What is Commission Clawback?
Commission Clawback or ‘Clawback’ is where mortgage brokers charge you extra commission a year or two after your loan settles. It can be up to 0.7%… that’s an extra $3,500 bill for a half million dollar loan!
Unbiased will protect you from Commission Clawback at no extra cost.
When can Commission Clawback happen?
Mortgage brokers clawback commissions for various reasons. These include:
- having too much money in your offset account;
- making too many or paying too much in extra payments;
- paying out your loan too quickly and so on.
Exactly what too much, too many or too quickly means is up to your broker.
Commission clawback is unfair.
You will only ever be hit with it because you are protecting your own financial interests.
Worse still, you won’t discover how big that bill is until it’s too late as most broker contracts don’t state the exact triggers, thresholds or clawback amount.
Any broker can legally charge Clawback.
Any broker can charge you clawback – even if they don’t pay or promise to pay you any commission in the first place.
Mortgage brokers are not required to disclose clawback charges anywhere in their advertising or their website or any place other than your Credit Quote*… even then, they only have to set out that clawback may be charged in the fine print… and they don’t even have to call it Commission Clawback.
*A Credit Quote is the agreement your broker will ask you to sign when you are already reviewing lots of other important information and you have already committed to using that mortgage broker to arrange your loan.
How to protect yourself against Commission Clawback
As early as you can, you should find out whether broker/s might charge you clawback or similar penalties and how bad that might be.
Simply copy and paste these 3 questions into an email or sms to your broker:
Before I provide you any further information, will you please confirm by reply in writing:
- Will your service include any provision to charge me commission clawback or similar fee or penalty?
- Has your service ever included any provision to charge me commission clawback or similar fee or penalty?
- What is the largest amount for commission clawback or similar fee or penalty that you have charged or attempted to charge a borrower?
To protect yourself against Commission Clawback and similar unexpected costs, the reply should read:
Ideally, you should receive these answers before you invest too much time or provide any detailed information to a broker.
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