Why Some Mortgage Brokers Are Free…
If you’re looking to buy a home or property to rent, choosing the right mortgage broker is crucial.
There are many reasons for this.
For a start, getting a mortgage is usually the biggest financial commitment you’ll ever get. So, you need peace of mind that any decisions you make around your mortgage are the right ones for you.
Finding a qualified mortgage adviser, one you feel comfortable talking to, is vital. You’ll be telling them all kinds of things about your personal finances so make sure you find them approachable and trustworthy.
For that reason alone, it’s always a good idea to shop around.
Once you start doing that, many people start thinking about how much they’re prepared to pay for mortgage advice.
Let’s break it down.
HOW DO MORTGAGE ADVISERS MAKE THEIR MONEY?
Broker fees vary.
Some charge fees – often around £500 per case or more. Which means they earn money from fees & commission.
And others are free. And that means they depend on commission only.
To understand all this – it’s worth thinking about what mortgage brokers actually do.
N.B. I’ve used the terms mortgage broker and mortgage adviser throughout this article because they’re interchangeable.
WHAT MORTGAGE BROKERS DO.
Finding a mortgage is a lot of running around.
Once they’ve got an idea of what you’re looking for, your broker goes off on a mission.
They research the market extensively on your behalf, using their in-depth knowledge.
Understanding your circumstances is a big piece of the puzzle. That’s why you need to look for someone who’s flexible about how you contact them.
Think of it like this: If you were up Mount Everest, you want someone who’ll phone you with regular updates. Even if it’s hard to get through. Even if a howling wind makes it difficult to hear what you’re saying. Even if you’ve already contacted them five times already that day because high altitude makes it hard to remember stuff…
Mortgage advisers are diligent. They have to be details oriented. That’s because they must check an enormous amount of information and documentation for every case, taking many hours to put everything together to make an application on your behalf.
A true mortgage broker exudes extreme patience. Really. The kind of patience usually only found in a carthorse (from long ago) quietly ploughing a field.
Being able to answer your questions about complex issues is also part of their job. Guiding clients through a sometimes-challenging process can be relentless.
It’s essential for a mortgage adviser to be regulated by the Financial Conduct Authority (FCA). This gives you the added protection of knowing they’re sticking to the rules concerning financial advisers of any kind in the UK. It also means they’ve got to double-check everything before they make a move. And this can be a time-consuming but worthwhile aspect of their work.
Over the years a good mortgage advisor builds a huge library of personal knowledge of all types of mortgages. This includes regular programs of professional development and updating their understanding of the current climate.
And they do all this to find the right deal for you.
THERE ARE TWO KINDS OF MORTGAGE ADVISERS…
Those who work for a single lender. And those who don’t.
If you use the mortgage broker with your bank they’re known as a tied agent. This means they can only advise you on products from that bank.
Without a thorough search of available lenders for your needs, this means you might be missing out on a cheaper deal somewhere else, or their lending criteria might not match your needs.
A comprehensive mortgage adviser, like us, is able to cast a wide net to find the right deal for you.
So now, we get what mortgage brokers do, and how they make their money, but to really understand why some advisers are free, let’s first have a quick look at….
HOW MUCH MONEY MORTGAGE ADVISERS MAKE.
A mortgage adviser is a type of financial adviser who specialises in mortgages.
Their average earnings (according to Glassdoor) around £33,000, with a starting salary that’s often a lot less. Higher earnings are possible over time. Those with many years of experience average about £45-55K.
They make money in two ways:
- Discovery (for you the client) of the right mortgage – fee payment.
- Acquiring the mortgage for the lender – commission payment.
Commission rates are typically under 0.5% of the mortgage, although they’re often less than that at around 0.35%.
Therefore, on a £100,000 mortgage, the broker earns about £350.
ADVISERS WHO DON’T CHARGE A FEE…
People often wonder whether a mortgage adviser from a bank is a cheaper option in the long run.
The answer, in a word, is often “no”.
That’s because, with so many options out there, your bank is unlikely to be the cheapest one. If in doubt, have a chat with an adviser. They’ll explain all this, so you can make an informed decision.
And when it comes to comprehensive mortgage advisers who aren’t tied agents, yet don’t charge a fee, they’re not necessarily right for everyone. For example, they often deal with gigantic caseloads.
Because of that, you might find that they just don’t have time to build one-to-one relationships with clients.
WHAT MAKES A GOOD MORTGAGE ADVISER?
They’re happy to talk (on your behalf) to your estate agent, solicitor or conveyancer, and mortgage lender.
And they will fight for you if needed.
Their aim is to find and bring you the right deal.
As always, a bespoke service is worth paying for. And it might save you money…
IN THE END, ARE BROKER FEES WORTH PAYING?
Well, here’s the thing. A good mortgage adviser could potentially save you money. That’s because an extensive, time-consuming search to find the right deal for you, is a saving.
Plus, you’ll almost certainly find the whole buying situation less stressful. You pay them to deal on the front line with everyone else involved in the transaction.
And, as we’ve said, they fight your corner. All of which takes time. And can be challenging.
So, essentially, you pay for their time, knowledge, and experience.
That’s the bottom line. It’s your choice.
Take your time. Find out everything you can before making a decision about what mortgage adviser to work with. It’s worth your while to shop around, do extensive research, and find the right mortgage broker for your needs.
Find out more: If you’d like a copy of our document, “Why we charge a fee”, with lots of information about our approach, have a chat with one of our advisers.
