What is a mortgage broking book?
It is the set of settled home and business loans a broker has arranged, and the right to the trail income lenders pay on them while they stay in place. Trail is often calculated on the outstanding loan balance and paid periodically, by the lender to the aggregator and by the aggregator to the broker, under the terms of those agreements. Upfront income is different: it is paid once, when a new loan settles.
The licence structure shapes what can be sold. ASIC says brokers, aggregators and other intermediaries can choose whether to get their own Australian credit licence or operate under someone else's licence as an authorised credit representative. Where the broker is a credit representative, the aggregator and licensee agreements usually decide how the trail entitlement can move to a buyer, whether consent is needed, and whether the buyer must join the same aggregator.
Why is a trail book valued as a declining stream, not a flat multiple?
Because it runs down. Every month some borrowers refinance elsewhere, sell their property, repay early or reach the end of a fixed rate and shop around. A flat multiple of today's trail hides how fast that happens, and two books with the same trail today can run down at very different speeds.
The method that fits is a discounted cash flow: project net trail forward year by year at the run-off the book's own statements show, then discount it to the valuation date at a rate that reflects its risk. Run-off is measured by loan age, lender and loan type where the data allows, because newer loans and loans approaching a fixed-rate expiry tend to behave differently from seasoned ones. A market-wide rate borrowed from someone else's book is not evidence for yours.
What does the starting cash flow look like?
Illustration only, not a market multiple. The figures are hypothetical and rounded. They show the first-year cash flow before any run-off is applied.
| Step | Hypothetical book | Note |
|---|---|---|
| Trail received in the latest month, excluding GST | $30,000 | From aggregator statements |
| Annualised trail at the valuation date | $360,000 | Before any run-off |
| Less aggregator fees on trail | ($20,000) | Set by the aggregator agreement |
| Less cost of servicing the clients | ($60,000) | Rate reviews, client contact, administration |
| Net trail for the first year | $280,000 | Then projected down at the book's own run-off and discounted |
| Separately | Expected clawback on recent loans | Deducted from the result |
How are clawback and upfront income treated?
Lender and aggregator agreements can claw back upfront income if a loan is repaid or refinanced soon after it settles. That makes recently settled loans a contingent cost. The valuer schedules them, reads the clawback terms in the actual agreements, applies the book's own early discharge history and deducts the expected cost. Leaving it to a warranty in the sale contract overstates the book.
Upfront income belongs to the business, not the book. It has value to a buyer when the referral partners, staff, brand and lead flow that produce new loans come too. A pure book sale transfers the trail stream; a sale of the whole broking business adds the upfront-earning operation, which is usually valued on capitalised maintainable earnings with the owner's pay restated to a market cost.
What else moves the value of a trail book?
Beyond run-off, the usual drivers are:
- ·Lender concentration: a large share of balances with one lender ties the book to that lender's terms and behaviour
- ·Loan seasoning: a book weighted to recent loans carries more clawback exposure and less proven retention
- ·Aggregator terms: consent to transfer, transfer fees, buyer restrictions and the fee model
- ·Client file quality and complaints history, which a careful buyer samples in due diligence
- ·Whether clients deal with the brand or one broker, and whether that broker is staying
- ·Referral partner arrangements and whether they continue under a new owner
What do we need from you?
Your aggregator can usually supply most of this.
- ·Twenty-four to thirty-six months of monthly trail statements
- ·A loan-level list: lender, settlement date, current balance, loan type and any fixed-rate expiry
- ·Clawback history, and the clawback terms for loans settled in recent years
- ·Your aggregator agreement, including transfer and consent clauses
- ·Your credit licence details or credit representative appointment
- ·For a whole-business valuation, upfront income history, referral sources and financial statements
What does a mortgage broking valuation cost?
Every valuation is a fixed fee, agreed in writing before work starts, and it does not change with the value concluded. The band is set by the annual revenue, excluding GST, of what is being valued: for a mortgage book on its own, that book's annual recurring income; for a whole broking business, or shares or units in it, its total annual turnover. Exactly $3 million is Medium; exactly $10 million is Large.
Add-ons are $495 per retrospective (past) valuation date and $795 per additional entity. Delivery time starts once payment and all required information have been received.
| Package | Annual revenue of what is valued | Fee | Delivery |
|---|---|---|---|
| Small Business Valuation | under $2 million | $1,495 + GST | 2 business days |
| Medium Business Valuation | $2 million to $3 million | $2,495 + GST | 3 business days |
| Large Business Valuation | $3 million to $10 million | $3,495 + GST | 3 business days |
| Over $10 million | above $10 million | quoted in writing before work starts | delivery date agreed before commencement |
| Expert report (dispute or court) | any size | $4,495 + GST | delivery date agreed before commencement |