mortgage broker fees - very confused!

jamtart6

i contacted a mortgage broker (we are FTB) and asked if he was a whole of the market and free broker. he said yes, he was free, but he could charge a fee if i wanted (why would i want him to charge a fee?) which would be 0.75% commision of the loan we would take out...

at this stage we just want advice on how much we can get, if anything at all on our paltry wages!! so how will he make his money?

imoneyop

The broker will be paid a commission from the lender once you get a mortgate.

AndrewSmith

The reason for this is that for the broker to be allowed by the Financial Services Authority to call himself INDEPENDANT he has to offer both a commission option and a fee charging option.

The benefit of the fee charging option is that you are secure in knowing that the broker is recommending the best product for you, not the one that pays him the most as long as he refunds the lender commission to you. However I personally think that 0.75% is a bit steep.

We make our money once the new mortgage actually completes, ie you begin making payments on it and move into your new home. It is a game of numbers in as much as if you see x number of people, y number will conclude business with you.

Rick62

If he operates Fees Free he gets paid by commission from the lender, usually about 0.35% from mainstream lenders going up to 1% plus on sub prime. This does not affect the cost to you as from the lenders side they often find it cheaper to deal through brokers than their own branch network etc.

There are a few lenders, HSBC, some of the smaller building societies that don't use brokers, although there are also frequently deals that are only available through brokers.

If he were to charge you then I think he means he would then rebate any commission, although at 0.75% this is more than the commission would normally be.

JoKay_2

Hi, having been a mortgage broker myself in my dim and distant past, I can tell you that he will probably earn a fee from the lender you eventually go with, and commission on any other products you might buy, such as life cover, mortgage payment protector etc.

I would suggest that you speak to several brokers, both with banks and estate agents, to see what advice they can give you, as well as guaging an idea of how much you can borrow. However, do not under any circumstances sign up to anything, or allow anyone to check your credit history, as this could have an adverse effect if / when you apply for your mortgage or anything else.

HTH!

jamtart6

Thank you for the responses. That does make sense now. He did say he would rebate the fee.

is it permissable to see more than one broker?

so if we dont go with broker no.1 he has essentially given us free advice and he gets nothing from it?

JoKay_2

Hi

Yes, it is definitely permissible, and in fact recommended, to see more than one broker. Its almost like just seeing one house / flat and buying it - you need to see others to compare it to.

And yes, if you don't go with him, he has given you free advice and got nothing from it - but that's the name of the game.

You need to speak to others to pick their brains - make sure you know exactly how much cash / deposit you need to buy, what the other associated costs are, what type of mortgage will suit you best etc, etc, and also to get a feel for which broker you have most confidence in, not necessarily the one who'll get you the cheapest deal.

Just my opinion, of course!

dunstonh

i contacted a mortgage broker (we are FTB) and asked if he was a whole of the market and free broker. he said yes, he was free, but he could charge a fee if i wanted (why would i want him to charge a fee?) which would be 0.75% commision of the loan we would take out...

That is not a fee. 0.75% of amount borrowed would be a breach of TCF rules on fees and the initial disclosure document would be uncompliant. It's higher than the commission on most mortgages (by more than double).

There have been a number of warnings issued telling advisers this but some still ignore it.

Rick62

Brokers can charge a % fee if they like, so long as it is disclosed on the IDD. What are you saying is wrong with the suggested fee basis dunstonh?

WaveyDave_2

Sorry to butt in.

Are you guys saying that if a broker charges a fee, then he has to refund the commission? Or that he can choose to refund? I've recently used a mortgage broker who charged me a flat fee of £175 (although he also arranged my life insurance). On the mortgage offer, it mentioned that the broker will get a commission of approx £500.

Have I been stitched up?

AndrewSmith

Not necessarily.

A broker can charge a fee and choose to either refund or keep the commission should they wish. They can also choose to work on commission only with no fee from the client as long as it is all disclosed at the outset in the Initial Disclosure Document