Brokers & Arrangement Fees

NervousYetFeisty

Hi. This is my first post. I've been trawling through the forum and articles here and found "Sneakily get top mortgage advice for free" especially interesting. Please forgive me if I should already have gleaned this bit of info from all this reading but I'm a little overwhelmed.

OK, my Q:

If we go through a broker do we still have to pay the arrangement fee (which is about £700 from what I can see), or is that covered in the broker's fee?

We are FTBs, looking to buy something for £160k with a £50k deposit. The relatively large deposit works in our favour but we will be looking to borrow a pretty high multiple, hence considering a broker rather than going straight to the lenders thrown up at moneysupermarket.com. Any thoughts on that strategy much appreciated!

TIA

SPembo

Do you mean reservation fee? You can have mortgages with or without the reservation fee, just if you take it with you tend to get a better apr so you tend to pay less over the fixed period. You'd most likely want to pay the reservation fee given the cash for deposit you have available.

Some brokers charge fee's + take commission and some just take the commission from mortgage. Some are fee free if you take out life insurance (which could likely be inflated compared to if you shopped around yourself)

NervousYetFeisty

I don't think I do mean the reservation fee - Ithey appear to be different things.

Conrad

As far as I am concerned the more competent brokers charge fee's.

Although we stand to make quite large sums from commision people often fail to realise that many cases do not go through, usually due to the property sale aborting. Any decent business person will 'factor - in' this unpaid work when calculating the minimum sum they earn from each case. For me this means I nearly always charge a fee.

I have to say that fees free brokers smack of desperation and I have personally found that fees free brokers tend not to be as dilligent as they are engaged in a numbers game where 'time on case' must be minimised.

There are many hidden costs over and above the time spent on each case, for example I spend a good deal of time carefuly checking the criteria of lenders in order to spot opportunities for clients. I am aware of lenders that allow 95% borrowing and allow you to not pay - off your existing residential mortage where as other brokers near me tell people they can only borrow 90% in this instance. For me it is far much more than simply inputting the clients details into a computer to see which rates 'appear' best, any fool can do that.

Robert_Sterling_3

If you refer to the website of the Building Societies' Association you can find out what is available from about sixty building societies.
You could in fact start with the biggest building society in the world ever, i.e. The Nationwide Building Society, and then see if, in your own particular case, any other building society can improve on it.
I have not seen any statistics on this matter but I expect that only a small minority of people have much to gain by using a financial adviser other than a free one working for the building society itself.

bingo_2

I am of the opinion that some lenders, brokers, and financial advisers make the whole mortgage playing field as complicated and jargonised as possible in order to make their expert knowledge necessary.

Just about all lenders ask for an "upfront fee" before lifting a finger, and this is designed to weed out the time wasters.
This fee can be labelled an arrangement fee, reservation fee, application fee, booking fee or anything else their marketing boys and girls can come up with to try and differentiate them from the competition.

In essence it’s all the same thing - a put your money where your mouth is commitment, so as not to waste their mortgage staff's time.

A completely separate issue is the broker fee

Some broker’s charge it and some don’t.

Why is this?

I believe that, contrary to what Conrad says above, a fee free broker is not necessarily desperate ............. it could be that he simply isn't greedy!

If a broker earns .25% on a £150,000 mortgage (£375) for simply locating a selection of lenders that will all agree your case (done by computer, and very quickly) and then giving you an application form to fill in (which he then checks for inaccuracies and posts it to the lender - or inputs the data online direct in to the lenders online facility) then that’s a fair reward for the amount of work involved.
(the .25% procuration fee example can easily be .45% ((£675 in the above example)), as .25% is about as low a procuration fee as it gets!)

If a broker gives a good service, or and, has a high level of enquiries, then he will more work than he can handle.

He could now charge fee in order to whittle down the case load and make more money per case.

He could hire more staff to help him out.

Or he could simply "cherry pick" the easy and best cases and let other brokers handle the others.

To charge a fee for a simple case that needs very little input is "profiteering" from the applicant’s naivety

Mortgage brokers can look upon borrowers the same way as doctors look at patients, or the same way as a solicitor tend to look at clients "a meal ticket"

"First time buyers" are especially good "meal tickets" due to their vunerability (you only have to type in "first time buyer mortgage " in to a search engine to see how the lenders and brokers are falling over them selves to get their foot in the door, and paying "per click" to appear in the top results)
"Next time buyers" tend to have a go themselves once they realise it's not so difficult as they first imagined.

In summary, arrangement fees are payable to all lenders in one way or another but are labelled differently.

Fees to brokers do not have to be paid, unless you need some special help.

Fee free brokers may not be desperate, they just might be happy to make a "very good living, thank you very much" on the lenders procuration fee alone, rather than milk an already cash strapped borrower when it is not necessary.

loobs40

Purely my personal opinion, but if yours is a straightforward mortgage i.e. income multiplier falls in the normal criteria, you have a deposit of at least 10% and you have no special circumstances such as being self employed, then I see no reason why a mortgage broker is needed.

There is enough information on the internet,mortgage magazines and sites like this to mean that its not difficult to find the best deal for you.

We have just arranged a mortgage for my partner and it turns out that after all my very detailed research, the Nationwide was the best bet for him(no fees, overpayments allowed and a decent fixed rate). Plus he had the reassurance of visiting a nationwide branch and talking through it with the mortgage advisor.

I am a completely different matter. I am self employed with no accounts yet, my stated 'income' means that I in theory need 6 times my income, even though I can easily manage repayments through other income sources. I would be more likely to use a mortgage broker because of those non standard circumstances

payless

You will often find a broker that can add value to a transaction ( research, special rates, and advice/ guidance) without an added fee , and perhaps in some cases even offer a rebate ( or perhaps a fee structure whereby fees are lower than commission that is rebated)

As for Conrad's thoughts (QUOTE I have to say that fees free brokers smack of desperation)
well different businesses have different overheads , and different brokers have a different opinion as to how much profit they want/ need to make