Mortgage Broker Fees - Paid By Lender?

iansmiggley

I'm looking at a getting a mortgage and have been recommended a fee free broker. The broker says their commission is paid by the lender. Is this commission paid by the lender entirely, i.e. it doesn't just get added to my mortgage amount? I know individual broker's arrangements may vary, but I'm just asking for the general case. I just find it hard to believe that my broker will get paid £1000s in commission and I don't get directly charged any of that - it just gets absorbed by Barclays or whoever the lender is?

csgohan4

The lender will earn far more in interest than giving out commission and it is normal for lenders to pay this to brokers, whether  fee free or fee paying. 

dwsjarcmcd

The fee paid to the broker is not added to your mortgage and you don't pay it in any way, it's a cost absorbed by the lender to acquire business

Whats_your_forte

It's a cost for the lender to get the business. The pricing of the deals take this into consideration as well as the fact the lender isn't taking on the responsibility for the advice given. The lender isn't have to employ anyone to advise on your mortgage. The adviser will have this liability as well as the fact you get the protection under the FSCS for which your adviser is paying for out of the money they earn.

It the same with any business. There is a cost to acquire the business and this is inbuilt in the rate and the fees. However, unlike other businesses, financial services have to fully disclose the figures. 

Yes, you can go to the Barclays branch and do it direct but the rates are the same. Again, rates are priced to allow for this.

[Deleted User]

The lender pays us commission and in turn it doesn't have to pay salaries for its own staff as they haven't done anything. 

It is a good business model that allows lenders to run with a smaller payroll whilst still getting business through the door 

ACG

If the broker submits the application, they do the research, they collect your information, they vet documents - the alternative would be an employee of barclays doing that. So the money they save by having less staff is paid in part to the broker. 

For commission to be thousands your mortgage would need to be £600k plus. Assuming that is the case, then yes it is probably costing barclays more than if a member for their own staff did it, but if your mortgage was £60k, then the commission would be about £180 and so it is costing barclays less - it will average itself out. 

But the commission is not added to your mortgage.