Arrangement Fees?

mercmanricky

A FTB here!
Have viewed a few properties and find that every estate agent likes to push their own "mortgage advisor". I had a meeting with a couple of said mortgage advisers to get a feel for them. I quickly dismissed one as she seemed very two faced or just hated her job. Although another seems pretty decent. My main question is that he quoted between £500 to £999 as an arrangement fee. The other advisor told me that she doesn't charge any arrangement fee like this other company does.

I was originally under the impression that the arrangement fee goes to the lender, not to the broker?

I am looking at properties around £130,000 and have savings of £25,000 of which i want to put a deposit of £20,000 in.

Both came up with simlar example rates of 4% based on my wife and I having a combined salary of £37,830.

TrickyDicky101

Some advisers charge fees up front (for advice) while others rely on the mortgage lender paying them commission and still others may expect to make money from 'additional services' eg insurance they try and sell to you.

I am of the opinion (and it is just my opinion) that paying an upfront fee to a broker is an excellent way to impoverish yourself for no gain. I am financially astute and have always taken it upon myself to search the market and determine what's best for me. If you don't feel able to do this then by all means go through a broker but I would think you should be able to find one who is OK and doesn't charge you (directly) a fee for his/her service.

supa-girl

The saying "there is no such thing as a free lunch" applies here imo. Many mortgage advisors will offer you "free advice" but I would proceed with great caution. Lenders pay a "proc fee" to advisors on completion of a mortgage - the amount paid varies massively and some lenders don't pay one at all. Insurance compnaies also pay commission and again this varies from one to another.

An advisor who is not charging a fee is going to need to make some money out of you, so they are going to place you with a) a lender that pays a decent proc fee and b) an insurance company that pays a good commission. They are certainly not going to "search the whole market" and will definitely not be using a lender that doesn't pay a proc fee to them. The basic salary is not much, especially for those based in an Estate agents office, if they even have one......many are self employed.

On the otherhand with someone charging a fee, they are being honest about making a living from you. If you choose to use them, they already have £500 - £1000 in the bank so WILL look for the best deal and search the whole market, even the lenders that don't pay proc fees and the insurers that pay less commission. You are paying them to ensure they get you the best deal.

I had a friend who was an adviser and he charged a fee - if he did make money on a proc fee, he would refund that to the customer on completion of their mortgage, almost as a "guarantee" that he wasn't going to swayed by the proc fee.

People have to eat, so they will make money out of you one way or the other - I would rather use someone who was honest about that and also felt their advice was worth something but that's just me.

Just look carefully at what you are being offered and don't be afraid to ask what they are making out of the deal!

SG

GMS

A great post showing the way to look at the role of a broker.

Whilst a good broker should not be swayed by commission there is truth in the 'need to eat' line.

Lenders pay a typical fee of 0.3% from which a mortgage network (if in place) would deduct 10-15%. Indemnity Insurance would be another 1%. Premises, electricity, gas, council tax etc all cost money too.

If you looked at a mortgage of £100,000 the broker would be looking at around £300 in commission. Factor in the deductions for network and Indemnity and you are at around £250. From this take out costs of visit such as fuel, phone calls, IT costs etc and there is not a great deal left.

If a broker charges a modest broker fee it is not to be seen as wrong. As pointed out above it is far more important to get the correct advice than it is to get the cheapest advice.

The old saying of 'You get what you pay for' applies to any service. Yes the internet allows mass comaprisons but how does somebody with an average knowledge of the mortgage market decifer it?

Minimum term of employment, which income is allowed to be used, adverse credit criteria, property type, new build/converted etc. People are being turned down for mortgages left right and centre. Could be due to credit scoring but equally could be due to a person applying direct for a product they are ineligible for. Why pay application fees to lenders to be turned down?

Use a 'Whole of Market' broker who will find the best deal. If they charge a fee then make sure it is proportionate. If the lender commission is huge then you may well find no fee is payable.

Broker fee free must be made up elsewhere.

Paid for good advice beats free bad advice hands down.

firstaspect

mercmanricky wrote: »

I was originally under the impression that the arrangement fee goes to the lender, not to the broker?

It does.
Personally if the advisors you are seeing are just the estate agent ones and offering you general products you could get on the high street then I'd listen and then apply for the mortgage yourself direct with the lender. Unless they getting any sort of special deal it's really not hard to fill in the usually online forms nowadays and go in to provide whatever ID/bank statements etc. are required.

dunstonh

ave viewed a few properties and find that every estate agent likes to push their own "mortgage advisor".

General rule of thumb. NEVER NEVER NEVER use the estate agent mortgage broker. They have the worst reputation going. Many are tied/limited panel and they know they have one chance to sell. They are not looking for long term relationships.

betmunch

Sorry Dunston, I disagree with your NEVER NEVER NEVER use an Estate Agent Advisor.

While I agree they have the worst reputation there are good ones out there. I could name many good Advisors that are either in an Estate Agency or started there.

You should NEVER NEVER NEVER use a Mortgage Salesman, the problem is you don t know you have one until it is too late. Many, but not all EA's have Mortgage Salesmen in them unfortunately!

dunstonh

Ok, fair call. When you make a generalisation you do risk offending the minority. I should have added that independent agents tend not to suffer the same reputation.

payless

around here even most of the "independent agents" are tied to a couple of mortgage salesforces / so called networks

payless

The best route will be an adviser who will offer true whole of market ( ie ask what bthey think of First Direct, ING etc ) ...
Of course no such thing as a free lunch - if you want true advice expect to pay for it... although that is not a defence of "advisers" who still just quote / take commission deals and then charge a fee on top to try and justify it as fee based

mercmanricky

Thanks for the top advice and informed opinions, i'm sure it wont be long till my next question!