Mortgage advisors

ACG

Some brokers will charge a fee and refund the commission to the customer. 
If you assume we get £300 from the lender on a £100k mortgage. You might find you pay £400 and get £300 back - although in reality I do not know of any brokers who refund the commission back to the customer.

They either charge a fee and keep the commission or do not charge a fee and keep the commission - it sounds like a no brainer to go with the one who does not charge, but there is a lot more to it than that. I would never do a mortgage for £300-400 commission for example, I would prefer to give up my job because the work and stress involved is not worth it. I would be better working for tesco and having a pension, a wage, and no expenses of running a business. 

[Deleted User]

allygate said:

Thanks JMA. I’m confused, then what is the point of the fixed-fee no commission independent mortgage advisor that Dunston referred to?

Can you recommend one of these independents so I can talk to them and see what fee they charge?

I cant unfortunately as I have never come across anyone who rebates the commission back to the client.   I am guessing its high net worth cases where they charge a lot up front to get paid for their time and then rebate it back to the client on completion. 

I can see no good reason to do it for a normal case.  It is in theory supposed to take away the risk of an advisor recommending a lender who pays more commission but thats not really something that can happen for the most part. There are so many checks and balances around recommending the best lender and justifying why you couldnt have a cheaper option.   I also offer a list of commission levels that each lender pays and its a difference of 0.1% here and there so it wouldnt be worth the hassle of trying to justify going to a lender that pays an extra tenner. 

allygate

Thanks ACG. So an independent will still get the commission but will refund it to the customer? Sounds like a good deaI but pointless if the fees is too high. Also struggling to understand what’s in it for the independent unless they charge a very high fee to begin with.

Hopefully Dunston will recommend a couple of independents so I can explore this option.

MWT

If you are talking about an Independent Financial Advisor (IFA), they will charge you a fee which should be agreed up front and they cannot receive commission on investment products, but they can receive commission on other products such as mortgages. There is no requirement that they 'will' refund commissions to the client.

allygate

I’m not sure what Dunston meant by ‘independent’. I simply assumed he meant an independent mortgage adviser who only charges a fixed fee and doesn’t get any commission from the lender.

[Deleted User]

out of curiosity, since you know that the interest rates wont be different,  what is the benefit to you of going to an advisor who doesn't receive commission? Do you perceive it to be more 'honest' for lack of a better word? 

If you use a regular broker you can ask for a Scheme List once they have recommended a lender.  This will list from top down any lender who was cheaper than the one recommended. You can then ask for an explanation for why you couldn't have those deals.  

allygate

Well, I don’t know to be honest. I was just intrigued by what Dunston said about independents not working on commission as I’ve always looked for such a mortgage adviser but never come across one.

K_S

allygate said:

Well, I don’t know to be honest. I was just intrigued by what Dunston said about independents not working on commission as I’ve always looked for such a mortgage adviser but never come across one.

@allygate As JMA said above, for a mortgage adviser (anyone who advises on residential mortgages is FCA regulated with a complex set of compliance requirements to stick to) there are a million and one hoops to jump through before you recommend a lender and product to a client. At the places I've worked at and now in my own business, you have to share your 'evidence of research' as well so the client can see for themselves what the cheaper products were and why I didn't recommend them.

The difference in commission for residential mortgages might be -

Barclays 0.35%

Halifax 0.36%

HSBC 0.4%

Santander 0.34%

Nationwide 0.35%

To take an example, for a 150k loan, the difference in proc fee between Nationwide and HSBC will be £75. No broker is going to risk a complaint, compensation or their career recommending one over the other (and going through all the effort of making up the justification) for the sake of that kind of difference in commission.

Like the other brokers on this thread, I also don't know any mortgage brokers who refund commission and work just on just a fee. You will just have to wait for the person who mentioned it to point you towards them. Good luck and do update this thread if you find someone like that!

ACG

Back in the day there were brokers who charged a fee (a higher fee) and refunded the commission. 
It would have worked out well for large mortgages, a £500k mortgage for example would generate around £1500 commission. If the broker charged a grand, the customer would end up with £500 after the brokers fee. 

I realise £300-400 commission looks good, trust me, it is not worth it for the work we do and the costs we have. Compliance/regulatory/Insurance costs is about 15% of turnover. You then have IT, Marketing, office, admin costs and of course the tax man which all need paying. Then you divide the net figure over the number of hours worked on your application and all of a sudden its not great. 

allygate

ACG said:

Back in the day there were brokers who charged a fee (a higher fee) and refunded the commission. 
It would have worked out well for large mortgages, a £500k mortgage for example would generate around £1500 commission. If the broker charged a grand, the customer would end up with £500 after the brokers fee. 

Out of curiosity, back in the day what happened if the mortgage didn’t go through to completion for whatever reason? Would the broker refund the fee to the applicant? Can’t imagine paying a £1000 fee!!