So how much do you pay a mortgage broker? An independent broker typically charges up to £300 for their services once a mortgage application is successful, however this can vary. Tied mortgage brokers (brokers that work on behalf of a lender) are usually free.
So you’re looking to get a mortgage and you’ve decided that a mortgage broker could help you get a good deal, but you’re worried there may be hidden costs associated. Don’t fear, we’ve broken down how mortgage brokers are paid and who covers their cost.
The reason that the broker’s fees varies so much is due to the broker’s secondary source of income – commission from the lenders. Read on to find out more about what this means to you, the end consumer.
Do I have to pay the fee if the application is rejected?
Usually, the fee is only charged upon a successful application, but you should confirm this with the broker prior to using their services. It’s possible that a broker could charge a fee for every attempted application, whether successful or not. Definitely one to check for, plus it’s always worth reading through their contract before you sign anything, just to avoid agreeing to anything you’re not comfortable with.
Lender’s Commissions on mortgages
Not only does the mortgage broker’s service benefit you the consumer, but they also help the lender out by helping you to apply for their products. It makes sense then that the lenders would incentivise brokers. Well, that’s exactly what they do, in the form of a commission.
Lenders typically pay a broker a commission around 0.5-1% of the total value of the mortgage, in exchange for making a successful application. In theory, this shouldn’t affect you, the consumer. In fact, commissions are not typically discussed between brokers and consumers, although you may find your broker is willing to discuss the subject, if you so wish.
Won’t mortgage brokers choose the mortgage offers that pay them the most commission?
Since the commission rates on different mortgage deals vary significantly, it’s certainly possible that some mortgage brokers could be inclined to recommend the deals that pay the most commission to them. This is certainly something you should consider and you may find it appropriate to use a broker that charge a client fee, just to ensure that their focus is on the end consumer.
Should I look for a broker that charges no fee?
This is entirely up to you, if saving a couple of hundred pounds is important to you. However personally, I don’t consider the fee to be a significant factor, just as long as it’s a sensible fee, say £200 maximum.
So we’ve established that mortgage brokers sometimes charge a fee to the client when a mortgage application is successful (or maybe even just for the process of making the application, regardless of whether it is accepted)
How do I choose the best mortgage broker?
Aside from fees and commissions, there are a number of factors to consider when choosing a mortgage broker. Some factors include:
- How many of years commercial experience they have
- Their professional qualifications
- Do they come recommended/praised by a friend/contact?
- Associated fees and hidden costs
- Do they have any specialisms, such as commercial property etc.
The importance of each of these factors depends on your specific needs. You may be clueless about mortgages and have to put your trust in the mortgage broker to hold your hand through the process, or you may know what you’re doing but just want to delegate most of the process. It’s worth having a think about what exactly you need from a mortgage broker, so that you can make an informed decision.
How much do mortgage brokers earn?
According to jobs website Indeed, an average rate across the UK is around £42,000.
Take this with a pinch of salt though, the answer to this question can vary greatly, depending on a number of factors including:
- Area of the country (London and other south cities will typically be higher)
- Level of experience
- Whether they are independent mortgage brokers or employed by a larger company or a lender
- If you want a more usable figure, you will have to take these factors into consideration.
- Jobs websites can be a good place to research this question further, as advertised salary rates are one of the better available pieces of information available when determining how much mortgage brokers earn.