Mortgage Fees

Jo.1981

My husband and I are first time buyers and recently went to a financial adviser about setting up a mortgage. He informed us that his fees to set up the mortgage would be £750 (this is additional to the mortgage providers fee). We plan to go to a few other places but I was just wondering if this was a pretty standard fee or if it was a little excessive.

(Not sure if it matters but we plan on borrowing around the £135k mark.

Senior_Paper_Monitor

Do you mean the mortgage providers' fee (as in their admin/application fee) or the 'commission/procuration fee' paid to the adviser?

The £750 may be a fixed fee with any 'comission/procuration fee' rebated back to you - if so, it is highly reasonable.

If it is £750 and the 'commission/procuration fee' retained by the adviser its probably on the high side, unless there are any particular issues with your circumstances/application.

The exact details of the adviser's charges will have been detailed to you in an 'about our services' document (Initial Disclosure Document) and 'correct practice' is to ensure that you fully understand the basis of his charges.

dunstonh

Is the adviser rebating any commission paid from the lender? (as it would be if the advice is independent and you have selected fee option - but may not be if you are not using an independent but using a whole of market adviser using commission plus fee).

Jo.1981

They are a independent company and but I'm not sure whether he earns a commission. We were told at our first meeting that the fees could be upto £1000 but have not received any documentation from him about what it is actually for.

Senior_Paper_Monitor

In that case he is 'bang out of order' unless this was the lightest of general conversations - and since he mentione the fee, he must therefore fully explain that and provide the required documentation (Initial Disclosure Document).

Frankly this is not working in his favour at all, as he may be offering you a very fair deal (£750 capped fee, part paid - probably in the £400-450 range - by the lender) or he may be looking for £750 on top of the lender's contribution. Without the document you simply don't know and I suspect won't use him as a result.

I have no problem with fees (we charge them), as £400ish does reflect the overhead, responsibilities and time inputs necessary in 'handholding' the average first time buyer properly through the process - but is important to ensure the client knows what the deal is and why!

dunstonh

They are a independent company and but I'm not sure whether he earns a commission. We were told at our first meeting that the fees could be upto £1000 but have not received any documentation from him about what it is actually for.

An independent financial adviser can work on fee basis only, fee and commmission or commission. They have to offer a fee only option though to be able to use the "independent" tag.

The fee only option cannot include the keeping of commission where it is paid (although it can be used to offset the fee. e.g. fee is £750, commission received is £600 leaving you to pay £150 difference).

If the adviser is charging £750 and keeping the commission then walk away.
if the adviser is charging £750 and rebating any commission then that option is good and it is possible that the commission rebate could exceed the fee and leave you with money in your pocket (although not likely on £135k borrowing).
if the adviser is using fee and commission then you tend to find figures more like £100 plus commission received are more common. This method is more common in areas with low house prices where the commission is not high enough to justify being fees free and they need to boost the income up a bit.

All good advisers will be up front with their charging and remuneration. Bad ones typically tend to hide it or avoid the subject.

Jo.1981

Thanks for your help.