Where's the catch?!

Panda78

My EA has put me in touch with their mortgage broker. I was reluctant to speak with him, as i won't have a problem securing a mortgage (45% deposit being put down), but they have said that their service is free of charge.

Am i missing something here? They said they could arrange my mortgage and conveyancing without a fee (i know the actual mortgage will have a fee and so will the solicitor), but that i wouldn't have to pay for the broker arranging it all for me.

Does this sound right? Thanks for any advice.

kingstreet

There are fee-free brokers out there who may be able to operate on that basis if they are in an area where average mortgages are high enough.

Typical commission on a high street mortgage is around 0.32%, so that may be all they need on a mortgage of £150k or more.

In our area, mortgages tend to be under £100k, so we charge £249 in addition to any lender commission, otherwise we would not make a profit on our advice, recommendation and arrangement service.

Dave_Ham

Where do I start...?

Ok, firstly you are assuming they are telling the truth. Secondly I do not know of many that offer fee free, see point 1.

The Solicitors pay them a commission (typically) for the introduction of the business and this is charged on to you. Their solicitors typically do not have the best reputation for working to your interests, although do your research first on the one recommended..

I think you already know all of this by the question, but best of luck

Panda78

Thanks guys, i am still a bit wary, but we've only spoken over the phone so far. If/when it comes to meeting him in person, i will of course get everything confirmed in writing as to what fees are payable and i will see if i can find the same deals myself.

I'm thinking going with the EA broker may help get my offer accepted, as they could push the vendor to go with me rather than someone arranging their own mortgage. I guess this is what they want me to think, anyway!

If there are no additional fees, it would be tempting to let the broker arrange it all, just so i feel a little less stressed.

kingstreet

Make sure you ask for and get an "Initial Disclosure Document" and that;-

section 2 - the service is whole market and not single lender or limited panel

section 4 - that the remuneration is no fee, commission paid by lender.

Ask if they receive a referral fee from the solicitor they introduce you too and if so how much, as that will increase the cost you pay by that amount.

Finally, ask if they sell insurance and ask them for an Initial Disclosure Document for that service too. Check if they are whole market for insurance, or tied. Check if you have to buy insurance to earn them a commission to pay for the mortgage service and check if you have to pay a fee in lieu of commission if you cancel the insurance, perhaps for anything upto four years from completion.

Make sure you check their website to see if it agrees with what you're being told about fees, or the lack of them.

Let_Us_See

Panda78 wrote: »

I'm thinking going with the EA broker may help get my offer accepted, as they could push the vendor to go with me rather than someone arranging their own mortgage. I guess this is what they want me to think, anyway!

I understand your thinking even although I think it is flawed. At the very least see anothger broker for a second opinion.

brooklyn07

when i bought my first house a few years ago i went with a broker that was completely fee free in the sense that he didnt charge us but took his commission from the mortgage company.

The mortgage still had a fee of £995 but we didnt have to pay him anything.

He also got us a mortgage at rates that no one else could come close to - will definitely be using him again in the future.

ACG

I'm thinking going with the EA broker may help get my offer accepted, as they could push the vendor to go with me rather than someone arranging their own mortgage. I guess this is what they want me to think, anyway!

This is exactly what they want you to think.
That practice is illegal and can/should be reported to trading standards.

I have done mortgages where i receive commission only. It was when i was first starting out, it helped my cash flow and gain experience. Its very rare i would do such a thing now though - the mortgage would have to be pretty big or it would have to be a friend/relative.

You get what you pay for in my opinion. But i tar pretty much all estate agents and their brokers with the same brush and i would not trust them as far as i can throw them.

If you want a broker, employ one who is working for you and solely you. There is then no question as to whos interests they are looking after.

jamesml

I would also be wary of using the EA-suggested broker. Do you think they have your interests at heart if you aren't paying their bill at the end? I think not.

I don't know where you are in the process either, but I have heard of stories where the EA-backed broker will have separate conversations with the EA behind your back. This includes dislcosing things like how much the bank are willing to lend you - do you really want the EA knowing that?

Personally I feel pretty strongly you need someone you can trust and rely on who has your best interests at heart (at least professionally) and I don't see that you can guarantee that with an EA-backed broker.