Mortgage Broker Fees Explained

What are mortgage broker fees?

A mortgage broker fee is a fee that mortgage advisers charges for getting you a mortgage.

There can be a lot of work involved when arranging a mortgage, depending on who the lender is and the situation.

Some applications can involve more work than others. For instance, if an applicant were debt consolidating or was self-employed and had adverse credit, this would likely result in more work for the mortgage broker than if a client was employed with clean credit.

The level of work involved for each mortgage differs and can vary hugely from one case to another, sometimes depending on something as simple as which underwriter gets the case.

Due to the potentially high level of work involved, mortgage advisers charge a broker fee which may vary depending on the type of transaction you wish to carry out.

For this fee, your mortgage broker will advise you on your mortgage, work out which lenders are suitable for you, conduct a fact find on you, apply for your mortgage, communicate with the lender and send all documents to them.

During the process, they will keep you updated and work with the lender until the mortgage offer is issued.

At this point, your conveyancer will take over and keep you updated in the process.

Hopefully, the mortgage advisers’ job is done. However, if changes are required at the legal stage, they may have to get involved again.

Not only will your mortgage broker know which lenders to approach, but they may also even have exclusive deals that you would not be able to get directly through the lender.

Most people who have used a mortgage adviser would likely agree that they are a valuable person to have on your side when buying or refinancing a property.

Your mortgage adviser’s charges may differ from the next company. Your broker should inform you of all costs upfront before any chargeable work is carried out.

Is it normal to pay a mortgage broker fee?

Paying a mortgage broker fee is not unusual. Many Borrowers opt to pay a broker fee to use the broker of their choice, based on their skills and the borrowers’ requirements.

In general, more brokers in the UK charge fees for their work than those that offer a free service.

You should determine what is a priority for you when taking a mortgage to see if you can justify a broker fee.

Do all mortgage brokers charge fees?

Not all mortgage brokers charge fees. Some are only paid by the lender and do not charge anything else on top.

If your priority is not to pay for your mortgage service, this is likely available to you, depending on your situation.

Some people believe you may get a better service with brokers that charge a fee as this allows them to work on fewer cases or have the means to employ support staff to limit the workload.

This may free up the broker’s time, making them more available when you need them.

However, this is not always the case and does not mean brokers that charge more are automatically better, or fee-free brokers will have no spare time.

Levels of service vary significantly between companies, so it is recommended that you look up customer reviews to get an idea of how other applicants have found their services.

A site like Trustpilot is a useful tool for this.

Do mortgage brokers get a commission? If so, why do they charge fees?

In addition to any fees charged, mortgage brokers often get paid a procuration fee for mortgages that successfully complete.

Many people confuse this with a commission, but there is more to it.

When a mortgage adviser gives you advice and arranges a mortgage, this takes some of the workload and liability away from the bank.

To arrange a residential mortgage, you must be qualified and have the correct permissions.

The bank would need to employ a qualified mortgage adviser to carry out the meetings and arrange the mortgages.

With advice being given, there is also the liability present, should a complaint about the advice ever occur.

Removing this job and liability away from the bank themselves saves them money and prevents them from any potential complaints about advice in the future.

For this, lenders are willing to pay mortgage brokers a procuration fee.

Mortgage brokers charge an additional fee on top of this for all the extra work that they are doing for the customer in order to get them a mortgage.

Should I look for a mortgage adviser that doesn’t charge fees?

Whether you should look for a mortgage adviser that doesn’t charge fees is up to you.

It would help if you were sure what your priority is when you are looking for a mortgage.

If it is to have the cheapest possible service, you should look for a fee-free broker to keep the costs down.

Suppose quality advice and a broker with an excellent reputation is your preference (for example, you have seen a house you love and want the mortgage to go through without any issues). In that case, you should research recommended mortgage brokers and check their reviews.

You may find that a heavily recommended mortgage broker does not charge a fee.

However, it is often the case that brokers that have the most demand charge mortgage broker fees to ensure they earn what they need from each patient and to be able to fit in all of their applicants.

The additional revenue may help the broker, allowing extra staff to help process the transaction.

Does the broker fee always reflect the quality of the broker?

The level of broker fees does not always reflect the service that you get from a mortgage adviser.

There will be mortgage advisers that do not charge a fee, give a very high level of service and receive plenty of referrals.

On the other hand, there are likely mortgage brokers that charge significant fees and whose reviews are not as high as that of other companies.

You should not expect that a high fee means a high level of service or no cost means no service.

Do your research on how other people have worked with the company to get an idea of what past service levels have been like.

At what point is a mortgage broker fee payable?

When your mortgage broker fee is due will depend upon the adviser’s company policy.

Some mortgage advisors only charge on completion, which means that if you do not get the keys to the property, they will not charge you a mortgage broker fee.

Other brokers may charge on mortgage offer, because this is when they have had success and your lender has issued you with a formal offer.

If you were to pull out at this point, this fee might be lost. Some mortgage brokers might be willing to work on the following application free of charge if the property was lost due to no fault of your own.

Some mortgage advisers may charge a fee on the application, called a commitment fee.

This reflects the work that is about to take place and shows that the applicant is serious about getting the mortgage.

Brokers all have their own way of charging fees, so make sure you ask what their fee structure is so that all is clear before you commit to working with a mortgage broker.

Do mortgage brokers charge fees for arranging insurance?

Often, mortgage brokers do not charge fees for arranging insurance policies.

Most mortgage advisers will offer to set up your life insurance, critical illness insurance, family income benefit or income protection at no further cost.

Insurance is an integral part of the process when taking a mortgage, as financially protecting your loved ones should be high priority.

Mortgage advisers will receive a commission from the provider for policies that go on risk.

Some mortgage brokers may, however, have a condition that if the policy is cancelled within a certain amount of time, an admin fee is payable to cover their work.

This is because the insurance company will take the commission from the broker, known as a clawback.

If the broker has carried out numerous hours of work going over medical questionnaires, applications, compliance work, potential trusts and more, they would want something to show for their time.

Some mortgage and insurance brokers may also charge an advice fee if your premium is below a certain level to ensure that the earning potential covered the amount of work involved in arranging the policies.

Each mortgage and insurance broker works differently, so you should find out about their fee structure at the outset to know your potential costs.

Are broker fees refundable?

Mortgage brokers will tell you if their fee is refundable or not.

Most of the time, the fee is charged when the work is done, for example, on mortgage offer. They may be willing to refund you in extreme circumstances where they felt retaining the broker fee was unfair.

However, usually the reason that they are charging their fee is because they feel that the work is now done and they have earned their money.

You have the right to complain if you believe you have been mis-sold a product.

Your mortgage adviser will be able to talk to you through the complaints process, which may involve the Financial Ombudsman if a resolution cannot be agreed upon.

Talk to your broker about their fees and whether they are refundable or not.

Are broker fees negotiable?

It may be possible to negotiate your broker fee, depending on the situation.

Not all mortgage brokers will be willing to do this, and it will depend upon the level of work involved and, potentially, the case size in terms of the procuration fee.

For example, if you were taking a £1 million mortgage, were employed, have clean credit, a standard property, and want three times your income, many brokers may be willing to waive their broker fee to secure the business.

On the other hand, if you were looking for five times your income, had complex earnings, and had adverse credit with a lower loan amount, many brokers would not be willing to give up their fee due to the amount of work involved in the mortgage.

However, you would need to talk to the individual broker to find out their stance on fee negotiations.

What is a typical mortgage broker fee?

Mortgage broker fees vary significantly, depending on the brokerage and potentially the case itself.

A common fee is around £500 for a standard mortgage case.

Some brokers may charge more for more complex mortgage cases, for example, debt consolidation, adverse credit or limited company buy to let cases. A common charge could be around £1,000.

For even more specialist scenarios, such as bridging loans, commercial transactions, development finance etc., a percentage-based fee is not uncommon—for example, 1% of the loan amount payable to the broker.

All brokers have their own fee structure, so they will go through their charges before starting any work that incurs a fee.

Do all mortgage brokers offer a free consultation?

Usually, even fee-charging mortgage brokers will still offer a free consultation to understand your circumstances and make a recommendation.

It would be difficult for a mortgage adviser to know if they can help you or not if they have not had a conversation about your situation.

However, depending on the mortgage broker and the situation (for example, if it is complex, requiring a lot of upfront research to a suitable lender), they may charge a research fee for the time needed to look into it.

Every mortgage advisor should make you aware of potential charges before they happen, usually by signing a fee agreement verifying that you accept that the work is chargeable.

Do commercial mortgage brokers charge fees?

Most commercial mortgage brokers charge broker fees. Commercial mortgages are specialist products, not understood by every mortgage broker.

Depending on the situation, there can be much work involved in understanding the company accounts, business growth, potential tenant’s financials, credit histories and more.

As a result, they will usually seek payment from the applicants for their work.

This is not to say that you would not find a commercial mortgage broker that is not charging fees. They all work in different ways, so they are likely available if avoiding a broker fee is the main priority.

Again, if you are considering whether or not to pay a broker fee for a commercial mortgage, you should weigh up your priorities to see if the broker’s service fits within your goals.

For example, if high-quality service is the most important thing to you, find out whether the broker has a history of looking after clients by checking their reviews.

If you find that, based on reviews, a company offering the best service charges a broker fee for their work, you may find that you are willing to pay if you feel you would get better service than another broker not charging a fee.

Conclusion

Whether you look for a mortgage broker that charges a fee or not is up to you.

It would help if you thought about your main priority when taking a mortgage.

If a high-quality service is key, and there is urgency in the transaction, you will want to look for a broker with good reviews that seems to have achieved clients’ wishes in the past.

You may find a fee-free broker that seems to offer the best service, this is a great outcome.

If this is not the case, and the broker you wish to use charges a fee, you may want to factor this in, as this may give you the best chance of achieving your goal.

Many borrowers are happy to pay a competitive broker fee to use the mortgage adviser they feel most comfortable with rather than filter based on whether or not they charge a fee.

Your mortgage adviser will likely be willing to arrange your mortgage protection policies without an additional fee.

The insurance company pays mortgage and insurance advisors a commission for policies that go on risk.

Some advisers may insist on a charge if the policy is cancelled during clawback.

Your mortgage adviser will be able to make you aware of any costs involved for their services before any chargeable work is done. Whether paying a fee or not, expert advice should always be your primary concern. Getting a mortgage wrong can be expensive, so find an experienced adviser who can tell you your options.

If you would like I NEED ADVICE to match you with a qualified, regulated mortgage adviser who can offer you a free consultation. Please complete the contact form.