Last reviewed on 15th September 2023 by Martin Alexander (Mortgage Advisor)
Mortgage broker fees often vary, with each advisor having a unique fee structure. That being said, the average mortgage broker fee is around £500, but some advisors won’t charge fees at all. Instead, they’ll earn a commission from the lender. Other brokers will earn both a fee from their client and a commission from the lender.
The main reason why mortgage broker fees vary is that each case is different. Complex cases often require a lot of work and therefore advisors charge for the additional time involved. On the other hand, a simple straightforward case may not involve as much work, so an advisor may charge a lot less.
Your advisor should always tell you in advance what their fees are. You can then make an informed decision on whether using a mortgage broker is the right choice.
- Should I pay a fee or commission for mortgage advice?
- What do mortgage broker fees consist of?
- How much commission do lenders pay mortgage advisors?
- How much should a mortgage broker charge?
- Why do some brokers charge fees in addition to commission?
- What is a fee-free mortgage broker?
- Are mortgage broker fees worth paying?
- Won’t my bank be cheaper than a mortgage broker?
Should I pay a fee or commission for mortgage advice?
Whether an advisor is paid a fee or a commission, shouldn’t make much difference to the level of service you get. For instance, the main goal for yourself and your broker should be to find the best mortgage deal possible. That said, you’ll still need to know your costs before you make any commitments.
Although advisors are upfront about how they’ll get paid, it’s perhaps more important to understand whether your advisor is independent or tied to a lender. This is because brokers who are tied to lenders will only be able to recommend their lender’s products. In comparison, an independent broker will search the entire market to find you the right product.
What do mortgage broker fees consist of?
Mortgage broker fees consist of the following:
- Broker fee for finding a mortgage
- Procuration fee from the lender
A broker fee is usually paid once you’ve agreed to go ahead with a recommended mortgage. A procuration fee is then paid by the lender on completion of the mortgage. Procuration fees are a commission that lenders pay to advisors.
How much commission do lenders pay mortgage advisors?
Lender procuration fees vary but almost every mortgage will involve paying a commission to a broker. This is a percentage of the mortgage and is usually less than 1%. Occasionally it can be slightly higher, but this depends on the lender. The average procuration fee is less than 0.50%. So, for a £100,000 mortgage, a broker would receive a £500 commission based on a 0.50% procuration fee.
Lenders will pay commission directly to your advisor. Any commission that a lender pays your advisor, won’t affect your costs in any way. Each lender offers different procuration fees to advisors. That being said, the commission from lenders shouldn’t affect their recommendation in any way. Your advisor should always recommend you the right deal, irrespective of fees and commission.
How much should a mortgage broker charge?
The fees that mortgage brokers charge can vary, but you can expect to pay between 0.3-1% of the loan amount. Some cases are calculated individually, depending on the amount of work involved. This is typically due to the complexity of the case. For instance, an advisor may charge a fixed fee of £299 for a straightforward case. If there is adverse credit involved, you could be paying up to £1000 in fees, if not more.
Other brokers will base their fees on the size of the mortgage itself. It’s the industry norm for fees to be between 0.3-1% of the mortgage. So, if your broker charged a 0.35% fee on a £100,000 mortgage, the fee you’d pay a broker would be £350.
Your advisor should present you with a client fee agreement that outlines their charges in detail. This is very useful as you’ll have a written quote from the start. Furthermore, the client fee agreement should explain the reasons for charging you the amount that they are.
Why do some brokers charge fees in addition to commission?
Some brokers charge upfront fees and won’t work solely on commission. This is because, at times, clients can change their minds. This results in brokers wasting their time and effort. Nonetheless, it’s still a good idea to ask your advisor what their fees involve. You’ll then be able to make a more informed decision about whether using an advisor will be worth doing so.
It’s often the case that mortgage advisors are able to save you money on your mortgage. This is why many of us pay brokers for their services. Although there is a cost involved, the amount you save on your mortgage will typically outweigh any fees you’ll pay.
What is a fee-free mortgage broker?
Fee-free mortgage brokers won’t charge you an upfront fee. Instead, they’ll receive a commission from a lender. Some brokers advertise fee-free advice, but this only relates to their initial advice being free. If brokers are able to find you a mortgage, they may well charge you a fee.
Your advisor should explain their fees in great detail beforehand. It’s always a good idea to get a full breakdown of any mortgage broker fees in writing before making a commitment.
Are mortgage broker fees worth paying?
Mortgage broker fees are worth paying more often than not. This is because you’re likely to recoup any fees you’ve paid with the savings you’ll make on your mortgage. Furthermore, mortgage brokers often do a lot more than recommend a mortgage.
There’s additional value to using an advisor such as:
- Communicating with your estate agent
- Liaising with your conveyancer
- Ensuring mortgage underwriters are satisfied
- Keeping you informed at every stage
- Fighting your corner when needed
Won’t my bank be cheaper than a mortgage broker?
Many think that going straight to their bank will ensure them the best mortgage. After all, you’ve been with your bank for years, so surely they’d offer you the best deal? No, this isn’t the case.
Going to your bank for a mortgage will rarely result in you getting the very best deal available. This is because there are hundreds of other lenders and thousands of other mortgages to compare. The odds that your bank happens to be the best pick are very low.
The majority of brokers will only request a fee once you’ve agreed to apply for a mortgage they’ve recommended. As a result, you’ll be able to calculate the savings you’ll make to justify paying a fee. If you’re still unsure, you can contact our advisors for more information. You can learn more about the differences between mortgage brokers and banks here.
About the author
Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.