Mortgage broker rates can be tricky to understand, as there are a few ways that they tend to charge. In this guide, we’ll explain mortgage broker fees, what to ask your mortgage broker before applying for a mortgage with them and we’ll answer some of the most commonly-asked questions.
The standard fee for a mortgage broker depends on how they charge: via a fixed fee or a percentage of your loan amount.
Fixed fees average at around £500, while brokers that charge a percentage usually charge between 0.3-1% of the loan amount. This means that you could end up paying more than the average broker fee if you need a large mortgage on a high-value property. Make sure you ask for a mortgage broker’s costs in writing before you go ahead with them to ensure you understand exactly what’s involved.
In almost all cases, mortgage brokers will be paid commission by your lender once your mortgage has been approved. That means that there are many mortgage brokers that will charge you no fees as they’ll collect their payment from your lender. Typically, the commission a mortgage broker is paid is around 0.35% of your loan size, so it could be a sizeable amount. Your mortgage broker should always be upfront about how they receive commission, and it should be on the mortgage illustration they give you when they make your application for you.
Quite often, yes – it is worth paying a mortgage broker. If you don’t have a fee-free broker available in your area or a charging mortgage broker made a good impression on you, it’s often likely that you’ll make the broker fee back on savings on your mortgage interest rate anyway.
Using a mortgage broker that has access to the entire mortgage market can save you more on your monthly repayments than if you simply took the interest rate your bank gave you – possibly far more than you paid your broker. Plus, if you have a poor credit history or you’re unsure on what income to declare on your mortgage application, trying to do it yourself could result in you getting rejected, which could cost even more money if you have to pull out of a house sale.
So, while using a fee-free broker would be the most cost-effective option, it still makes sense overall to pay a mortgage broker if you can’t find a free one.
Some mortgage brokers are tied to a certain lender or a certain panel of lenders. That means that the broker can only help you apply for a mortgage with those suppliers, which could mean that you end up missing out on a better interest rate. Ideally, you should choose a mortgage broker with access to the entire market – they used to be called ‘whole-of-market’ brokers – so they can search through tens to hundreds of lenders to find you the best interest rate.
Mortgage brokers are essentially financial advisors that specialise in mortgages. Make sure you’re speaking to a qualified mortgage advisor – the most popular qualification is CeMAP. They also need to be authorised by the Financial Conduct Authority and have a duty of care to only recommend products that are suitable for you. You can check that your mortgage broker is authorised on the Financial Services Register.
It’s important to ask your broker whether they charge a fee, and if they do, how they charge it. Some mortgage brokers charge a fee upfront from consultation (to protect them from customers changing their minds), whereas others only take a fee on arrangement of a mortgage. Make sure that you understand whether you will pay a fixed fee, a percentage of your loan amount or nothing at all – and get it in writing so you can refer to it later.
In some cases, mortgage brokers can offer better rates than banks. They often have access to deals that aren’t available if you go direct to the lender, so it’s worth speaking to a mortgage broker and asking if they have access to any exclusive products at the moment.
Even if they don’t have any exclusive rates to offer, they can still help you find a great mortgage. While mortgage brokers don’t necessarily offer better rates than banks, brokers that aren’t tied to a certain lender can access most of the market. That means that they can find the best interest rate for you from a range of banks, rather than just one.
No – mortgages certainly aren’t more expensive through a broker, especially when you use a broker that has access to all lenders. If you choose a mortgage broker that only has access to a certain panel of lenders, then you might not get the lowest interest rate available, so it can be more expensive. But if you use a broker that has access to most of the market, then you should get the best interest rate available to you according to your financial situation.
A lifetime broker fee is a one-time fee you pay to a mortgage broker who will then offer you mortgage advice for your subsequent mortgages. Brokers will charge differently for this – some may arrange mortgages for multiple properties, for example your main home and any buy-to-let properties, whereas others will stipulate that the fee only covers your main property. The average fixed mortgage broker fee is around £500, but brokers may charge more than this for a lifetime agreement. Remember to read the terms and conditions carefully before you agree to paying a lifetime broker fee.
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