A mortgage trail book can be one of the most significant assets in a mortgage broking business. It produces ongoing income from loans that have already settled, which can make it appealing to a prospective buyer. But the trail income arriving today does not, by itself, establish the value of the book.
The question is how that income may change over time. Loans are paid down, refinanced or discharged. New settlements can add income, while run-off reduces income from the existing book. A buyer needs to understand that movement before deciding what the book is worth.
This is why a single month’s trail statement gives only a limited view. Looking across a longer period can reveal whether income is rising, steady or declining. It can also show how much new lending the business needs to generate to maintain its current level of trail income.
Consider two brokerages earning the same trail income today. One has a book that has remained steady because new settlements consistently replace lost income. The other has relied on older loans while new settlements have slowed. Their current figures may be similar, but their future income prospects may look different.
The composition of the book matters as well. A buyer may want to examine its size, history and the patterns behind its income. They may also look at the quality of the records supporting it. Clear information makes it easier to assess what is being purchased and to form a view of future earnings.
The trail book should also be considered alongside the rest of the business. Does the brokerage continue to attract new clients? Where do those clients come from? What does it cost to generate and settle new loans? An active, profitable broking operation may offer a buyer something different from a trail book being sold on its own.
For owners, the practical lesson is that “my trail earns this much each month” is a starting point for a valuation. It is not the conclusion. Understanding value requires a closer look at run-off, new settlements and the income the book may reasonably continue to produce.
BCI Business Brokers’ appraisal tool can provide an indicative value range for your business based on the information submitted. An experienced broker reviews the submission, helping you begin a more informed conversation about what your mortgage broking business may be worth.
Click here: https://freeappraisal.valueabusiness.com.au/
Read more on our Linkedin Newsletter here.
If you want to know more feel free to reach out. Contact us for personalised assistance and expert guidance.
Regards,
Tony Arena