When using a mortgage broker most will usually charge a fee. There are however some brokers that don’t charge a broker fee at all. However the service you get and amount of involvement you get throughout a mortgage application will vary from broker to broker. Paying a fee doesn’t necessarily mean that you will get a better service however we have typically found that brokers who do charge fees treat their business seriously and are committed to helping their clients.
Brokers that don’t charge fees often treat their businesses as a part time business and are happy to perhaps work part time or work flexible hours around their family needs.
There are also a few national mortgage broker companies who have carved their niches and build strong brands around the fact that they never charge a fee.
How brokers charge fees?
Fees can be charged at several different parts of the process.
Fee charged on decision in principleA preliminary decision by a lender to offer a mortgage, base... – some brokers will ask for a fee to be charged once they get a mortgage agreed in principal for you.
Fee charged upon application – some brokers will get the mortgage agreed for you and once you have seen the figures and decided you are happy to proceed, they will then charge the fee before they do the application.
Fee charged on offer – some brokers will charge the broker fee on offer that is once the lender has assessed any documents and carried out a valuation.
Fee charged on completionThe point at which a property purchase is finalized and owne... – completion is when the lender releases the funds and you get the keys to the house on a purchase or you get the funds released for a remortgageRefinancing an existing mortgage with a new mortgage..
Which is the right way for a broker to charge fees?
There is no right or wrong way. Sometimes a broker might ask for 50% of the fee upfront before application and 50% of the fee on offer or on completion.
If the mortgage is very large then in some cases the commission or procuration fee that the broker gets can be quite sizable. For example on a million pound mortgage the procuration fee would be around £4,000. In a case like this the broker might charge a broker fee upon application and may agree to refund this to you on completion once they get the commission.
If you look at things from the brokers point of view doing a mortgage application from start to finish could take 10 hours or more. If they charge a fee on completion and the valuation does not come back satisfactory and the case gets declined then the broker has worked 10 hours for nothing. The valuation coming back as not satisfactory is not the brokers fault and beyond their control thus them keeping the broker fee for their time input seems only fair.
What is a fair fee for a broker to charge?
Typically I would think a broker charging more than 1% of the loan amount would be excessive.
Typically though broker fees vary between £300 and £500. The broker fee might depend on how complex a mortgage is to do. For example if a client had adverse credit then lenders that they have to deal with such as adverse credit lenders are much more time consuming and more hands on thus a fee for an application would be a higher charge.
Portfolio landlords where the landlord has many mortgages and properties in the background again would be a very time consuming application thus the fee on such an application would generally be high.
As a rule of thumb I would evaluate whether or not you feel confident with a broker and feel that you will get value for money. Once you have spoken to them you should be able to judge whether they are someone you can work with.
Reading online reviews like the ones available on our website might also help you assess a broker to ensure they are competent and offering good service and value to their clients.
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