Mortgage Broker Fee

ElwoodP

Hi,
First time remortgaging. My mortgage broker has found me a deal which looks good, where he gets £700 remuneration from the lender. On top of this he charges me a fee of £399. So making £1100 in total.

Is this normal? It seems like a lot. Is it reasonable for me to negotiate his fee considering the hefty remuneration?

KnowledgeIsLife

So your only paying 399 you shouldn't take into account what he gets from the lender for sending business to them as it's not you paying that it's not coming out of your pocket I don't see why you should pay a smaller fee just because of this what would you do if the shoe was on the other foot?

financegeek

my view is that you get what you pay for. i don't think £700.00 is exactly hefty? especially when you're not paying it!

Negotiate all you want, but i wouldn't expect your broker to be prioritising your application over others who are happy to pay the full fee.

amnblog

The Lender pays the Broker a fee for finding a suitable Client and presenting their situation in the best way possible to enable the Lender to say ‘yes’ as easily as possible.

You pay the broker for advising you on a suitable product for your needs and underwriting that advice through their indemnity insurance.

By the way, the figure quoted on the figures as being paid by the Lender is higher than the amount the Broker receives.

dunstonh

Is this normal? It seems like a lot.

Doesnt seem like a lot to me. Remember that the mortgage broker isnt going to see all that money. A third of it is going to vanish in regulatory costs and compliance. Add in staff costs (or extra work time if sole trader) and softare costs etc. Some of the money will go to the network/club he is linked to.

£700 is not hefty. And if you had gone direct to that lender, the lender would be keeping it all for themselves. You are only paying £399. The typical range is £195 to £750. So, the £399 sits nicely in the middle.

Thrugelmir

ElwoodP wrote: »

Is this normal? It seems like a lot.

Lender is contributing to the brokers cost of running a business (premises etc). Not every application leads to a mortgage offer or a client accepting what's on offer. For lenders it's a way of generating their business , i.e. through brokers, thereby reducing their own internal fixed cost base.

Much in the same way that motor manufacturers give kick backs to dealers to shift in volume. No sales = no income.

ACG

The £700 costs you nothing.

You will also find that the broker does not earn £1100.
The mortgage club (if there is one) will take part of it.
His network (if there is one) will also take part of it.
The broker has to pay for insurance, compliance costs, governing body fees, admin fees if there is admin, IT costs, offices, marketing... you get the idea.

Sadly we do not earn everything that shows on the paperwork. There is a cost to doing business in this industry which is much more than most other industries.

If the lender stopped paying us commission, our fees would have to go up.

ElwoodP

Thanks all. It seems from replies that the offer is standard and fair.

cjv

Seems fair, my brokers fee is £395 on exchange of contracts.

No need for us to worry what commission they get, I think it is just procedure to inform us what they will receive from the lender.

payless

Personally if was paying £399 fee I would want assurances that’s the deal on offer was the best from the full range including those that don’t pay fees.

£1099 - even with overheads is not a bad gig - assuming straightforward remortgage . ( house purchase and/or credit issues adds to the time).

minimike2

payless wrote: »

Personally if was paying £399 fee I would want assurances that’s the deal on offer was the best from the full range including those that don’t pay fees.

£1099 - even with overheads is not a bad gig - assuming straightforward remortgage . ( house purchase and/or credit issues adds to the time).

Like others have said, the broker doesn't see all of that money.

You would be suprised the amount that gets swallowed up. There is a horrible stigma attached to the word "commission" in this country and brokers often feel the brunt. When it comes to financial products everyone wants something for nothing. It's like they don't expect brokers to actually get paid for going to work.

Your post is a great example of that and not actually understanding the way brokers are paid. Like others have said, take out all the regulatory costs, insurance and other overheads, then take off tax and national insurance. There isn't a huge amount left for what probably takes 8-12 hours work.