you client said to you they wanted an offset account and variable rate with interest only repayments, you know for sure there’s no way they’re going to be getting the cheapest rate on the market.



Limit your lender options

I suggest to my client coaching clients that they try their best to have a one hour, face-to-face fact find meeting. I also suggest that when it comes to presenting your lender recommendations that you also make it around one hour and also face-to-face.

I’ll leave discussing the structure of this meeting for another day but when it comes to presenting your lender options make sure you do three things:

  1. Limit your choices to no more than 3
  2. Ensure the lender you want them to go with has the cheapest rate
  3. Make sure the lender you recommend is someone who you know back-to-front

Give all this a go and let me know if you have found your closing percentages increase as a result of having a structured client experience.

Committed to your success,

Tim Russell

 

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