December 3rd, 2018
As you know, the Combined Industry Forum has recommended changes to upfront commission structures. Quite a few of the lenders on our panel have already begun to implement these changes and we expect the rest to follow over the next few weeks.
Each lender on our panel has a different approach to implementing the reforms. We understand that this may make it difficult for you to get on top of the different upfront commission structures that apply to each lender for settled loans. So, we’ve created an Upfront Commission Change document to make it easier for you to understand. It is now available via the Services tab on your Mercury dashboard (if you’re using the desktop app, it will be available from Wednesday December 5).
To access it, simply log on to Mercury, then click Services > Comm Schedule.
Not all lenders have announced their new upfront commission policy. The Products Team will update the document as soon as we receive the information.
What has changed?
Lenders will no longer be calculating upfront commissions based on the total loan amount approved. Moving forward, lenders will calculate upfront commissions on the net balance of the loan – which may take into account the drawn down amount, offset balance, pre-payments, fees applied, interest (not accrued) and any transactions.
How this upfront commission is calculated, and when the upfront commission will be paid, will differ from lender to lender, according to their individual policy.
Some lenders will pay upfront commissions on settlement day, others will take up to 14 days. For example, Bankwest will calculate the upfront commission payable to you as at close of business on the day of settlement. Whereas Commonwealth Bank will calculate the upfront commission 14 calendar days after the date of initial draw down. Some lenders will also do a future recalculation of upfront commission, which may include a clawback.
Example: Commonwealth Bank loan.
Approved Loan Amount: $750,000 with balance at first draw down $750,000.
Balance in Offset account 14 days after settlement: $50,000.
Upfront commissions will be calculated on a net balance of $700,000.
Need more information?
Your local Broker Support Manager is on top of all these changes. If you’d like to know more simply give them a call. Meanwhile, the Products Team will continue to keep the important information you need fully updated in Mercury.