5 Major Benefits of Launching a Mortgage Lending Operation
Alan Parris
Demand for home loans consistently increases over any substantial period of time. That makes mortgage lending a solid, profitable bet, as long as you’re able to set the groundwork for sustainable growth resilient to market fluctuations. Creating that basis is absolutely achievable in markets like today’s, especially if you connect with the right partner to mitigate risk and guide your operational logistics.
Entering the mortgage lending space offers powerful value to both de novo entrants new to the space and existing banking and credit union business models through a variety of revenue-enhancing benefits. Let’s explore the top five reasons to consider entering mortgage lending.
Increasing customer stickiness
Offering mortgage loans improves customer retention by simply giving existing clients the option to engage with more services, helping to improve your success with repeat business. Remember: Cross-selling products or services offered by your business has an almost 40% higher conversion rate than selling those offerings to new customers.
Increasing average revenue per user (ARPU)
Similarly, mortgage loans boost the lifetime value of each client you serve. Studies show that increasing customer retention rates by just 5%—a result that can be driven by launching new products—can create a 25-95% revenue boost.
Increasing fee income quickly
Due to the high dollar amount of a mortgage loan, a mortgage division that leverages a good partner and outlet in the secondary market can be an incredibly valuable lever to boost a bank’s total fee income.
Driving long-term growth
Offering mortgage loans not only provides instant value to your bottom line, but it positions your business for scalable expansion in coming years. By launching mortgage operations, you’ll be able to capitalize on strong home-buyer demand and project sustained growth over the next five or more years.
A wedge into a new customer base
Mortgages can be an ideal introduction product into a consumer base you do not serve today, to which you can later cross-sell your core product offerings.
In other words, expanding your footprint into the mortgage market provides both short-term revenue gains and a basis for sustainable business growth. Still, entering mortgage lending requires careful consideration, deliberate planning, and strategic partnerships. By understanding how to play to your strengths and best meet your addressable market, as well as syncing with trusted providers who remove operational burdens and lend valuable expertise, you’ll be well positioned to profit and grow.
Want to learn more about what to expect from launching mortgage operations from scratch?
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Our new eBook Launching Home Loans: How to Build a Profitable & Scalable Mortgage Operation walks through the logistics, costs, and requirements related to launching home loans. Your download will include actionable insight into:
- How to choose the institution type and product mix best suited to your unique business
- The ins and outs of the licensing process
- How to partner for success in mortgage lending
- And more
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