How To Make Sure Your Mortgage Broker Isn’t Ripping You Off

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When people are considering whether to use a mortgage broker, it is understandable to have an element of caution in regard to the possibility of getting ‘ripped off’.

Like with many occupations, the majority are trustworthy and do what is best for the customer but there are also a few people that may be dishonest and try to take advantage over their customers’ lack of understanding of how the market works.

Buying a home is usually the biggest financial commitment you will ever make and the difference in overall costs from one mortgage deal to another is significant.

Therefore, working with a mortgage broker is not something to rush into and you should always do enough research to be confident that you are choosing a mortgage broker that will not cost you more than you should be paying for their services.

The average client fee that brokers charge in the UK is £500 (according to the Money Advice Service, 2020).

They receive this in addition to a commission paid by the lender. But some brokers, like Boon Brokers, do not charge the client at all and instead only accept a commission from the mortgage lender.

Brokers such as Boon Brokers are able to access the most competitive mortgage deals without charging a fee to clients and they provide an exceptional brokerage service.

Boon Brokers operate on a fee-free basis due to an efficiently run business with low overheads due to the use of state-of-the-art technology.

Fee charging brokers will often apply a charge that could be 1% of the loan sum because they have to cover high costs for running the business.

On a mortgage of £200,000 that is a staggering £2,000 fee, which does not necessarily reflect the amount of work put into finding a deal.

It should be of no surprise that client fees are typically at their highest in London, where overheads and other business costs are also high.

You might think that the brokers that are charging these kinds of fees are justified because they are offering a superior level of service to other brokers but this may not be true.

If a broker has truly ‘whole of market’ access to all lenders in the UK, and not just a restricted panel of lenders, they can quickly identify your most suitable mortgage product.

This is regardless of whether the broker charges a client fee or not.

If you are considering buying a property, a mortgage broker should make the process easier and they should be able to save you a considerable amount of money by finding a better deal than you would have going direct to lenders.

When you are choosing a mortgage broker, here are some tips to make sure you do not end up being overcharged for brokerage services:

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Get an understanding of how mortgage brokers are paid

If you just go with the first broker you come across, you might think that they always just get paid by charging their clients a fee, and receive no other income stream.

However, all brokers also receive a commission from the lender.

This commission from the lender varies depending on the loan size but it can often be over £1,000 per case.

You should ask your broker if they are receiving a client fee as well as a commission from the lender. If the broker is receiving a sizeable commission from the lender, you are in your right to question why an additional client fee is justified.

Regardless of the loan size, Boon Brokers will not charge a client fee at any stage of the mortgage process.

Compare several estimates

Even if you have been recommended a particular broker by your estate agent, this does not mean that you have to go with them.

If you were to get a tradesperson to do a big job on your property, you would usually get a few different quotes to compare and you should take the same approach with your mortgage broker.

Rather than simply opting for the recommended broker or getting an estimate from just one broker, try at least two so that you can compare the costs.

They should provide you with a full breakdown of the fee that they will apply as part of brokering your mortgage deal, so you can see exactly how much you will be paying them.

Get pre-approved for a mortgage

If you are not too sure how much you can get approved for your mortgage loan, then it is a good idea to get a pre-approved mortgage.

This will allow you to have a better idea of the price range of properties that you will be able to look at.

There is no point looking at lots of properties and then finding out further down the line that your loan will not be enough to afford the price range that you are going for.

Additionally, whilst you are doing this initial process with a mortgage adviser, you will be able to decide whether you trust them and how helpful they are.

You should certainly ask the broker if they have access to all lenders in the U.K. or just a restricted panel of lenders.

Those brokers with truly ‘whole of market’ access are more likely to find the best mortgage product for you.

Some brokers may do the bare minimum work, whilst others may go well out of their way to get the best solution for their clients, so you can use these discussions to get an opinion on this.

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Provide as much information as possible

When you are providing information like your financial details, such as any debt or your salary/income information, try and be as accurate as you possibly can.

If you don’t provide the right information this can add up to a lot of extra work for the mortgage broker.

If they find a set of deals based on the information that you provide, then when checks are made, it turns out to have been inaccurate, they may need to then find you a new deal based on the correct information.

Details such as your income and financial commitments will determine the type and amount of loan you are able to get approved and your estimate will be based on this.

Inaccurate information could mean that your estimate is well out, leaving your total fees different to what you were estimated too.

Look out for bait and switch!

Bait and switch is where someone sells you something based on one price but then when it is going through, additional costs suddenly appear.

They may say that you are able to get a specific deal and give you an estimate for that but then they tell you that the product is no longer available, or you didn’t qualify for it.

So, if you are told one fee to start with and costs end up being different, you can challenge this.

Also, be careful of brokers using marketing tactics such as ‘No Upfront Fee’.

This implies that a client fee is likely to apply on completion of the transaction.

To conclude

If you are paying between £500 and £2000 to a broker each time you want to arrange a mortgage, it is going to end up costing you many thousands, perhaps tens of thousands of pounds, over the course of your mortgage term. This is because, to ensure that your interest rate is on the best deal, you should aim to use broker services every time that your mortgage product is about to expire. The broker can then arrange the re-mortgage to ensure that your mortgage has the lowest costings available. So, if want to ensure access to the best mortgage deals, without getting ripped off by the broker, go with a broker that charges no (or very low) fees and that has a great reputation.

Trust Pilot is a good place to verify the reputation and customer service levels of a broker and Boon Brokers is proud to boast excellent reviews and 5/5 star ratings on Trust Pilot. If you would like to talk to us about finding the best deal without charging a fee, call or e-mail us today.

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.