How Do Mortgage Brokers Get Paid?
Learn exactly how mortgage brokers get paid and how they can help you find a cheaper deal.
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Have you ever considered how much a mortgage advisor will need to be paid and how they earn their money? To answer this very question, we’ve created this short guide to fill you in on exactly how mortgage brokers get paid and how they can help you find a cheaper deal.
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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 then gets paid a commission from the lender.
Depending on the complexity of the case the adviser might also charge a fee for their services of advising and arranging the mortgage. This could either be on a fixed fee or percentage of the loan amount.
Many of the mortgage brokers we work with are only paid when they successfully arrange your mortgage, if they are not successful they will not get paid. All of the brokers we work with will provide a full breakdown of their individual fees on your first conversation with them.
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How much does a mortgage advisor get paid?
Mortgage brokers all have different income models, some will be employed and receiving a basic salary plus commission, others will be completely self-employed.
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
Fess will vary between the advisors and firms that we work with. However, if your mortgage broker charged their fee as a percentage (1%) and you were offered a mortgage of £200,000, their fee would be £2,000.
Some mortgage brokers charge an upfront fee which can vary heavily depending on the experience and skill of the broker and the complexity of your case.
A typical charge for an upfront fee might range between £250 and £500. Once a mortgage agreement has been successfully offered, you might be charged a further payment. as a success fee, again this could be fixed or percentage fee.
Do I pay my broker directly?
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 and then this is transferred to the broker along with their commission.
For upfront or success fees’ they are typically transferred directly to the advisors company, this should be set out in writing. Any queries regarding fee payment should be direct 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.
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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 of the possible options that might be available to you.
These brokers are usually referred to as tied brokers. Some brokerages are actually owned by lenders themselves, 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…
- Bad credit mortgages brokers
- Overseas mortgage brokers
- Second charge loan brokers
- Shared Ownership brokers
Whole-of-market brokers, like the ones we work with, are independent and although they have good relationships with a range of lenders, they will always 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 individual circumstances.
They also have a responsibility to ensure 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 of market to save you money and truly find you the best deal.
- Researching lenders before you apply for a mortgage and make 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 highlight 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 the process of finding a mortgage lender a lot smoother.
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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 the current rates and conditions of numerous lenders, they do not lend money themselves.
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