Mortgage broker fees can vary considerably, depending on the value of the mortgage, and how your particular broker happens to charge, with some offering advice at no cost to you.
This article will help you understand the different ways mortgage brokers are paid and what they do to earn their fees.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
What does a mortgage broker do?
Working out which type of mortgage is right for you isn’t always easy, especially with countless different deals to choose from.
A mortgage broker’s role is to look at your financial situation, and advise which mortgage is likely to suit you best. For example, if you’re worried about interest rates continuing to rise, they’re likely to suggest a fixed rate deal, so that you have peace of mind your monthly payments won’t change during the fixed rate term.
A broker will also be able to advise how much you can borrow, based on your income and outgoings, and will also be able to support you through the application process. They will essentially be a middleman between you and the lender, helping simplify things and hopefully alleviating some of the stresses and strains that are often involved.
Brokers also often have access to ‘intermediary-only’ mortgage deals, which you can’t access by going directly to lenders. You will also have recourse through the Financial Ombudsman if something goes wrong and the mortgage they’ve recommended ends up being unsuitable. If the Ombudsman rules in your favour, you could be entitled to compensation, which you wouldn’t be entitled to if you choose a mortgage without advice.
What is the typical cost of a mortgage broker?
Brokers charge for their advice in a variety of ways.
1) Fee-free
Rather than you paying for the advice you receive, some brokers offer mortgage advice free of charge, because they are paid in commission from lenders rather than by customers. This means you don’t have to pay anything at all, although some may receive commission and charge you a fee on top of this.
Brokers who receive commission from lenders should still provide you with unbiased advice. It is worth checking, however, that they can research the whole of the mortgage market to help you find the best deal, and that they don’t offer restricted advice, which means they are tied to just a few lenders.
2) A percentage of the loan amount
Some brokers will charge a percentage of the mortgage amount. This tends to be between 0.3% and 1%. So, for example, if you’re borrowing £200,000 and the broker charges a fee of 0.5%, you can expect to pay £1,000 for advice.
3) A fixed fee
Other brokers may charge a fixed amount for mortgage advice, which typically ranges from around £300-£700.
4) An hourly rate
Alternatively, you may be charged by the hour for mortgage advice. Bear in mind that while this can be cost-effective if your circumstances are relatively straightforward, it could prove expensive if your situation is more complicated and there is lots of to-ing and fro-ing between the broker and lender.
Get costs in writing
A broker should always notify you about their fees at the outset, so you know exactly how much you’ll be expected to pay.
Normally, these fees are paid after your mortgage application is accepted, but specific payment times will be outlined in the document that your broker draws up as part of your agreement. Make sure to read this carefully before you proceed.
If you’ve chosen a broker who is fee-free, they should still notify you how much they will receive from the lender if you receive a mortgage offer. This will be explained in the ‘key facts illustration’ document that they will send you once you have chosen a particular mortgage deal.
If you are using a broker who charges you for advice, it can be worth asking them to explain exactly how and why they are charging you the amount that they are, so that you can be certain you’re getting your money’s worth. After all, getting expert help is supposed to save you money in the long run by helping you procure the best possible deal.
Where can I find a mortgage broker?
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
If you still aren’t sure whether mortgage advice is right for you, read our article Should I get advice on my mortgage? for more information. You can also check out our guide Mortgage fees and costs explained for a comprehensive rundown of the fees involved in the mortgage application process.
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