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Just starting out here and trying to benchmark what i should pay for a broker.
What would be considered cheap, average and expensive for a brokers fee? Are discounts available for using them multiple times of the year or for 3/4 mortgages at once?
Thanks in advance.
Dear Tobs Ston
The age-old debate of what (or if?) a Mortgage Broker charges a Professional Fee for, or how much, is (in my opinion) only ever asked because the person posing the question is not clear on the onerous, comprehensive, highly regulated, compliance-driven and quality and client-centric tasks that we have to perform.
Whether a borrower asks for one mortgage, or 100 mortgages, the work nowadays is either very onerous, or very onerous x 100, as each case is individually underwritten, scrutinised, researched, placed, chased and completed.
Please do not confuse a mortgage salesperson, with a professional mortgage Broker - two VERY different avenues to getting a mortgage. The salesperson is either a bank employee (ie just tied to that one lender), or maybe an estate agent employed adviser (usually tied to a small panel) both of which (and there are others) are targeted with sales figures and who do not provide the full holistic financial advice required to implement and protect a financial strategy.
Here is a very interesting insight in to what a professional Mortgage Broker provides (courtesy of MoneyFacts website (https://moneyfacts.co.uk/guides/mortgage...ker180511/ - published in Feb 2019);
Why use a mortgage broker?
Author: Nigel Woollsey
What is a mortgage broker?
A mortgage broker is a financial adviser who specialises in offering advice on mortgages. A key thing to remember when using a mortgage broker is that they have a duty of care towards you and are obliged to recommend the mortgages most suitable for you and be able to justify that recommendation.
At a glance:
Independent mortgage brokers help you find the best mortgage deals available on the market – not just from a single provider.
Often possess a wealth of valuable market knowledge and experience, in addition to having to be formally qualified to give advice on financial products.
Some lenders only sell their mortgages via a broker rather than directly to the customer, so brokers may have more mortgage products to choose from.
Pros and cons of using an independent mortgage broker:
• They work for you – not the lenders. So, you can be sure that they will be showing you the best products out there, not just the best products in one lender's range.
• Great, in-depth knowledge about the market and individual lenders – meaning they know who will be more likely to look favourably at your application.
• Provide independent advice on a range of related financial products such as insurance, payment protection, etc.
• Will charge a fee for their services – adding to the list of extra fees (mortgage arrangement fee, legal expenses, etc.) that you must pay.
What does a mortgage broker do that you can't? And why should you pay for their services when there are already loads of other costs when moving home or remortgaging?
If you're asking yourself these questions, it can be more than tempting to cut out the middleman. However, you may want to think twice.
Mortgage advice, from a reputable broker, can be an invaluable service – and here's why…
An important thing to understand is that when you receive mortgage advice, your mortgage broker has a duty of care to you. They must recommend a suitable mortgage and be able to justify why the mortgage they have chosen is right for you. If their advice is not up to scratch, you can complain and be compensated.
In contrast, if you go directly to a high street mortgage lender, don't take advice, and end up with a mortgage that later becomes unaffordable, you may not have so much legal recourse. (However, it's the lender's responsibility to ensure affordability – so even if you buy direct, you could have some recourse. Nonetheless, a broker can still offer a valuable layer of protection.)
2. A mortgage broker is qualified
There's an awful lot to think about when choosing the right mortgage. It's not as simple as just opting for the cheapest fixed or tracker rate mortgage you can find!
Mortgage brokers must be qualified to give you mortgage advice, whereas a person you speak to in a lender's call centre may not be so well qualified. That said, new regulations mean that all call centre staff need to be advisers or must refer you to someone who is. Therefore, if you visit in-branch you'll be able to arrange an appointment with one of their mortgage advisers.
3. A broker is on your side
An independent mortgage broker will look for the best mortgage for you. They aren't on the lender's side, they're on yours, and they'll give you access to far more products than if you went direct. You should expect unbiased advice and to be able to choose from a range of lenders and subsequent products, rather than being restricted to the single range of the lender you contact directly.
4. They know the industry
Mortgage eligibility criteria have tightened considerably over the last few years. The rules are designed to ensure borrowers can prove affordability, even in the event of a rate rise. Understandably, these extra checks have increased application times.
That's why it's so important to stay in the loop – and to have a mortgage broker on your side who understands it all. A broker deals with lenders on a day-to-day basis – they'll know what the application process is like for each one and which lender can process things with minimal delays.
A mortgage broker also knows the background criteria that each lender has and can bring this experience to bear when advising you and processing your application. Then there's the fact that, because a mortgage broker may put a lot of business to a lender in a year, they can exert influence and chase things in a way you just can't do by yourself – and that can be invaluable should things get held up.
5. It's not just about the mortgage
A mortgage broker won't just advise you about your mortgage. They will also look at any related life insurance, payment protection and even buildings and contents cover you have.
They will recommend insurance based on your new mortgage arrangements to make sure you are fully protected in the event of:
6. Don't be put off by a fee
Mortgage advice tailored to your situation is a valuable service. For the mortgage broker to be able to offer this service, they need to make money.
They do this by one or both of the following:
Charging a fee. This could be a one-off fee for advice, or a fee that pays for advice throughout the term of your mortgage (if you need to remortgage, move home, etc.).
Commission. Lenders and insurers may decide to pay the mortgage broker commission for putting your business their way.
How can I find out how much my mortgage broker makes?
Mortgage brokers are required to provide you with a Key Facts document about their services that details any fees or commission they charge or earn.
You will also be provided with a Key Facts Illustration (KFI) about the specific mortgage being recommended.
Details of your broker's fees can be found in section 8 of the KFI.
Details of any commission earned by your broker for introducing your business to the mortgage lender can be found in section 13 of the KFI.
7. The value of advice
Mortgages are a lot more difficult than they first appear. Knowing what rate, term, lender, features and insurance to get are all time-consuming and complex matters.
Comparing mortgages online is a good place to start – it's great to get an idea of what's out there. But choosing a mortgage is a process far more complicated than simply opting for the lowest rate or the best incentives.
A mortgage broker takes your whole circumstances into account to recommend a suitable product. It's this thorough, professional look at your finances that makes their advice well worth paying for.
"Using a mortgage broker can save you time, stress and money when searching for the right mortgage product."
Thank you to MoneyFacts for writing this. They are an independent publication and I (and my Company) have no affiliation to them. Except of course that Property Tribes Financial Services is a multi award nominated Business MoneyFacts Buy To Let Broker of the Year over several consecutive years (awards)
My final message in this post; the investment made in to your Mortgage Broker's service is nearly always far less than the overall % charge of the mortgage, the lenders arrangement fee, the valuers fee, the solicitors fee, the stamp duty etc., yet it's the Mortgage Broker who does the majority of the work for you.
Don't ask how much, or why, instead ask ... why haven't I bought your services before?! :-)
Hope that helps.
FOR INDEPENDENT MORTGAGE AND INSURANCE ADVICE
PROPERTY TRIBES FINANCIAL SERVICES
CONTACT US FOR LIFE INSURANCE QUOTES AND STRATEGIES. PORTFOLIO MORTGAGES (VARYING TERMS) COVERED
MULTI CREDIT REFERENCE AGENCY REPORT, IN ONE DOCUMENT HERE.
Yes very insightful. I did not really need convincing as I have already decided to use a broker, totally worth it as is expressed in your very helpful reply. I just needed to know what the benchmark, this will be a business for me and i don't want to unnecessarily be paying over the odds.
Great response. I've saved it to my bookmarks
Disclaimer: I have no legal expertise nor am I a qualified advisor on any subject. A humble landlord using an open forum to exchange ideas and experiences.
I am fascinated at how much interest there is in what a Broker charges, which of course is very different from what a Broker actually earns. A self employed business person charges a fee (or rent!) and then there are deductions. After all expenses are paid, there is the net profit. This is what the Broker really earns.
For every landlord who has the temerity to challenge the earnings of a very hard-working, heavily regulated, much qualified (and continually CPD tested) mortgage broker, I would be interested to know what you would say if your tenant says "how much do you earn, and why should I pay you a fee (rent) when you also get capital growth in your property too? I think the capital growth is enough and you don't deserve a rent too" And I speak as a very long term portfolio landlord as well.
I refer to my detailed answer above as to why a Broker in todays world is worth every penny that they work so hard to earn .... and we work extremely hard for our Clients benefit, often saving them many thousands of pounds for the individual deal, which is far more than what the Broker charges (and the Brokers fee is often far less than what the lender charges, the solicitor charges, the valuer charges etc).
When you have walked in the shoes of a Broker for as long as I have been privileged enough to do (and I have done this for 26+ years now), then you have the prerogative to question the real value.
I now look forward to the replies concurring with my sentiment and also of course those from the critics who enjoy this type of banter.
Hi mate ,
I have a broker I’ve used for years and wouldn’t do it myself as the paperwork takes ages . also self employed so it’s easier for a pro to do it for me .
They charge £565 inc vat which in my book is worth it
Try One and All Financial ask for Frances 0161 832 2222
and what proc fee did they also get from the building society
my broker gets about £1k for a switch onto a new 2 year deal from the same mortgage company
12 of these every 2 years, and steady referrals, thats more than enough without paying extra fees
Chartered Accountant, FCA 34th year in public practice,
BTL since 1992
£1k for a product switch with the same lender? This implies a mortgage of at least £400,000
if they were my broker, I would seriously be questioning their ethics and work practices. Are they searching the market for you for each and every mortgage? Are they really doing the best for you? Highly doubtful if you are staying with the same lender each time. 12 times with the same lender every two years? It seems like the broker is being lazy here, and almost certainly you are losing out. How much could you have been saving with a full market review? More than the lazy freebie adviser I would bet.
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I personally don't mind paying a fee if I'm getting value out of it. I can see that your broker is possibly not charging you any fee and taking all his earnings from the procurement fee. However if he is only doing switches for you then I don't think you're getting real value.
I would rather pay a fee and get them to actively look at whole market and find a good deal for me.
From my experience, each time I go to a broker they do end up finding something where the new product will save me at least £500 after all the costs of switch are deducted. So I don't mind paying the £500 fee because the way I see it is that I've effectively had the advice for "free". Quite often the saving is much greater.
In my opinion people should always go for a broker and be more that happy to pay around the £500 mark. Think of it as free advice on most occasions because of the savings they'll find for you. Obviously people can negotiate if you're a repeat customer because the amount of time they need to spend with you reduces over time as they have most of the personal data in their system already from your previous appointment with them.
Almost always the UK's biggest free mortgage broker is enough. London and Country. They don't charge any fees.
I've been using them for years, as my first port of call.I'd advise against using any small or sole traders. I have experimented in the past with 6 or so of these, they often let me down, went on hols! and also charged fees.Brokers earn a procural fee from lender, that is enough!