Broker choice

JackRouge

Hi

Me and my girlfriend are in the process of trying to buy our first house. We have a WOM broker we've been talking to who has found us a couple of deals that he would charge a fee of 1k for. The only thing is after putting in the offer this morning, the estate agents have quoted us half of this to use their own WOM broker, but I'm unsure whether it's a good idea to go through them or not.

Any thoughts?

ACG

There is a lot of bad things about estate agent based brokers.
There is the odd decent one but in the main you will get a better service from someone working on their own as they will have no sales targets, more likely to be in control of their own workload and they are employed by you - not the agent, so you can be sure there is no conflict of interests.

Do you have anything unusual in your situation? £1k for a straight forward mortgage does seem on the high side... why not ask if your broker can reduce his fee?

Neese

We are currently buying our first house too, although this is the second we've tried to buy as the first fell through due to a lot of problems. The first time we used the estate agents broker, this time we are using an independent broker (his own business). The difference is huge, there is no way I'd recommend anyone to use the estate agent broker. Information was shared that wasn't in our best interest and we were constantly chasing him for information and to get things done. This time the broker is fantastic, really prompt with contacting us and very helpful. He is charging us £250 if the mortgage application is successful, nothing if it isn't, although our mortgage is costing £999 in fees to the lender.

JackRouge

This is kind of what I was expecting. The fees to the lender for the product quotes our independent broker gave us were 1k also.

I might see if he can drop his fee then as it does seem quite high.

ACG

How much is the mortgage?

If the mortgage is £50k or something then there is no money in it for the broker so they will need to charge a healthy fee to make it worthwhile. But if the mortgage is say £200k then I do think £1k is on the steep side.

Likewise, if you have bad credit coming out of your ears or are a foreign national - or something quirky then a higher fee may be needed to cover the extra time for research and dealing with those sorts of lenders.

JackRouge

The mortgage is 90k so not mega. The only thing is a previous estimated quote he gave me for a mortgage of 100k was with a fee of £500, so I'm a bit puzzled. Neither of us have any bad credit history.

ACG

£500 would be more reasonable, but commission is quite low so that may be why he has bumped up the fee.

You have nothing to lose by asking the question. I would rather earn £500 plus £300 in commission than nothing, but not all brokers are like that. My old boss used to be 1% of the mortgage amount or we dont do it.

JackRouge

Yes I was wondering whether there would be commission on top as well. Their website says their average charge is 2% on the loan, so that would be another £1800. I will confirm this with him when I call on my lunch.

pinkteapot

Why not have a chat with the EA's broker and see what you think of them?

We ended up using an EA broker, though he wasn't at the EA dealing with our sale or purchase. He was also WOM and employed by a company of mortgage brokers (not the EA). The EA just rented them a desk so they could have someone based on the high street in the EA's office.

I'd done all my own research on best rates etc so knew the deal he found for us was good. We used a broker as my job wasn't permanent at the time, which ruled some lenders out. Shame, as if our situation had been straightforward we'd have done the application ourselves as we've always done in the past!

Our broker only charged us £500 on a £245k loan. I know he also got paid a percentage commission from the lender so possibly he did it for £500 because he got a big chunk from them.

The Key Facts document the broker gives you about the mortgage will tell you how much commission he's earning from the lender. If he sends you a few and is recommending a product where he earns a higher commission, you can look at whether you agree that it's the best product for you.

Although ours was one sat in an EA, he was very organised, great on communication, and we got our mortgage offer within two weeks of applying (though this was late last year so pre-MMR).

kingstreet

Typical proc fees for high street lenders range from 0.3% to 0.35% so no-one is going to get rich on selling more expensive products to get a higher commission payment.

For every £100,000 borrowed, it's another £50 at most.

Fees depend on your mortgage amount and where you are. Our fee is a flat £250 and in many cases, shared ownership particularly where the mortgage is less than 50% of the purchase price, the proc fee from the lender can be as little as £122 for a 95% mortgage on a 40% share.

One potential client took great umbrage recently when I explained we had to charge a fee, otherwise it wasn't actually worth getting in the car and doing a 100 mile round trip to write the business.

JackRouge

He's said he can look at reducing the broker fee if we do our insurances through him too.