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  • FIRST POST
    • MSE Martin
    • By MSE Martin 14th Apr 06, 10:47 AM
    • 8,116Posts
    • 42,302Thanks
    MSE Martin
    Martins View On Using Mortgage Brokers...
    • #1
    • 14th Apr 06, 10:47 AM
    Martins View On Using Mortgage Brokers... 14th Apr 06 at 10:47 AM
    Hi,

    As its often debated here 'to broker or not to broker' I thought I would briefly lay out my thoughts.

    "The right broker is a big benefit. Far better to go to a broker than direct to one lender who will simply try and flog you their own mortgage. They will look after the market and possibly bring you better negotiating power Overall I'm a broker fan!"

    Of course there are ifs and buts. The two key questions to ask a broker are

    "are you whole of market?"

    and

    "do you charge a fee?".

    If the answers are yes and no then... whey hey hey... we're off to a good start. If the answer is anything else I would seek another broker.


    IMPORTANT NOTE: Please read the relevant articles


    Remember this is the Chat Forum, its for discussion by lots of parties. However the main information on this site is in the articles section. Please do read those before getting involved in discussions which will often get very technical.

    The two most relevant for this are "Get top mortgage advice for free article" or even better, its included in the free 28 page MoneySavingExpert guide to remortgaging available as printed guide or download a PDF (or read more)

    What about the brokers answering questions on here?

    First of all say thank you. Many of them do a great job without renumeration for it. It's a great place to ask. Of course its always worth remembering just because someone says they are a broker doesn't mean they are, however, the vast majority on here are genuine and want to help.

    Can they generate business from here?

    Touting for business is strictly forbidden. However if someone helps you out, and you feel they can help you, if you approach one of the mortgage brokers on the site I've no problem with them helping you.

    Do check out the "whole of market" and "fees free" notes above to make sure they are right for you though. And double check they are genuine, ask to see their creditials and that they're authorised by the regulator, the FSA.

    Hope this helps

    Martin


    Last edited by MSE Helen Saxon; 14-01-2015 at 1:45 PM.
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.

    Don't miss out on urgent MoneySaving, get my weekly e-mail at www.moneysavingexpert.com/tips.

    Debt-Free Wannabee Official Nerd Club: (Honorary) Members number 000
Page 1
    • AndrewSmith
    • By AndrewSmith 14th Apr 06, 2:54 PM
    • 2,830 Posts
    • 2,238 Thanks
    AndrewSmith
    • #2
    • 14th Apr 06, 2:54 PM
    • #2
    • 14th Apr 06, 2:54 PM
    Martin,

    Thank you for this post, I think it was needed as just of late there have been a few posters trying to imply that our motives are less than honourable.

    From a personal point of view Martin you already know my motive and reasons for posting here, all of which fit in with the ethos and rules of this site, of which I am a loyal supporter. It is a welcome release to have an enviroment to give help freely and without obigation either way.

    I will continue to support your site and, as long as you permit, will continue to help those who post here. After all I wouldn't have been thanked so many times in a short period without doing some good

    Andy
  • Beena Rashid
    • #3
    • 14th Apr 06, 3:13 PM
    "Do you charge a fee?"
    • #3
    • 14th Apr 06, 3:13 PM
    Can someone clear this up for me please?

    Martin says that the second key question to ask a broker is "do you charge a fee?" and if the answer is "yes" to seek another broker.

    My mortgage adviser charges me a fee for giving me advice, and says that this is because she is an "independent mortgage broker".

    She says that if I dont use an independent broker, I cant be offered all the mortgage deals in the market.

    I have contacted another mortgage adviser, who was recommended to me, and he says that he is not an independent broker, he doesnt charge a fee, but can get "whole of market"

    I am confused.

    Does it mean that all independent mortgage brokers charge fees?
  • stanmoresaver
    • #4
    • 14th Apr 06, 3:27 PM
    • #4
    • 14th Apr 06, 3:27 PM
    No- I am whole of market and nearly always charge a fee in addition to the proc fee paid by the lender- It's a business decision! And, suprisingly, i disagree with Martin on this!

    It's all about value for money- and, in my case, some transactions need the attention that earning more than the proc fee gives. To be honest- and i haven't read the full article yet, i feel the issue of arranging the loan on a face to face or remote basis is a bigger question

    With respect to those fee free brokers on the board!

    SS
    I am a fee charging WoM Mortgage broker.

    I now no longer give information and opinion within the Mortgage boards, because a number of posters who, having approached me professionally, agreed my fee-which has been been made very clear at the outset, taken my advice (normally cancelling a [home visit] meeting at short notice) have then approached one of the fee-free brokers on here to arrange the very same deal I have advised.

    Whilst I totally concur with the ethos of "money saving"- abusing the goodwill of a professional who provides a quality service is taking it too far!
  • Beena Rashid
    • #5
    • 14th Apr 06, 3:58 PM
    • #5
    • 14th Apr 06, 3:58 PM
    Let me see if I understand you quite correctly.
    You said - "No" - to the question "Does it mean that all independent mortgage brokers charge fees"

    The reason I need to be sure on this is becasue I have just phoned my second advisor (I am about to make an offer on a house I have seen!), and I discussed this "independent" issue with him, and he said that if he wanted to be an "independent" he could be, but he would have to charge a fee, and he doesn't want to do that.

    He says that it is in the new mortgage regulations that if he wants to call himself "independent" he has to charge fees.

    Sorry to go on about this, but when Martin says "seek another broker" if they want to charge you a fee, I feel sure it must be good advice, but at the same time, I feel I am being misled a little by this first adviser.

    I suppose what I really want to know is - can a mortgage broker be an "independent mortgage broker" and offer a "fee free" service ?

    My second broker says, categorically "No they cant - they are bound by the regulations to charge fees, so there is no such animal as a "fee free independent mortgage broker" and that is why he is not one.

    Who am I to believe ? help ! I need to make a decision.
    • dunstonh
    • By dunstonh 14th Apr 06, 4:07 PM
    • 98,597 Posts
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    dunstonh
    • #6
    • 14th Apr 06, 4:07 PM
    • #6
    • 14th Apr 06, 4:07 PM
    I suppose what I really want to know is - can a mortgage broker be an "independent mortgage broker" and offer a "fee free" service ?
    Yes. If you see the research, which you have a right to see, then you can verify that the research is valid and the recommendation looks good.

    My second broker says, categorically "No they cant - they are bound by the regulations to charge fees, so there is no such animal as a "fee free independent mortgage broker" and that is why he is not one.
    A tied advisor would say that. He is being paid by his provider and probably more than the amount the independent is getting. However, you are not seeing those fees so it appears better value. However, the chances of him offering a mortgage deal of the quality the independent can is highly unlikely.

    Who am I to believe ? help ! I need to make a decision.
    A mortgage advisor can choose to levy a small fee or not. Some may do that as they are so busy that they make the fee to deter time wasters and concentrate on the real enquiries. Others do it because there are people willing to pay the fee. Some may do it as they come to your home in the evenings and see you rather than you coming to see them. That is an increased cost that they may need you to pay for. Whilst others will do all that without charging a fee.

    Tescos charge £5 for home delivery but you always see that van delivering. Obviously enough people feel that paying that extra fee is worthwhile. Whilst others do not. It's a case of what you feel is good value for money. Others do their shopping in expensive shops as they get extra service. It's all about getting what you think is value for money.

    Back to your situation Beena. An independent is always better than a tied or multi-tied/panel advisor. If you do not want to pay any fees and allow it to be done on commission basis (like the tied advisor), then there are plenty of independents out there that will not charge you and do it that way.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Beena Rashid
    • #7
    • 14th Apr 06, 4:53 PM
    • #7
    • 14th Apr 06, 4:53 PM
    This is now even more confusing.
    I decided to take a look at Martins pages on how to pick a broker, and have copied some of it below.
    He seems to agree with my second mortgage adviser, in that a "whole of market broker, only taking commission, can't call itself independent".

    But this is the opposite of what you say isn't it Dunstoh ?

    "Many brokers charge both fees and take commission. However, to call themselves an ‘Independent Mortgage Broker’ they must offer an option to pay fees only with any commission earned rebated must be available. Yet in practice this is bunkum as what tends to happen is this: they offer to allow you to pay either a “1% fee in full and they will rebate their 0.35% commission” or alternatively they’ll suggest you can just pay a “0.65% fee and keep all the commission” in other words, no difference.

    Worse still, it means a truly whole of market broker, only taking commission, can’t call itself independent even though it is providing the same advice and is cheaper, so sadly it's best to simply ignore the ‘independent’ term, and simply stick with the questions."


    I now seem to be torn between Martins advice (which seems to agree with my second "not independent" broker), and the independnent broker number 1 and Dunstonh.

    Does it go like this - an independent broker has to charge a fee and can choose to pay some of the lenders commission back to the customer (and can use "whole of market") but a "not independent" broker does not have to charge a fee (but can if they choose to) and can also have access to "whole of market" simply because they are a self employed mortgage adviser (like my second mortgage adviser) and work on their own (again like my second advisor)

    If that is correct, then Martins advice now makes sense - "whole of market" can be applied to any mortgage broker (as long as they are not tied to a lender or other group), whether they are independent or not, and whereas independents will always charge a fee (because they have to by law) non independents can choose whether to or not (their own personal decision.)

    Go on, tell me I've got it right.!?
    • dunstonh
    • By dunstonh 14th Apr 06, 6:25 PM
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    dunstonh
    • #8
    • 14th Apr 06, 6:25 PM
    • #8
    • 14th Apr 06, 6:25 PM
    Does it go like this - an independent broker has to charge a fee and can choose to pay some of the lenders commission back to the customer (and can use "whole of market")
    No.

    Independent mortgage advisors will offer you the option of paying by fee for their services. If you choose the fee route, all commissions earned will be refunded (or offset the fee). It doesnt mean you have to pay a fee though.

    Or, they can go commission route just like any other advisor if you wish them to. Or, they can go commission route and you can pay fee as well. (more common perhaps in areas where mortgage values are generally lower and commissions are not sufficient for that business model).

    There is no requirement for Independent mortgage advisors or independent financial advisors to be fee only.

    but a "not independent" broker does not have to charge a fee (but can if they choose to) and can also have access to "whole of market" simply because they are a self employed mortgage adviser (like my second mortgage adviser) and work on their own (again like my second advisor)
    I read your earlier posts as if your second advisor was a tied advisor. Re-reading them and the quote above suggests that he is not an independent advisor because he has chosen not to offer the option to pay fees. He is commission only. If you are commission only you cannot call yourself independent.

    The distinction is the choice offered to you:
    1 - If commission only, you can be whole of market but you cannot call yourself independent.
    2 - If you offer the client the option to pay by fees or commission, then you can call yourself indepedent. You DO NOT have to be fees only.

    An indepedent allows you to choose how they are paid. A commission only advisor doesnt. Your second advisor can probably offer exactly the same deals as the first one but you cannot decide how he is paid. Whereas the first one gives you that choice.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Beena Rashid
    • #9
    • 14th Apr 06, 8:01 PM
    • #9
    • 14th Apr 06, 8:01 PM
    Thank you Dunstonh, i understand it now.
    My second advisor is right.
    It seems he can offer me the same "whole of market" options on my new mortgage as the independent advisor, but do it without charging me a fee.
    I can now see why Martin advises to look for another advisor if the one I am talking to charges fees.
    By the way, my offer has been accepted!
    Fingers crossed I dont get Gazumped !
    I now need to ask my advisor to find me a good 5 year fixed rate at just under 90%
    I would appreciate any ideas on lenders, so I can see how he compares to what you or any of the other brokers on here might suggest as possible lenders.
    I know my income is enough, they both say I am well inside the limits on this, and my credit is perfect.
    I dont want any penalties when the 5 years come to an end, though.
    Oh, and obviously, now that I understand that the only difference between an "independent" and a "non independent" is the option of paying fees or not, I would happily accept any advice from a "non independent"

    Thank you Martin, a great web site.
    • dunstonh
    • By dunstonh 14th Apr 06, 9:11 PM
    • 98,597 Posts
    • 67,021 Thanks
    dunstonh

    It seems he can offer me the same "whole of market" options on my new mortgage as the independent advisor, but do it without charging me a fee.
    Just for 100% clarification, so can the first one. If, however, he has chosen to charge a fee on top of the commission option, then that is what you could avoid by shopping round. Another note is that fee option can be cheaper than commission with some mortgages. This is why seeing an independent is better than whole of market as you can get both options priced up and make the choice from there.

    Oh, and obviously, now that I understand that the only difference between an "independent" and a "non independent" is the option of paying fees or not, I would happily accept any advice from a "non independent"
    That is not the correct difference. I will clarify again as it is confusing. It gets even more confusing when the mortgage advisor is also a financial advisor.

    In perhaps an easier way to read it, the classifications are (in order you should aim for).

    1 - Independent - can offer products from whole of market and allow the client to choose the option to pay by fees or commission.
    2 - whole of market - can offer products from whole of market but is paid only by commission. No fee option is offered.
    3 - multi-tied - can offer products from a limited panel of providers
    4 -tied - only offer the products from one marketing group.
    Last edited by dunstonh; 14-04-2006 at 9:16 PM.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Beena Rashid
    I thoght I understood it , until your last comments,

    You say:

    "This is why seeing an independent is better than whole of market as you can get both options priced up and make the choice from there."

    But isn't "whole of market" available to both independents and non independents (like my second advisor) and as Martin says:

    "Many brokers charge both fees and take commission. However, to call themselves an ‘Independent Mortgage Broker’ they must offer an option to pay fees only with any commission earned rebated must be available. Yet in practice this is bunkum as what tends to happen is this: they offer to allow you to pay either a “1% fee in full and they will rebate their 0.35% commission” or alternatively they’ll suggest you can just pay a “0.65% fee and keep all the commission” in other words, no difference.

    Which surely means that a non idependent can charge a fee if they want to, whereas an independent has to and they can both offer "whole of market"

    By this logic isn't a "non independent" perhaps a better option, because they dont charge fees and yet can still offer "whole of market?

    Martin appears to be saying that if a broker offers a whole of market service then this is good, but if they charge a fee for their advice (rather than work on the commission alone), look for another broker. Yet Independents charge fees.

    I think I must be a little stupid.

    Sorry to take up so much of your time.

    I really do appreciate it, but I'd better just stick to the rule of "if they charge a fee, go elsewhere, and make sure they can offer you just about everything that is going"

    My second broker is suggesting a Nationwide BUilding Society 5 yr fixed rate at a rate of 4.78% (as I am borrwing less than 90% of the price of the house I am buiying). Any opinions on this would be appreciated.

    My first broker is away for Easter break.
  • EdInvestor
    ... the fee option can be cheaper than commission with some mortgages. This is why seeing an independent is better than whole of market as you can get both options priced up and make the choice from there.

    I find Martin's advice puzzling as the fee option will be the cheapest in some cases, as dunstonh says.In others a combination of a fee and commission will be the best way.

    ...alternatively they’ll suggest you can just pay a “0.65% fee and keep all the commission” in other words, no difference.
    Obviously in some cases there will be no difference, but I believe there is often a difference caused by no requirement to pay VAT?

    A potential problem with choosing an advisor who doesn't offer a fee option is what's known as "commission bias", where an advisor might choose a mortgage ( or other product) on the basis that it pays him a higher commission, rather than because it is the best product for you.

    It's really best to compare all the figures: commission only, fee only, or fee and commission combined, to see what is the best deal IMHO. But you can only get all three comparisons from an independent.

    Moneysavers should realise that any commission payable to the salesman on the product is charged to them eventually. Not paying a fee doesn't mean you are getting something for nothing, quite the opposite.
    Last edited by EdInvestor; 15-04-2006 at 8:18 AM.
    • dunstonh
    • By dunstonh 15th Apr 06, 9:34 AM
    • 98,597 Posts
    • 67,021 Thanks
    dunstonh

    Martin appears to be saying that if a broker offers a whole of market service then this is good, but if they charge a fee for their advice (rather than work on the commission alone), look for another broker. Yet Independents charge fees.
    Independents DO NOT have to charge fees. That is your choice.

    Some mortgage advisors (doesnt matter if they are tied, multi-tied, whole of market or independent) will charge a fee on top of the arrangement of the mortgage. That is the bit that Martin is telling you to avoid (at least how I read it anyway)

    Some transactions will be cheaper on fee basis than commission. Although this is probably more common on investment class business than mortgages. Larger mortgages or difficult lending cases are probably cheaper on fee basis than commission.

    By seeing an independent, you can ask them to price the transaction on fee basis and commission basis and then you get to choose which you do.

    By this logic isn't a "non independent" perhaps a better option, because they dont charge fees and yet can still offer "whole of market?
    No. A non independent doesnt have to be whole of market. They can be tied or multi-tied.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Beena Rashid
    But a non independent that is whole of market, and doesnt charge a fee, costs less than a broker that does charge a fee ? Yes ?

    The other thing I dont understand is why you say it is probably cheaper to have a larger mortgage arranged on a fee basis, rather than commission, if my broker is not going to charge me a fee anyway.

    Surely fee free is cheaper than payng a fee ?
  • Beena Rashid
    I think I've got it.
    Hang on a minute.
    Dunstonh said that I could pay a fee and have all the commission refunded to me.
    So if an independent adviser charges me say £600 as a fee to sort out a mortgage for me, but the commission is £1000 that he earns from the lender, he would end up giving me £400 as the balance.

    In other words, he is paying me to do my mortgage !

    (Martin says he wouldn't refund all the fee, but Dunstonh says he would. Who is right?)
    • dunstonh
    • By dunstonh 15th Apr 06, 11:13 AM
    • 98,597 Posts
    • 67,021 Thanks
    dunstonh
    Hang on a minute.
    Dunstonh said that I could pay a fee and have all the commission refunded to me.
    So if an independent adviser charges me say £600 as a fee to sort out a mortgage for me, but the commission is £1000 that he earns from the lender, he would end up giving me £400 as the balance.

    In other words, he is paying me to do my mortgage !

    (Martin says he wouldn't refund all the fee, but Dunstonh says he would. Who is right?)
    by Beena Rashid
    http://www.fsa.gov.uk/pages/Doing/small_firms/mortgage/PDF/Lamb_IDD.pdf

    That is a sample disclosure document from the FSA. As you will see in part 4. There is a fee taken and all commissions are refunded.

    The important thing to remember is that there are many different business models. You also have the IFA authorisation which works on different rules to mortgages (IFAs have to refund all commission when done on fee basis but with mortgage advisors, they can charge fees and keep some of the commission. Just because they can though, doesnt mean they will).

    The initial disclosure document (IDD) describes their charging method.

    http://www.fsa.gov.uk/pages/Doing/small_firms/mortgage/PDF/DouglasFir_IDD.pdf
    this is one where there is no fee option but commission only.

    http://www.fsa.gov.uk/pages/Doing/small_firms/insurance/pdf/barracuda_cidd.pdf
    here is another that offers a different combination which you dont get to see until page 3 as its a combined investment, mortgage and general insurance IDD.

    So you can see, you get a variety of charging methods (and the above is just a sample of the options). Every advisor must provide an IDD to you at the first contact. This allows you to compare charging options along with authorisation status and a range of other things.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • EdInvestor
    Nuts!
    Here's where the confusion seems to lie:

    Stanmore says:

    I am whole of market and nearly always charge a fee in addition to the proc fee paid by the lender- It's a business decision! And, suprisingly, i disagree with Martin on this!

    This fee is in addition to the commission.However this fee is not the same fee that I was referring to, and which dunstonh refers to here:

    IFAs have to refund all commission when done on fee basis
    where the fee is instead of the commission.

    However just to confuse the issue completely,

    with mortgage advisors, they can charge fees and keep some of the commission....
    There is a different rule between advisors dealing with different products.

    This is called "depolarisation" and if it's any consolation, hardly anyone else understands it either. :confused: :confused:
    Last edited by EdInvestor; 15-04-2006 at 11:37 AM.
  • Beena Rashid
    I've looked at all the examples, but it still doesn't answer the conflicting statements made regarding the full refund of commissions made earlier, that would result in me getting paid for allowing an independent to do my mortgage for me, where the commission is larger than the fee.

    You say the broker does have to refund all the commission he receives on one posting, but then says he does not on another ?

    Perhaps Martins advice is the best to follow:
    "You want a fees-free, whole-of-market broker. This means it only earns commission, however as it’s whole-of-market, it must give you best advice anyway."

    and

    Advanced MoneySavers Note: Why ‘independent’ is irrelevant
    • LMac
    • By LMac 15th Apr 06, 12:52 PM
    • 277 Posts
    • 941 Thanks
    LMac
    Stuck with broker?
    Sorry if this has been done before - Im a bit overwhelmed by all the new info!

    Im really new to all this - Im buying my first home. I called L&C to make a basic enquiry, and got a little carried away and the guy searched the market and called back promptly with a mortgage by Abbey. But can I get advice from someone else (or indeed go through that one that gives a rebate-i know, its a little cheeky), and what are the benefits of applying through the broker compared to directly with abbey?
    • dunstonh
    • By dunstonh 15th Apr 06, 2:18 PM
    • 98,597 Posts
    • 67,021 Thanks
    dunstonh

    You say the broker does have to refund all the commission he receives on one posting, but then says he does not on another ?
    As Ed highlights, its not as straight forward as that. I perhaps have been answering more from the IFA side which is more clear cut than those only dealing in mortgages. Partly as your initial posts suggested more that it was an IFA with mortgage authorisation that you were seeing. After all, the independent and whole of market definition only exists on the IFA side and not on the mortgage side.

    If you agree fee basis with an IFA (on IFA related business), the IFA has to refund any commission that is paid (or use it to offset the fee agreed). A whole of market mortgage advisor can choose whether or not to do that and must disclose what they do on their IDDs. The IDD is the key document here and that can vary widely as shown in the examples higher up.

    Lets cut to the bottom line here.

    Does an whole of marke/independent mortgage advisor charge a fee and keep the commission?

    Answer: yes, no, maybe. You will find some that will, you will find some that wont and you will find some that do a combination.

    You are trying to pigeon hole the independent advisor into one business model and assume all independents are that way and that is not the case. We have both at various points floated into IFA/Whole of market discussion points, as has your second advisor and that may not be appropriate in the overall consideration when it is the mortgage side that matters.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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