It may be a controversial tactic, but one leading broker has established a rate buydown system specifically tailored to switching lenders at renewal. Dustan Woodhouse of Dominion Lending Centres explains.
It may be a controversial tactic, but one leading broker has established a rate buydown system specifically tailored to switching lenders at renewal. Dustan Woodhouse of Dominion Lending Centres explains.
With around 1.1 million privately owned properties in B.C., about 50 per cent of which have mortgages on them, there are arguably more than 100,000 renewal transactions up for grabs in my home province each year. This is a significantly larger market than purchase transactions, and one with far less pressure and much longer lead times than most refinance and purchase transactions tend to entail.
Nice work if you can get it.
That, for me, has been the challenge since day one. The statistics we often hear are that lenders retain around 70 per cent of existing clients at the time of renewal. One popular broker lender boasts a current renewal retention rate of 91 per cent.
In other words, this is not an easy nut to crack.
As a broker starting out in 2008, I knew the above numbers, all of them, yet still made initial efforts to win some renewal business as the opportunity arose. However I quickly learned that in the 11th hour, in particular once the payout statement was ordered, lenders would get far more aggressive than the market rates offered in the initial renewal letters sent to their clients. Many clients would wind up sticking with their existing lender at that point. The time, and often the money I had invested in the file, was all for naught.
#pb#
The real trick was maintaining my cool with the clients' last minute U-turn and holding the relationship together, hopeful that I would retain the client as a referral source. That is another story altogether, a story of Zen meditation and deep-breathing exercises.
So I shifted gears and changed my approach.
Act 1: The letter
I began writing a letter for my clients outlining the market rates available and assuring them that there would be no costs associated with 'switching' their mortgage to another lender. To be fair the author is in a market with an average mortgage transaction of $425,000 which generates (full service) commission enough that even when there are costs, there are no costs to the client.
This letter served as a tool with which the client could short-circuit the entire dance with their lender. Nine times out of ten it did just that, forcing the lender to cut to the floor rate. Once in a while the lender would not match the rate, or would make the process so difficult that the client would return to our office, truly grateful. Either way the letter served as a tool for myself as well. It built trust with what would be potential future clients, if not immediate clients.
#pb#
Although it may seem like madness to some, the idea of writing a letter and sending clients back to their lenders with it, it freed up what would have been several hundred fruitless hours over the past six years and also helped build a strong network of supporting and grateful referral sources and clients alike. Admittedly without a lot of direct compensation up front.
As I entered my sixth year of brokering, I found myself writing these letters not just for random callers, but increasingly for my very own clients whose mortgage I had placed in 2009. There is a bit more of a sting to giving back a client you worked hard to obtain and to retain for five years. There had to be a better way. With these clients it was also not simply a matter of a short chat and a quick letter dashed off. Instead the expectation on their side was still there for a solid hour or more of catching up, consulting, market review, talk about future goals and strategic mortgage planning.
Catch and release might be fun while fishing, but it is not any way to run a business.
This is part 1 of a 2 part series. Check back tomorrow as Woodhouse fully explains his renewal rate buydown tactic.
With around 1.1 million privately owned properties in B.C., about 50 per cent of which have mortgages on them, there are arguably more than 100,000 renewal transactions up for grabs in my home province each year. This is a significantly larger market than purchase transactions, and one with far less pressure and much longer lead times than most refinance and purchase transactions tend to entail.
Nice work if you can get it.
That, for me, has been the challenge since day one. The statistics we often hear are that lenders retain around 70 per cent of existing clients at the time of renewal. One popular broker lender boasts a current renewal retention rate of 91 per cent.
In other words, this is not an easy nut to crack.
As a broker starting out in 2008, I knew the above numbers, all of them, yet still made initial efforts to win some renewal business as the opportunity arose. However I quickly learned that in the 11th hour, in particular once the payout statement was ordered, lenders would get far more aggressive than the market rates offered in the initial renewal letters sent to their clients. Many clients would wind up sticking with their existing lender at that point. The time, and often the money I had invested in the file, was all for naught.
#pb#
The real trick was maintaining my cool with the clients' last minute U-turn and holding the relationship together, hopeful that I would retain the client as a referral source. That is another story altogether, a story of Zen meditation and deep-breathing exercises.
So I shifted gears and changed my approach.
Act 1: The letter
I began writing a letter for my clients outlining the market rates available and assuring them that there would be no costs associated with 'switching' their mortgage to another lender. To be fair the author is in a market with an average mortgage transaction of $425,000 which generates (full service) commission enough that even when there are costs, there are no costs to the client.
This letter served as a tool with which the client could short-circuit the entire dance with their lender. Nine times out of ten it did just that, forcing the lender to cut to the floor rate. Once in a while the lender would not match the rate, or would make the process so difficult that the client would return to our office, truly grateful. Either way the letter served as a tool for myself as well. It built trust with what would be potential future clients, if not immediate clients.
#pb#
Although it may seem like madness to some, the idea of writing a letter and sending clients back to their lenders with it, it freed up what would have been several hundred fruitless hours over the past six years and also helped build a strong network of supporting and grateful referral sources and clients alike. Admittedly without a lot of direct compensation up front.
As I entered my sixth year of brokering, I found myself writing these letters not just for random callers, but increasingly for my very own clients whose mortgage I had placed in 2009. There is a bit more of a sting to giving back a client you worked hard to obtain and to retain for five years. There had to be a better way. With these clients it was also not simply a matter of a short chat and a quick letter dashed off. Instead the expectation on their side was still there for a solid hour or more of catching up, consulting, market review, talk about future goals and strategic mortgage planning.
Catch and release might be fun while fishing, but it is not any way to run a business.
This is part 1 of a 2 part series. Check back tomorrow as Woodhouse fully explains his renewal rate buydown tactic.
