Mortgage Broker Costs 2023: How Much Do Mortgage Brokers Charge?
By choosing to work with a mortgage broker, you can benefit from their in-depth expertise in the market to help find you the best mortgage deal for your situation.
Whether you need to use a specialist broker due to having adverse credit or any other circumstances that standard mortgages are not suitable for, a broker will help with this.
There are many different brokers available to choose from, but they do not all offer the same level of service and the pricing structures can vary significantly.
In this guide, we provide a comprehensive review of the mortgage broker fees across the market, answering some of your most frequent questions.
After reading this guide, you will be able to decide which type of mortgage broker is more suitable for your budget and your circumstance.
- What fees do mortgage brokers charge?
- How much do mortgage brokers charge in fees?
- Mortgage broker fees or commission - which is better?
- Is fee-free mortgage advice too good to be true?
- How do mortgage brokers get paid?
- Is a mortgage broker fee worth the money?
- How many homebuyers use a mortgage broker?
What fees do mortgage brokers charge?
A broker fee is charged by a broker to execute transactions or provide their services. Brokers charge fees for a multitude of services, such as consultations, delivery, purchases and negotiations.
Before you start working with a mortgage broker, you should ask for their costs and confirm this in writing, as the pricing models can vary from one broker to the next.
Below are the different pricing models that brokers operate with.
Short for time? Here’s a quick video explaining mortgage broker fees and how they work between different brokerages.
Some mortgage brokers do not charge any fees at all to the mortgage applicants, as they make their money from charging commission to the mortgage lenders instead. This means that you get their service without paying a single penny, which is very helpful when paying fees for solicitors and other costs associated with buying a property.
Some brokers will charge by the hour. The danger with this is costs can quickly escalate if there are any complications that they need to spend more time on. You should try to get an estimate of how many hours they are going to charge you for, as this should be fairly standard.
Brokers with a fixed charge provide a more transparent approach to their fees, but you will still need to make sure there are not going to be any further costs excluded from the initial quote.
Typically, a fixed fee mortgage broker cost will range between £300-£600, with the average cost in the UK currently sitting at £500, according to the Money Advice Service.
This is backed by recent research we undertook with mortgage brokers across the UK, revealing that the average amount charged was £559. Some brokers even charged upwards of £1,000.
This fee may be charged upfront or on completion of the mortgage transaction.
With this model, the broker charges a percentage of the mortgage that the applicant is taking out. In this instance, buying a higher value property could mean you end up paying a lot more than the average mortgage broker fee.
For example, if you take out a mortgage for £250,000 and they are charging 1%, you will pay them £2,500, which is significantly higher than the average mortgage broker cost.
There are a number of brokers who will use a combination of these models, for example they might charge you an hourly rate and also get commission from the lender.
However, it is worth noting that all mortgage brokers receive commission from the lender. This means that any client fee charged will be an additional income for the broker.
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How much do mortgage brokers charge in fees?
All mortgage lenders pay a mortgage broker a commission or procuration fee, typically being 0.35 percent of the full loan size. Any additional fees charged to the client are optional and are individual per broker.
Some brokerages, such as Boon Brokers, operate on a fee-free basis for their clients.
Mortgage broker fees or commission – which is better?
There is not a simple yes or no answer to this question, as it all depends on the quality of your mortgage broker.
According to our recent research, 59% of mortgage brokers across the UK charge fees, meaning 41% mortgage brokers do charge fees for advice.
However, the price that each mortgage broker charges does not always correlate to the level of service that you will receive.
There are some excellent mortgage brokers that will charge fixed client fees, just like there are some exceptional brokers that operate by not charging the client a single penny.
To keep your costs down, the ideal option is to find a reputable broker that will not charge you any costs for their services. At Boon Brokers, we’re proud to offer an exceptional service without any cost to you.
It is important to do your research before working with a mortgage broker. A good way of finding out whether your mortgage broker is of high quality is through reviews. Feedback provided by previous clients through a third-party review site, such as Trust Pilot, is a great way to identify whether they are the right fit for you and if you trust them to provide the best advice.
You don’t want to appoint someone and then feel that they are difficult to work with or are not putting your best interests first.
You should also make sure that any broker you select is authorised and regulated by the FCA (Financial Conduct Authority), either through a network or directly. This will provide you with protection even if you are given poor mortgage advice.
Is fee-free mortgage advice too good to be true?
When something is free, your natural instinct is to wonder whether it is too good to be true. Of course paying no fees is preferred, but if you receive poor service you could end up worse off financially than if you paid a fee.
However, due to the fact that brokers can operate on a commission basis through the lender, mortgage brokers such as Boon Brokers can give you the highest level of service without incurring you any costs.
Typically, brokers that apply costs will do this because they have large overheads such as employee salaries and office costs to pay for. At Boon Brokers, business operation costs are kept to a minimum by utilising cutting edge technology, so you don’t incur any costs.
There really isn’t a catch when it comes to fee-free brokers, but as we mentioned previously, you need to be confident in the quality of the service that the broker will deliver.
When you are looking at the different broker options available, you should be looking for brokers that offer whole-of-market access. This means they have access to every lender on the market to find you the best possible deal.
We conducted a survey* at Boon Brokers that found there was a general lack of understanding around what mortgage brokers can or should offer. Worryingly, one in seven of those who have used a mortgage broker didn’t know if they had whole-of-market access.
It is important to remember that the financial implication of obtaining a mortgage deal with a better interest rate can be very significant. Over a 25 or 30-year term, even a small percentage of difference could end up costing you thousands of pounds over the full term.
However, you can move to a new mortgage deal once your fixed rate ends. This is another factor to consider when you are thinking about whether to go with a fee-free broker or not.
If you are paying an additional £500 or more every two to three years when switching your mortgage, you will end up paying a huge amount in mortgage broker costs.
This is why it is a good idea to find a high-quality fee-free broker that you trust. It is then very easy to go back each time when you need to remortgage.
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How do mortgage brokers get paid?
Mortgage advisers are paid on a commission basis paid by the mortgage lender. The mortgage lender will give a commission of around 0.35 percent of the full loan size after the mortgage is completed by the adviser on behalf of their client.
For a £100,000 loan, the commission would be £350 or for a £200,000 loan, they would receive £700.
The lender will benefit from providing a larger loan, so it makes sense for them to give the broker a higher fee for arranging the mortgage. However, for the mortgage applicant, the mortgage broker will not be doing more work to find a good deal on a £200,000 loan compared to a £100,000 one. Therefore, they cannot justify charging you a percentage of the loan.
Mortgage commission is a topic that has been heavily scrutinised in the past by regulators. There are concerns that high commission fees can lead to brokers recommending specific products that might not offer the best deal to their clients.
Research Boon Brokers undertook with 2,000 mortgage holders showed that 13% of people worry a broker will push you into a deal that they want you to take because they get better commission*.
However, if the commission was completely removed it could lead to brokers charging high fees for their services. This is another reason to make sure the broker you choose is regulated by the FCA.
Is a mortgage broker fee worth the money?
In many cases, a broker will be able to find you a mortgage deal that you could not find on the market yourself and with a lower interest rate, whether you pay a broker fee or not.
If you choose to go with a broker that charges a fee you need to consider how this fee stacks up against the savings you may make from using them. It is worth asking why they apply a charge in the first place and what the fee covers. This will indicate whether it is worthwhile paying it or not and what you are actually getting for your money.
A good mortgage broker will be able to identify the best mortgage deal to suit your circumstances but they should also be able to make the process much smoother. They will know which lenders will provide a loan to you and for how much, by assessing the information that you provide them.
They might have worked with specific lenders for years and agreed a special type of deal that will save you a large amount of money. The better their knowledge of the mortgage market, the quicker and easier the application process should be for you.
There are many fee-free brokers out there (like us) who will find you the best mortgage deals on the market, but won’t charge you a single fee.
Again, your best bet is to take a look at the reviews of each broker to find out if they are the right fit for you and your circumstance. The reviews will also indicate how easy it is to get hold of your broker. Communication is key and not being able to ask questions when you need to can hold up the application.
If you would like to learn more about mortgage brokers before beginning the mortgage broker, we have a full article based on choosing the perfect mortgage broker.
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How many homebuyers use a mortgage broker?
Despite the fact a good mortgage broker is likely to be able to find homeowners a much better deal than they could secure themselves, well over a third of mortgage holders have never used one.
We conducted a survey of almost 2,000 mortgage holders* to ask how many had used a mortgage broker when securing a mortgage in the past.
We discovered that on average 39 per cent of homeowners had never used one, with the number rising to half amongst the over 55s.
This means many homeowners could have paid off their mortgage without ever having had professional advice to help them secure the best deal. Over a lifetime of mortgage payments that could mean they’ve paid out thousands of pounds on unnecessary interest and fees.
Younger homeowners are more likely to consult an expert, with three out of four of 25 to 34s saying they have used a broker for a home loan.
Regionally, those in the South East and Wales are most likely to have used a mortgage broker, whereas those in Northern Ireland, Central England and Scotland are least likely.
Edinburgh was the city where people were least likely to have consulted a broker, followed by Belfast and Norwich. Southampton was the city where homeowners were more likely to take advice from an expert, followed by Manchester and London.
Buying a property is usually your biggest investment in life and a decision that is not to be taken lightly. As well as the actual price of the property, there are many additional costs such as mortgage arrangement fees, interest fees, solicitors’ fees and valuation fees.
The more expertise and help you have with your mortgage application process, the better your chance of securing the right deal for your specific situation.
If there are any factors such as poor credit history, being self-employed or any other reason that makes it harder to get a standard mortgage, a broker will be the best option for finding you the best deal.
A free service does not mean lower quality. Brokers like Boon Brokers can give you the best level of service but make their money by charging the lender rather than the mortgage applicant.
A broker that has many years of experience working in the industry will be able to save you a considerable amount of money because they will know exactly which deal works out best financially.
If you want to save yourself some money then you should select a broker that has a fee-free model but make sure you find out as much information about them as you can.
Recommendations from friends, online reviews and other online research will help you to form an idea of whether a broker has a good reputation, or if you should stay well clear.