Martins View On Using Mortgage Brokers...

kingstreet

You may be able to add a mortgage arrangement fee to the loan, but valuation fee, solicitor's deposit for search fees, possibly booking fee (if there is one) and possibly broker fee may be payable upfront.

Solicitors fees are normally payable on completion.

Look for products with a free or refunded valuation and a contribuyions towards legal fees. These are normally better for low-value mortgages such as RTB business.

dunstonh

Ah excellent, I did think that was the case. The previous comment had me worried!

Normal mortgages need a deposit. RTB are an exception.

Let_Us_See

dunstonh wrote: »

An independent has to offer fee basis as an option. However, most consumers don't actually pick fee basis. They prefer whole of market basis. So, whilst they may be independents, chances are they were not doing it on independent basis but whole of market basis. Independent would mean commission rebated. Not retained. (although it can be used to offset fee with any surplus repaid or difference made up by you if short)

I am surprised at the number of occasions I read posts (some by professionals, and I am not specifically targetting dunstonh) that still fail to understand the terms "independent" and "whole of market."

The common fallacy is a mortgage adviser/broker can only be one or the other, but many are both. Also, it has no reference to whether a separate broker fee is charged, or not charged. So what do the terms mean?

Independent
This purely means that the adviser/broker offers the client the option to how their renumeration is received and has absolutely no reference whatsoever to the number of lenders that the adviser may or may not have access to, or whether he charges or not charges an additional fee.




If an independent adviser, the client has the option of selecting:

1. Paying a fee to the adviser with the applicant receiving the lender's procuration fee on completion of the mortgage or,
2. Electing not to pay a fee with the adviser receiving a procuration fee on completion from the lender for submitting the application.

In both of the above options the adviser may or may not charge an additional fee.

Very few applicants select option 1 as most advisers request non-refundable upfront payment of the fee and as there is no guarantee the mortgage will complete, the rebated lender's procuration fee may never be received. Often the initial fee will be higher than the payable procuration fee - so again, it is a no-brainer. However, with large mortgages, it is possible the lender's procuration fee will be higher than the upfront fee and the applicant may elect to pay a fee and accept rebate of the procuration fee. Once again if the mortgage fails to complete, the applicant has already paid a fee and will not receive the procuration fee. These are the reasons why few applicants select the "fee payment" option.

Whole of Market

Surely, this is easier to understand? Perhaps! Firstly, following on from above, an adviser can be independent and whole of market, they can also be non-independent and whole of market, or neither independent nor whole of market.

In basic terms, Whole of Market is taken to understand that the adviser has access to all lenders. However, this term can also apply to an adviser who has sufficient market access (but not all, more later) that he "represents" whole of market. Advisers not classified as whole of market work from a restricted "panel" of lenders, and this is true of some of the UK major estate agency chains' mortgage advisers. However, in reality unless an adviser has access to all lenders, and this includes direct only providers, then true Whole of Market doesn't exist. I have yet to met an adviser who has stated 100% access to all lenders and providers - and if I did, I would have to smile!

In summary! Being independent means the applicant if offered the choice of how an adviser is renumerated - either by an upfront fee payable by applicant, or via lender's procuration fee. If this option is not offered then the adviser cannot be classified as independent. It has no significance to access to lenders. With either option the adviser may or may not charge a separate brokers fee.


Whole of Market is purely a term that signifies level of access to lenders and should be treated with caution. The level of access should be stated on the Initial Disclosure Document, but I would always request clarification at the outset. Whole of market has nothing to do with fees whatsoever.

I hope this clarification helps.

big_sved

Perhaps a silly question, but please ignore my naivity. If a mortgage broker does not charge a fee. where does their margin come from? do they recieve a comission direct from the mortgage provider? in which case do mortgage providers include an allowance for comission in all there mortgage offers?

dunstonh

big_sved wrote: »

Perhaps a silly question, but please ignore my naivity. If a mortgage broker does not charge a fee. where does their margin come from? do they recieve a comission direct from the mortgage provider? in which case do mortgage providers include an allowance for comission in all there mortgage offers?

A commission based adviser gets their remuneration from the mortgage company. A fee based adviser rebates the commission to you and charges you a fee instead. The fee based adviser is also able to go to the wider market to include non-commission paying deals if they wish (hence why fee paying can be more cost effective).

Many mortgage advisers also earn from the insurances.

Mortgage lenders factor the commission into the pricing of their products.

evandfarnes

Thanks for the interesting and informative insights from everyone; I have learned plenty while reading this thread.

Emilyee

thanks,Martin, have so many good tips share with us. and really appreciated all the brokers efforts. It's very kind of you .

JBo_3

Hi Martin,

We have recently applied for a mortgage through a mortgage broker which was highly recommended on your website. Unfortunately our experience has been a complete disaster! The mortgage broker chose the wrong mortgage for us, I have only been working 8 month and it was a requirement that I had been in work for 12months. This was not highlighted to us prior to applying and we found out a week before we were due to move in (on the second attempt). We have not only lost the house, but money and my present accommodation. We supplied all the documents within days of asking and have a healthy deposit. Also I would also like to note they took over 30days to return my passport. We are first time buyers and now need to start from scratch- I would not use a mortgage broker again.

dunstonh

I would not use a mortgage broker again.

Wow, that is very harsh. You rule out tens of thousands of others because of the actions of one that doesnt have a great service reputation and operate a business model that is different to most brokers.

As first time buyers, you would have been better using a small local firm and have local contact and service levels more suited for you.

ascendant

Hi, I am looking for private mortgage loans (pr!stamos hipotecarios privados) on properties in Costa Rica. Could anyone please suggest me from where I can get the loans at low interest rates.