Is 1% Fee Normal when using a broker?

Crown

Hi, I have a extremely bad credit as I had a property repossessed last month and have outstanding debts that are being paid off on a DMP.

We are currently with Kensington Mortgages who have put our interest rate up to a huge 10.25% (crept up from 6% over the last 24 months).
I was told by a friend to contact a mortgage broker he had used and they are currently doing a search to see if they can get a better rate than this even though my credit file is in tatters.

I have been told though that they will charge 1% of the amount borrowed and im quite suprised at this amount as it will be around £120,000 we will need to borrow. is this type of fee normal in these circumstances or are they trying it on?

I was advised by a friend of a friend that I mat get a rate of around 8% what would still be better but I dont really know if to proceed with this broker. He is meant to be getting back to me today.

TIA

toonfish

many brokers will do this for no fee - they will earn a decent amount from the new lender. You would be advised to shop around a bit.

dunstonh

In some areas the amount of the mortgages are so low that the adviser has to charge a fee to remain in business. 1% is not an uncommon amount.

I was advised by a friend of a friend that I mat get a rate of around 8% what would still be better but I dont really know if to proceed with this broker. He is meant to be getting back to me today.

The 1% charge from the broker is a one off. It is not an annual payment so the mortgage rate obtained isnt likely to be affected.

However, if you are not able to get a mortgage from mainstream lenders, then it would be worth shopping around for another broker. Poor quality lending tends to have higher commissions than the mainstream lenders so taking a higher commission and 1% could be viewed as a bit greedy. Maybe agreeing a fee which is offset by the commission would be a cheaper option for you.

Crown

Thanks for the replies. I did try contacting Charcoal after I spoke to the CCCS who are managing my DMP. They wouldnt touch us as we can not prove our entire income.

I am quite desperate to find a deal but feel that a fee of £1200 plus VAT seems a little excessive.

toonfish

ask friends & family for a recommendation, or look for someone locally and discuss your options.

dunstonh

Why is VAT being charged? There is no VAT on advice when a product is taken out. There is if no product is taken out.

silvercar

Having had a property repossessed last month will limit the number of lenders prepared to look at your case. I suggest you make this clear to any brokers, so that they don't waste time on lenders for whom this will automatically lead to rejection.

Good luck, it can't be easy having to pick your way out of your situation.

andrewbrydon

Tia

The broker is charging a fee as there is a lot of work to do, to find a provider for you.
Others will do so for no fee

good Luck

fistfullofdollars

Charcol charge 1% less any amount from the lender.

In our case the Halifax is paying them 0.4 of the loan amount. They then can charge us the remaining 0.6%, but we haggled this down to 0.2

Its well worth it IMO as their service has been brilliant so far.

dunstonh

fistfullofdollars wrote: »

Charcol charge 1% less any amount from the lender.

In our case the Halifax is paying them 0.4 of the loan amount. They then can charge us the remaining 0.6%, but we haggled this down to 0.2

Its well worth it IMO as their service has been brilliant so far.

I think that is a fair way of doing it. Especially on higher risk lending where the commissions can exceed 1% and you get a rebate.

UK007BullDog

I would say 0.5% to 1% is OK, any more though is being greedy, and have seen adverts where some take up to 5%.

Having said that trying to find a lender for you in your situation is not going to be easy and will take quite a few man hours to find a lender willing to take you on. And this is a cost that needs to be covered.

Some lenders like Amber are reducing their proc fees / commissions so you will find the days of the fees free broker is numbered. Once one lender starts then the others will follow, especially if they feel their margins are being attacked, through reclaiming of bank charges for instance.