Mortgage Broker Fees – The Complete Guide

Mortgage Broker Fees

August 2022

Mortgage Broker Fees – The Complete Guide in 2022

If you’re trying to get onto the property ladder and want to get the best deal possible on your dream mortgage, you might be thinking of using a mortgage broker to help with your mortgage application process. 

It’s essential to be aware that while a broker might be able to help you get the best mortgage deals, most mortgage brokers also charge fees.

Make sure you know the mortgage broker fees ahead of time, so there are no unpleasant surprises later on. 

And keep in mind that the lowest mortgage broker fee isn’t always the best mortgage deal; make a careful comparison of all aspects of the service before making a choice on a mortgage product.

Topics that you will find covered on this page

You can listen to an audio recording of this page below.

What is a mortgage broker?

A mortgage broker is a professional who helps mortgage applicants throughout the entire mortgage process to find and apply for home loans. Brokers generally work with a variety of mortgage lenders to find loan products on the mortgage market that fit their clients’ needs.

Mortgage brokers are regulated by the Financial Conduct Authority (FCA). As a result, they have to meet certain standards and can be held accountable by the financial ombudsman service if they don’t provide a good service. The ombudsman promises a reasonable and prompt handling of any and all complaints that mortgage brokers receive.

You can find out more about the FCA and how it regulates mortgage brokers on its website.

If you want to apply for and obtain a loan on your own, you don’t need a broker. However, before making a decision, it’s essential to compare various loans and ensure that you understand the application procedure.

What fees will a mortgage broker charge?

There is no one average mortgage broker fee. Mortgage broker costs will vary between brokers who will charge different amounts and have different structures for mortgage repayments.

Percentage fee

Typically, mortgage brokers charge a fee which is a percentage of the loan amount. This can vary depending on the type of loan, the loan size and loan to value and the mortgage lender, but it’s usually between 0.5% and 2%.

For example, if you’re borrowing £200,000, a 1% fee would be £2,000.

The advantage of a percentage-based fee is that it gives the broker an incentive to get you 

the best deal possible. A mortgage broker charges more, in this case, if they manage to secure a loan with a lower interest rate.

Hourly rate

Not all brokers charge by a percentage; some mortgage brokers charge a fixed fee or hourly rate. Average mortgage broker fees are usually around £100-£200.

Generally, brokers charge an hourly rate if:

  • your financial situation is complex and takes longer to assess
  • you need help with a lot of paperwork
  • the process of finding and applying for a loan is taking longer than expected

The benefit of an hourly broker fee is that you only spend money for the time you need. If you just require a little bit of help or assistance, this can be beneficial.

However, it’s essential to compare this with the percentage-based fee to make sure you’re getting value for money.

Fixed charge

Some mortgage brokers charge a fixed rate. For example, £500 for arranging the loan or £250 for each year of the loan term (if you have a 5-year loan, this would be £1,250)

Fixed broker fees are less common, but they can be helpful if you want to know exactly how much you’ll need to pay. Fixed mortgage fees might be more likely to be an upfront fee.

Combination

Some mortgage brokers charge a fee with a combination structure:

For example, they may charge 1% of the loan amount, plus £500 for arranging the loan.

This might be helpful if you want to know how much you’ll need to pay upfront, as well as an idea of how much the broker will earn if they’re successful in securing a lower interest rate.

mortgage advisor fees

Fee-free

A few mortgage brokers don’t charge any fees at all. Instead, they’re paid a commission from the lender when the loan is approved.

The advantage of this is that if the lender pays, you don’t need to pay anything upfront. 

However, it’s important to check that the broker is still working in your best interests. There’s a chance you will be more likely to get access to better mortgage advisors and better interest rates by using a broker that charges you a fee.

What about commission?

Commission is the amount a broker earns from the lender when they arrange your home loan. Being paid commission from the lender used to be common practice, but it’s now banned in the UK.

"Make sure you know the mortgage broker fees ahead of time, so there are no unpleasant surprises later on."

How are mortgage broker fees paid?

Mortgage broker fees are usually paid by the lender when your loan is approved or after completing the mortgage transaction. In some cases, you may have to pay brokers upfront fees.

If you’re self-employed or have a bad credit history, you may need to pay the mortgage broker’s fee upfront. This is because lenders are less likely to approve your loan if you fall into one of these categories.

Paying the fee upfront can also be helpful if you’re in a hurry to get a loan. This is because it shows the lender that you’re serious about getting the loan and that you have the funds available to do so.

Make sure you confirm your mortgage broker’s fee in advance with a written quote. Also, get written confirmation that if your mortgage deal falls through, there will be no fee to pay.

mortgage broker cost

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What does a mortgage broker actually do?

A mortgage broker’s task is to help you find the best home loan for your needs and circumstances. They’ll do this by:

  • Assessing your financial situation
  • Researching different home loan products (helping you to avoid mortgage advisor costs)
  • Negotiating with mortgage lenders on your behalf
  • Completing mortgage paperwork and liaising with your solicitor or conveyancer throughout your mortgage application

What are the advantages of using a mortgage broker?

There are a few advantages to using a mortgage broker:

Brokers have access to a range of lenders and home loan products

This means they can find a loan that’s right for you, even if you don’t have time to compare all the options yourself.

Brokers can save you time and effort

Applying for a home loan can be difficult and time-consuming. A broker can take care of everything for you, from researching different loans to dealing with the paperwork.

Brokers can offer expert mortgage advice

They have experience in the house loan sector and can explain your alternatives in simple English. If you are not sure which loan is best for you or whether you have any questions about the application process, this may be beneficial.

‍ mortgage broker fee

How do I choose the right mortgage broker?

When you’re choosing a mortgage broker, it’s important to compare a few different options. 

Consider things like:

  • Whether and how they charge fees 
  • The range of lenders and products they have access to
  • Their level of experience and expertise – if you have adverse credit or any other circumstances that standard mortgages would be unsuitable for, you might have to consult a specialist broker.

It’s also a good idea to read online reviews before making a decision. This will give you a sense of what other customers think about the service they’ve received.

Are mortgage broker fees negotiable?

Broker fees are typically non-negotiable. However, it’s always worth asking if there’s any flexibility, particularly if you have a good relationship with your broker.

In some cases, you may be able to negotiate a lower fee if you’re willing to pay it upfront. 

This is because the mortgage broker will have the funds available immediately rather than waiting for the loan to be approved.

You may also be able to negotiate a lower fee if you’re using the same mortgage broker for multiple loans. For example, if you’re buying a new home and remortgaging your old one at the same time.

Is a mortgage broker’s fee worth the money?

When it comes to locating a loan, mortgage brokers may save you a lot of time and effort. 

They have access to several lenders and frequently obtain you a better mortgage deal than you could do yourself.

However, their fees can add up, so it’s important to compare the cost of using a broker with the cost of going directly to a lender – using a broker will not always get you the best deal.

If you’re not sure whether using a mortgage broker is right for you, speak to one for free mortgage advice. Alternatively, consult a mortgage advisor. A mortgage advisor will be able to assess your situation and recommend the best way forward.

mortgage advisor costs

Can I expect to pay other fees?

As well as the mortgage broker fee, you may also face other mortgage costs:

  • An application fee to the lender
  • Valuation fees (You will be required to pay a valuation fee if you’re borrowing more than 60% of the property’s value)
  • A survey fee (if you’re buying a new home)
  • An arrangement fee (an arrangement fee is paid to the lender)
  • Conveyancing fees (if you’re buying or selling a property)
  • Mortgage advisor fees
  • Legal fees

Won’t my bank be cheaper than a mortgage broker?

It’s often cheaper to use a good mortgage broker than to go directly to a bank. This is because banks typically charge higher fees for arranged loans.

However, it’s always worth comparing the cost of using a broker with the cost of going directly to a lender.

What is a fee-free mortgage broker?

A fee-free mortgage broker is a broker who doesn’t charge any fees. Instead, they’re paid a commission by the lender when the mortgage loan is approved.

The advantage of using a fee-free broker is that you don’t need to pay anything upfront.

average mortgage broker fees

Is fee-free mortgage advice too good to be true?

It’s important to check that the broker is still working in your best interests, especially in the case of fee-free brokers.

This is because some fee-free mortgage brokers may only offer products from a limited range of lenders or estate agents. This could mean that you miss out on better mortgage deals that are available from different mortgage providers or a different estate agent.

 

It’s also important to check that the broker is regulated by the Financial Conduct Authority (FCA). This will give you protection if something goes wrong.

So do I need a mortgage broker?

There’s no right or wrong answer to this question. It depends on your individual circumstances and your capacity to pay mortgage broker fees.

When deciding whether or not to use a mortgage broker, it’s important to consider the cost difference between using one and going directly to a lender. In most cases, working with a broker is less expensive than visiting the bank directly, even if they charge a fee.

However, some banks may offer lower fees for arranged loans. A trustworthy mortgage broker will also have access to a wider range of lenders than most people would be able to find on their own, which could lead to you getting the best mortgage deal.

It is important to make sure that the broker is working in your best interests, though, by checking whether they are regulated by the Financial Conduct Authority (FCA).

If you’re not sure whether using a mortgage broker is right for you, speak to a reputable broker for advice (they shouldn’t charge a fee for this). A broker or mortgage advisor will be able to assess your situation and recommend the best way forward.

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Learn More About Mortgages In The UK

How do mortgages work in the UK?

Buying a home or land is expensive. A mortgage is a financial product that helps people purchase their own home or land.This is especially true for a first time buyer, as it might be the only route onto the property ladder.

The minimum credit score for a mortgage

ou can still be approved for a mortgage to buy a property if you have a poor credit score. However, someone with a poor credit score will probably have a higher interest rate than someone whose credit score is good. Buyers with a low credit score may also need to pay a bigger deposit.

fixed term Contract Mortgages

A fixed term contract is a way of describing certain types of employment. If your current employment contract is due to end after a certain period of time, or after a specific piece of work is complete, you are likely on a fixed term contract. 

how long does a mortgage application take?

After sending off the final application waiting for the decision can be frustrating. Many prospective homeowners ask ‘how long does it take?’ but the truth is the mortgage approval process is always different for each customer.

how long does conveyancing take?

The entire conveyancing process will normally take anywhere between 8-12 weeks, however you should be prepared for this to take much longer depending on your circumstances and wider factors. This articles explores what the timescale involves.

Mortgages if You are bankrupt

There is no hard and fast rule when it comes to what lenders will accept your mortgage application if you want to get a mortgage after bankruptcy. They will lend to discharged bankrupts and consider each case individually. 

what stops you getting a mortgage?

Everyone wants to get the best deal when it comes to buying a home and getting a mortgage when they buy a home. However, being too ambitious can lead to your application being rejected. 

how much do mortgage advisors charge?

Fees for mortgage brokers can be off-putting. A mortgage is an expensive financial product, and often buyers want to save as much money as possible. This might limit their options when it comes to using a mortgage broker.  However, not everyone advisor charges a fee.

IVA Mortgage

When you have an IVA, mortgage acceptance is still possible. However, involuntary agreement mortgage lenders can be hard to find. Typically, a high street company will be more less keen to give you a mortgage. 

Article author

Katy Davies

I am a keen reader and writer and have been helping to write and produce the legal content for the site since the launch.   I studied for a law degree at Manchester University and I use that theoretical experience, as well as my practical experience as a solicitor, to help produce legal content which I hope you find helpful.

Outside of work, I love the snow and am a keen snowboarder.  Most winters you will see me trying to get away for long weekends to the slopes in Switzerland or France.

Email – [email protected]

Frequently Asked Questions

What is a mortgage broker?

A mortgage broker is a professional who helps mortgage applicants throughout the entire mortgage process to find and apply for home loans. Brokers generally work with a variety of mortgage lenders to find loan products on the mortgage market that fit their clients’ needs.

What fees will a mortgage broker charge?

There is no one average mortgage broker fee. Mortgage broker costs will vary between brokers who will charge different amounts and have different structures for mortgage repayments.

What about commission?

Commission is the amount a broker earns from the lender when they arrange your home loan. Being paid commission from the lender used to be common practice, but it’s now banned in the UK.

What is a fee-free mortgage broker?

A fee-free mortgage broker is a broker who doesn’t charge any fees. Instead, they’re paid a commission by the lender when the mortgage loan is approved.

The advantage of using a fee-free broker is that you don’t need to pay anything upfront.

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