Do mortgage brokers charge a fee?
Whether it’s for moving home or to remortgage, most people use a mortgage broker to help them save time and find a great deal.
A broker can use specialist software to narrow down the search from the many thousands of mortgage rates available. But in many cases it is the broker’s experience and intimate knowledge of how lenders work that enables them to find suitable solutions.
A mortgage broker’s job is to find the best deal available for their clients. This can range from finding a great rate for a first-time buyer to securing a deal for a company director who wants to buy a property to let out or helping people with bad credit.
Brokers don’t do all of this for free! They need to be paid for their time and the work done to help their clients.
What fees might a mortgage broker charge and how do you know what a typical fee is for a UK mortgage broker? Read on for answers to these questions and more.
In many cases a mortgage broker will charge you a fee for arranging your mortgage. The amount charged will vary as each mortgage is unique, some may take more time to arrange than others.
All brokers must explain how they get paid and mention any fees they may charge.
Why Do Mortgage Brokers Charge a Fee?
Mortgage brokers do offer different levels of service and expertise and whether they charge a fee is often linked to the costs of running their business.
We will look later at how brokers can earn a commission from lenders. But this only happens when their clients get accepted for a mortgage and then that mortgage actually starts.
All brokers will have spent hours helping a client to find and apply for a mortgage only for it to be refused, abandoned or cancelled, leaving the broker out of pocket (and without the commission payment).
Fees help to provide some certainty of income so their clients can receive high levels of service, impartial advice and professionalism.
In addition, a broker can save you money by finding a mortgage rate where the savings outweigh any upfront costs.
How Much Do Mortgage Brokers Charge?
There’s no set fee structure for brokers to adopt, so firms develop their own scale of fees according to their business model. But of course they still need to be competitive.
There will be a base level of £300-500 per mortgage but this will increase according to the complexity and amount of time needed to arrange it.
Fees can be payable at the beginning of the advice process or when you apply to a lender, or a mixture of the two. The fees paid to a broker are rarely refundable but it is important to confirm this before you pay them.
Importantly the broker must tell you how much they are going to charge before you are committed to the process.
How much commission do mortgage brokers earn?
When a broker recommends a particular lender, the lender will reward them by paying a one off commission, or procuration fee, for each mortgage.
The commission is expressed as a percentage of the loan and is only paid when a mortgage actually starts. If a mortgage does not start, for any reason, no payment is made.
The average procuration fee will be 0.35-0.50% of the mortgage amount. This can increase if a specialist lender is used for complex cases or for bridging loans or commercial mortgages.
IT IS IMPORTANT TO KNOW THAT THIS COMMISSION DOES NOT AFFECT THE COST OF YOUR MORTGAGE.
Some quick examples:
| Mortgage size | 0.35% commission | 0.50% commission |
| £100,000 | £350 | £500 |
| £200,000 | £700 | £1,000 |
| £300,000 | £1,050 | £1,500 |
These commission payments are made to the mortgage brokerage firm, not direct to the individual advisers and will be in addition to any client fees charged. A few employed advisers may be on a fixed salary package but the majority will be paid a proportion of this commission payment in addition to their salary.
Should I pay a fee or commission for mortgage advice?
The level of service you receive, and the advice you get, should be the same however your broker gets paid.
That said it is important to work with an independent mortgage broker, so you get the maximum choice and that they are experienced in helping people in similar situations.
Your broker is providing you with a service, in the same way that a solicitor, surveyor or accountant would. And all of these need to receive compensation, via fee income, for their time and experience.
What is a fee free mortgage broker?
A genuine fee-free mortgage broker is one that relies solely on the commission payment, without charging the client any fees.
Some brokers will advertise ‘fee free mortgage advice’ but then make a charge for the administration of the application, which we feel is misleading.
There are many fee-free brokers who offer independent mortgage advice in a very cost effective way for borrowers. Just remember to check that they can provide the type of service and expertise you need beforehand.
Mortgage Calculators
Get started with our free and easy to use mortgage calculators.
CONTACT A MORTGAGE BROKER
If you are ready to take the next step then we can put you in touch with a fully qualified independent mortgage broker.
Which is the best type?
Which is best will depend on the client, their financial situation, their budget and the type of mortgage they need to find.
Fees-free broker
- Clearly the best where it’s not possible for the client to afford a fee
- Can still provide independent advice
- Watch out for admin fees
- Good for borrowers with simple requirements
Fee charging broker
- Will obviously cost more money
- Will provide independent advice
- Can deal with the most complex of cases
- Likely to be more experienced in a wide range of issues
- Experience of using specialist lenders and private banks
What do mortgage brokers do?
A broker’s primary role is to find a mortgage deal that they can recommend to you from the many thousands that are available.
They can speak with the lenders to see which would offer the best fit for you. Then they will help you to make a mortgage applications along with all of the necessary documents.
Once this is all with the lender your broker and their team will keep an eye on the underwriting progress and help to deal with any issues or queries as they arise.
Do I need to use a mortgage broker?
While many people feel much happier using a mortgage broker, it isn’t a requirement. It is up to you to decide whether you need some help.
If you choose not to use one you will need to spend some time researching what type of mortgage and what lender would provide the solution you need.
Although this route is cheaper from an upfront fee position, there’s no way of knowing that you have chosen the best mortgage for you, or that it has been set up in the right way.
How to find a mortgage broker?
If you think that working with a mortgage adviser would be useful then it’s important to find one that is:
- Independent or whole of market
- Qualified
- Regulated by the FCA
- Experienced in helping people in a similar position to you
Respect Mortgages works with one of the best known independent mortgage brokers who have won many awards for their excellent advice and customer service.
Let us introduce you to them, you are sure to receive great help and advice and we will receive a small proportion of their income, as a thank you.
