How Do Mortgage Brokers Get Paid?
One of the most common questions we're asked is, 'How do mortgage advisors get paid?' In this article we'll explain how our fees and services work and how other mortgage brokers may also be paid.
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Author: Pete Mugleston
CeMAP Mortgage Advisor, MD
How do mortgage brokers get paid?
Most mortgage brokers are paid on a commission basis, meaning that for every mortgage they successfully complete on behalf of their customers, the advisor receives a commission from the lender. Depending on the complexity of the case, the adviser might also charge a fee for advising and arranging the mortgage.
The amount a mortgage broker is paid can vary depending on several factors, such as:
- Whether they are independent or not
- The loan size
- Any other products taken alongside the mortgage, such as life insurance
With OnlineMortgageAdvisor, you will not be charged a fee without an explanation. Your advisor will send you a breakdown of all fees involved and when they can be paid. This is usually during your first conversation with your advisor.
Do mortgage brokers charge fees?
Yes, in the majority of cases, a mortgage broker will charge a fee for their services, which can include:
- Comparing the whole of the market to find you the best deals
- Calculating your affordability to find you a cost-effective mortgage
- Negotiating your mortgage terms and conditions
- Managing and filling out your paperwork
- Overseeing your mortgage application and ensuring all deadlines are met
- Comparing the range of mortgage products that may be better suited to your needs
However, not all brokers charge upfront fees. Some brokers are paid solely through lender commission and don’t charge customers directly.
How much do mortgage brokers charge?
It depends on the broker you use and when they require payment. Some fee-charging mortgage brokers do ask for upfront payments directly from the customer before they begin their search for lenders, and these fees can range anywhere between £300 to £600, although this isn’t always the case.
In addition, there are mortgage brokers who charge a flat fee with a fixed rate; this rate is billable whenever mortgage advice or their services are provided.
This can result in the cost of mortgage broker fees accumulating, so always be clear on how much you will be charged ahead of seeing a mortgage broker.
To avoid unexpected charges, always read your mortgage broker fee disclosure form before signing.
OnlineMortgageAdvisor has a fair fee policy. We charge our fee based solely on the complexity of your situation and is directly related to the amount of work an expert needs to do in order to secure you a deal.
What’s more, if your mortgage is not accepted, we will refund the fee – provided all the information you gave your advisor was accurate and complete. However, if you choose to withdraw from the mortgage, fees are typically non-refundable since the work will already have been carried out and our service delivered.
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Are there fee-free mortgage brokers?
‘No fee’ mortgage brokers do exist, and some people can find this to be a cost-effective solution. A majority of brokers will receive a commission payment from your lender once the mortgage is completed. However, the difference is that these brokers will not charge you a fee on top of this.
At OnlineMortgageAdvisor, some of our advisors work on a fee-free basis for straightforward cases. If your situation is suitable for a fee-free service, we’ll match you with one of these advisors.
Fee-free vs paid broker: which is best?
It entirely depends on your circumstances, the fee you’ve been quoted, and if the broker can shave off any lender fees.
While a free broker sounds great, unfortunately, some unethical brokers may take advantage. In a worst-case scenario, a broker may actively recommend that a borrower take out an unsuitable mortgage with a lender if they can earn more commission through them.
Fee-free brokers are typically reserved for applicants with less complex needs, for example, those with perfect credit, easy-to-prove income, and who can put down a higher deposit. Those with more complex needs (such as buy-to-let applications, low deposit or bad credit) may need a more experienced broker specialising in bad credit mortgages.
Even if you plan to buy a very cheap property, if your loan-to-value is high (for example, you need to borrow 95% of the property’s value), your application may still be considered higher risk.
By paying to work with a broker, not only will you benefit from their unparalleled expertise, but they could also potentially grant you access to more competitive products.
Whether you pay or not, working with an experienced, competent, trustworthy mortgage broker can help you find your dream mortgage. Our advisors are all fully qualified by the Financial Conduct Authority (FCA), and they are best set to give you trusted advice.
Are there different types of mortgage brokers?
Yes, there are. Some mortgage brokers have links to lenders, which can make their advice biased. Because of their relationships with certain mortgage providers, they can’t compare all available options.
These brokers are usually referred to as tied brokers. Some brokerages are owned by lenders, so even though they can access other lenders’ products, you can’t guarantee it’s always the best advice.
This is an important factor to consider when choosing a mortgage broker because working with a tied broker could limit your options and result in you missing out on a cheaper or better deal.
There are also mortgage experts who specialise in certain fields:
- Overseas mortgage brokers
- Second charge loan brokers
- Shared ownership brokers
The advisors at OnlineMortgageAdvisor are whole of market. We have good relationships with a range of lenders and will continually search the whole market to find the most financially beneficial mortgage for you.
How do mortgage brokers earn their money?
An independent mortgage broker’s advice can be invaluable when searching for a mortgage.
Independent mortgage brokers have a duty to find you the best possible deal based on your circumstances.
They are also responsible for ensuring your mortgage is affordable, so any recommendation they make must be justifiable.
To earn their money, a mortgage broker will assist you with:
- Calculating your affordability and finding the right mortgage to suit your budget
- Comparing the whole market to save you money and truly find you the best deal
- Researching lenders before you apply for a mortgage and making you aware of all the pros and cons you should consider
- Filling out and overseeing applications on your behalf to save you time
- Reading the terms and conditions of your mortgage agreement and highlighting any points that could be unfavourable in the future
- Progressing your mortgage from start to finish, often working with the solicitors to complete particularly tricky cases
Having this guidance and knowing that the advice you receive is correct and in your best interests can make finding a mortgage lender much smoother.
Do mortgage brokers lend money?
No, a mortgage broker is not a lender and therefore they do not fund loans. Think of a broker as a mortgage expert whose knowledge helps you to find the best lenders and rates on the market.
Although a mortgage broker will know numerous lenders’ current rates and conditions, they do not lend money themselves.
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FAQs
No. Second-charge mortgages are charged the same way as first-charge mortgages, with fees varying by broker and case complexity.
Some brokers request their fees be paid upfront, whereas others request payment once a mortgage application has been successfully approved.
In many instances, mortgage broker fees are paid by the lender at no cost to you, but it’s always important to be clear on when your mortgage broker will be paid and whether or not the cost is chargeable to you.
Not necessarily. If a broker fee is added to a mortgage (in the case of a remortgage), the broker’s fee is paid to your lender, which is transferred to the broker along with their commission.
This should be set out in writing. For upfront or success fees, these are typically transferred directly to the advisors’ company. Any queries regarding fee payment should be directed to the company compliance department.
Always be clear on how you pay your broker. If you feel unsure about the cost of your fee and how your broker came to that amount, ask them for a detailed breakdown.
If you feel dissatisfied with the service you have received from your broker, it’s always a good idea to raise the issue before payment, if possible.
However, if you have already paid your fee and later feel you were mis-sold a product or recommended a lender that wasn’t suitable for you, you have every right to complain.
Another point to remember is that before signing a mortgage broker agreement with your mortgage broker, always check their refund policy. If this isn’t stated within their contract or they don’t have a refund policy, it may be worth asking them to include one.
It depends on your circumstances. For complex cases (bad credit, self-employed, low deposit), a specialist broker’s expertise can be invaluable and may help you access better rates that offset their fee. For straightforward applications, a fee-free broker may be sufficient.
Ready to get started with a mortgage broker?
OnlineMortgageAdvisor works with over 100 lenders with access to thousands of mortgage products including exclusive products that you can’t access directly, giving you access to some of the most competitive rates available.
- Whole of market access – Our advisors have access to a wide range of lenders and products
- Specialist knowledge – Expert advisors for every type of mortgage situation
- Proven track record – Highly rated by our clients
Call 0330 818 7026 or make an enquiry to get started with OnlineMortgageAdvisor today.
Pete Mugleston
CeMAP Mortgage Advisor, MD
Pete, a CeMAP-qualified mortgage advisor and an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete successfully went the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained and his love of helping people reach their goals led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!
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