Commission or fee based MA?

fimonkey

Hi All,

Can anyone please point me in the direciton of info which explains whether a fee based or commission based MA is best for me(potential FTB).

What kinda fee's do MA's charge and when does the fee become payable? (i.e at teh very beginning, or when the sale is complete?).

If its a commission MA how do I find out what their commission is per the product they recommend?

Thanks in advance

kingstreet

Fees can be charged up front or on completion.

The amount and payment point will be disclosed at the outset in an Initial Disclosure Document.

Commission is disclosed i £ on the Key Facts Illustration when you choose the product you apply for.

The amount of fee is negotiable between you and your adviser. If you don't get what you think is a decent deal, go elsewhere.

Worth remembering an independent mortgage broker will charge you a fee but will rebate any commission from the lender back to you on completion.

kingstreet

Here's an example I prepared for another thread last month;-

In some cases, using an independent broker may be preferable to a whole market adviser.

Whole market advisers may only select from lenders and products which pay them a commission, while an independent may agree a fee with you and pay to you any commission he receives. If a direct to lender product is better for you, the independent will tell you if that is better as you are paying a fee for the advice.

Here's an example;-

you see a whole market broker looking for a 25 year repayment £150k mortgage on a £200k purchase. You want the best five year fix, regardless of fees. You agree the broker will take commission on any arranged mortgage.

He finds you an Accord Mortgages product at 4.44% fixed until 31/08/2016 at £828.65 per month. The broker will receive commission of £487.50.

You then see an independent broker who agrees to charge you a fee of £299 and to pay you any commission he receives on any arranged mortgage. He also looks at direct to lender deals and explains that in this case, you may get the best deal, but no commission rebate.

He finds you the Accord option, but as you have a fee agreement, he tells you the commission rebate would be £487.50, leaving you £188 better off.

The best overall deal is Yorkshire Building Society's 3.99% fix until 30/09/2016. The monthly payment is £790.93. This is a direct to lender product, so no commission rebate. You've paid a £299 fee, but in doing so, the monthly cost of your mortgage has fallen by £37.72 against the Accord option, saving you £2,263 over the five year fixed term.

I'm sure someone will point out that you can save £299 by finding the best direct deals yourself and that is true. If you have the time and inclination to do that, why bother with a broker at all?

fimonkey

Yeah I have the time to go direct and find the best deals myself, however i thought going through a broker would get you better deals that only they have access to? Additionally I am on two fixed term part time employment contracts until 2014 (one is a research grant) I have a letter from my original employer stating I will revert to a full time permenant contract after that but I was under the impression I would need a broker to help with this. Am I wrong?

fimonkey

Are independent brokers also whole of market then? How on earth do you find an independent broker? Thanks

handytips

You are probably better off looking for a Whole of Market broker. can i ask you a simple question. Why do you need to know how much commission is being earned ? Seems a very odd thing to ask unless you are very anti. With your employment record you will be better off looking for a broker to do the work for you, for example i will charge a fee of £495 payable on Offer of mortgage on a Remo it is on completion, and neither do i refund any commission, why should i, do you give any of your pay back to your employer ?
A good broker will then look after your needs on a permanent basis, advising you on the best ways to get your mortgage payed early etc, negotiate a life time fee with the broker, for eg you pay the fee once and then never again on further advice or mortgages arranged. Remember banks only offer their products and are not allowed to give advice. Good luck with your house hunting

kingstreet

fimonkey wrote: »

Are independent brokers also whole of market then? How on earth do you find an independent broker? Thanks

A whole of market broker will typically not source products which are only available direct from the lender. Whole of market actually means "whole of market commission paying deals."

A broker offering independent mortgage advice will source from all the deals in the market, commission paying and direct. You pay the broker a fee to find you the best possible deal and to avoid the broker only sourcing from deals which pay commission, he rebates any commission back to you on completion.

If you go to https://www.unbiased.co.uk, use the search facility to source mortgage advice. Switch off the paid-for only ads and you should get a list of your nearest independents offering fee-only with commission-rebate services.

fimonkey

Thanks Kingstreet, you explained it perfectly.

Handytips, I'm curious about the commission aspect, if a broker found me a deal that paid him £500 commission, but could get me a better deal if I paid him £250 and not other costs then of course Id choose the latter, that's all. With respect to looking after my needs in the future, - no thanks, no guarantee for me if the MA goes bust/changes profession etc so not inclined to pay for it upfront.

Ta!