Topics
Key Takeaways
- A mortgage broker acts as an intermediary between borrowers and many lenders.
- A mortgage advisor is contracted to a single lender.
- Fee mortgage brokers start from ± £500, but costs can vary between mortgage brokers.
- Mortgage advisors usually don’t charge a fee. They get paid a commission from lenders.
- A fee-free mortgage uses fee-free brokers, meaning there is no cost to the borrower.
Mortgage Advisor Fees: Explained
Mortgage advisors are employed by a single mortgage lender, such as HSBC Bank, for example. They offer mortgage advice to borrowers about the various mortgage products available from their lenders. In essence, they’re mortgage consultants.
Fees
Usually, mortgage advisors don’t charge a fee, as they get paid a commission from their affiliated lender. Some advisors also take their fees as a percentage of the total mortgage deal instead. A mortgage advisor may structure fees as the following:
- Fee-free: The lender pays a commission to the mortgage advisor.
- Percentage: Some mortgage advisors have a percentage-based rate instead, ranging from 0.4% – 1% of the total mortgage deal. This could become costly, especially with higher-priced properties.
- Flat rate: Some independent mortgage advisors charge for their services; however, this is usually rare.
Why do they charge a fee?
Mortgage advisors offer expert advice relating to mortgage deals. They assist borrowers during the entire home-buying process. The services they typically provide are:
- They source the best mortgage deals from their range of financial products, ensuring it’s aligned with the borrowers’ budget.
- They assist with calculating the loan amount that borrowers are eligible for.
- A mortgage advisor assists with your mortgage documents. They also deal with mortgage lenders, estate agents, and valuators on your behalf.
- They provide guidance with the mortgage application process and ensure it’s completed and submitted on time.
- They offer ongoing support and explain complex loan terms, interest rates, and monthly repayment information.
Advantages
- Expertise: A mortgage advisor has detailed knowledge and is up-to-date with the latest financial products from their lender.
- Access: They have access to exclusive deals that may not be available to others on the UK property market.
- Support: A mortgage advisor offers ongoing support throughout your entire home-buying journey – from sourcing the best mortgage deal and accessing your budget to expediting your Agreement In Principle paperwork, amongst others.
- Time-saving: They assist with all your mortgage application paperwork, saving you time in the long run.
- Fee-free: Using a mortgage advisor can help you save money, as most do not charge a fee. They also do the groundwork for you, making them a reliable partner to have.
- Regulated service: Advisors are regulated and authorised by the Financial Conduct Authority (FCA). This ensures they maintain consumer protection, confidentiality, and ethical practices.
When to pay
A mortgage advisor is usually paid a commission from the lender (e.g. fee-free mortgage), so you won’t have to pay anything upfront. If your advisor works on a percentage-based fee structure, this will be paid upon the approval of your mortgage.
Mortgage Broker Fees: Explained
Mortgage brokers explore various mortgage deals on behalf of the borrower (i.e. you). They have access to a wide range of mortgage products from multiple mortgage lenders. Essentially, they are “the middlemen“, choosing the best mortgage deals that align with your budget and preferences from various lenders.
The fees can vary between mortgage brokers. The average mortgage broker fee is around £500. However, some don’t charge a fee at all (known as fee-free mortgage brokers).
Fees depend on the type of mortgage you opt for and how much work and preparation has to go into your application. Understanding mortgage broker fees is crucial, as you may need to budget accordingly. Here are different pricing structures you can expect:
Fees
Most mortgage brokers get paid a commission from the lender for sourcing the mortgage loan. They only pay brokers upon completion of the mortgage deal. However, some mortgage brokers charge additional fees, structured as:
- Fee-free mortgage brokers: These mortgage broker fees are commission-based and are paid by the lender (at no cost to the borrower).
- Hourly rate fees: These mortgage brokers charge fees per hour, which can vary.
- Fixed fee: A flat fee or fixed rate fee can range between £300 and £1,000. The amount charged is based on how much work the mortgage brokers have to do. These costs can vary significantly from deal to deal.
- Percentage: Some mortgage brokers charge a percentage-based fee instead, ranging from 0.3% to 1% of the total mortgage loan. This could become costly, especially with higher-priced properties.
- Combination: Some mortgage brokers charge a combination of the above-mentioned fees. For example, they could charge a percentage fee and an hourly rate charge. It’s best to clarify this with your mortgage broker before you start proceedings.
Why do they charge a fee?
Mortgage broker fees are charged based on the services they provide. These services include:
- They source the best mortgage deal that aligns with your budget. They compare mortgage deals across the whole UK property and mortgage market.
- A mortgage broker will calculate your mortgage affordability.
- They assist in completing and submitting your mortgage application process.
- A mortgage broker will negotiate mortgage loan terms, interest rates, and conditions with the respective mortgage lender.
- They offer mortgage advice by explaining the complexities of mortgage-related contracts (e.g. monthly instalments, property taxes, etc.).
Advantages
- Convenience: Brokers do the groundwork for you and simplify the mortgage application process. They are recommended for first-time buyers.
- Time-saving: An experienced mortgage broker can assist with your mortgage paperwork (i.e. application forms) and can help arrange your Agreement In Principle documents.
- Access: They have access to various mortgage lenders, sourcing the best deal on the UK market that aligns with your budget.
- Unbiased opinion: Mortgage brokers offer independent mortgage advice that is not subjected to a single lender’s products.
- Regulated services: An independent mortgage broker is regulated and authorised by the Financial Conduct Authority (FCA), which ensures that consumer protection and ethical standards are met.
When to pay
Mortgage broker fees can either be paid upfront or upon completion of the deal. Check with your brokers about any refund policies, if the mortgage deal falls through.
Are There Other Fees Involved When Getting A Mortgage?
Yes. In addition to your mortgage broker fee, you may find an advisor or mortgage broker charges for extra services, such as;:
- Underwriting
- Procuration fee
- Broker finding
- Broker application
- Cancellation
There are also several other fees involved when closing your mortgage deal:
- Loan origination fee – charged by lenders to process the mortgage loan.
- Valuation fee – to determine the market value of the purchased property.
- Legal fees – solicitors fees for handling documentation and legal procedures.
Then there are additional costs pertaining to your property purchase, such as:
- Stamp duty: These are types of property taxes that are charged when purchasing a house (or land) in the UK. In Wales and Scotland, they’re known as ‘Land Transaction Tax’ and ‘Land and Buildings Transaction Tax’ respectively.
- Title insurance: Also known as Homeowners Insurance, this covers homeowners against damages or potential ownership disputes.
- Property taxes: These are government-levied taxes, calculated at the value of the property.
FAQs
What is a fee-free mortgage broker or advisor?
Fee-free mortgage brokers mean there are no mortgage broker costs. Instead, brokers (or advisors) are paid by the lender through commissions.
Can I use a mortgage advisor if I am self-employed?
Yes. Whether you are self-employed or work for a company, you can apply for a mortgage. You will need to provide evidence to support your mortgage application process.
This includes three years of tax returns, bank statements, credit scores, and confirmed business registration (i.e. Companies House), to name a few. Your chosen mortgage advisor will be able to assist with your application.
Are mortgage broker fees worth it?
This all depends on what you expect from a mortgage broker. If you are looking to save time and have your paperwork organised and application submitted; then yes, mortgage broker charges are well worth it.
Is a mortgage broker or a mortgage advisor better to use?
This depends on several factors. For example, if you bank with Barclays and would prefer to keep your mortgage loan with them, it’s advised to use a Barclays mortgage advisor. On the other hand, if you want access to a range of mortgages from many lenders, then a mortgage broker is best to use.
References
https://www.mortgageable.co.uk/mortgages/mortgage-broker-fees/
https://yescandomoney.com/guides/costs-and-fees/do-mortgage-brokers-charge-a-fee/
https://upthegains.co.uk/blog/how-much-do-mortgage-advisors-charge
https://www.onlinemortgageadvisor.co.uk/mortgage-broker/mortgage-broker-charges/https://helpandadvice.co.uk/how-much-do-mortgage-advisors-charge/