Most mortgage brokers charge a fee, earn a commission from the lender, or both. These costs can vary widely:
- Some broker services are free
- The average cost is £200-£500
- In some cases, costs can be over £1000
For those looking for guidance during the mortgage process, a broker can be highly beneficial. Not only can they find a mortgage product to suit your financial circumstances, but they could also save you money.
This guide explains mortgage broker's fees clearly so you can make the best decision during your mortgage journey.
How Much Do Mortgage Brokers Charge?
According to the Boon Brokers research, consumers on average pay £200-£500 in broker fees, but can be as high as £1000.
Percentage-based fees will be determined by the loan size, while an hourly fee will depend on how much time is spent on your case. Flat fees will vary between brokers and can increase if someone’s financial circumstances are more complex.
Boon Brokers’ research showed that location could also be a factor. Consumers in Belfast, Glasgow and Edinburgh reported an average fee of £200, while Manchester had the highest average of £700.
When Are the Fees Paid?
Depending on the broker you use, fees can be paid upfront, after a mortgage offer is secured or on completion. When they require the fee will often be down to the broker’s discretion.
Many mortgage brokers will offer a short, initial consultation for free. During this consultation, a transparent broker will explain their costs and when they need to be paid.
How Much Do Mortgage Brokers Make in Commission?
Typically, a lender will pay the broker 0.35%* of the loan amount. So, if your mortgage is for £200,000, the broker will earn £700.
A broker who earns a commission from a lender should not make your mortgage more expensive. A good mortgage broker will not intentionally guide you towards a particular deal for their own gain and brokers who do so could risk losing their licence.
Further reading: Mortgage Broker vs Bank - Which Is Right for You?
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Are Mortgage Brokers Worth the Cost?
Mortgage brokers can be worth the cost as they can save you money by finding a great deal that was otherwise not available to you. This could mean a favourable interest rate and potentially additional benefits, such as cashback or a free valuation.
This potentially frees up money to be spent on your new home, putting down a bigger deposit or paying for conveyancers and surveyors. The peace of mind they provide can also allow you to focus on other aspects of your home journey.
Mortgage brokers are suitable for anybody, regardless of your circumstances. But they can be especially helpful for first-time buyers who are unfamiliar with the process and may feel overwhelmed. Their expert help can be invaluable at this time.
Another benefit of a broker is convenience. They can save you the time and effort of shopping around for the best mortgage deal and lender. They can also help by assisting with the mortgage application process and explaining unfamiliar jargon.
How to Keep Mortgage Broker Costs Low
Below we look at some of the ways you can keep your mortgage broker costs low.
1. Fee-Free Broker
One of the best ways to keep costs low is to choose a fee-free broker. This would be a broker who only takes commission from the lender, making their service free for you.
2. Cashback Mortgage Offers
Ask your broker about cashback mortgage offers. Some lenders offer these as an initiative, providing you with a lump sum, which can be used however you wish. This could be used to offset any broker fees. However, the role of a broker is to find the right mortgage for your needs, which may not include cashback offers.
3. Negotiate Your Fee Upfront
Always ask upfront how a broker earns their fee. A trustworthy mortgage broker will be transparent and explain their pricing model. This ensures there are no hidden costs or unexpected charges. You could also ask if the broker is open to negotiating fees, especially if you are borrowing a large amount from the lender.
4. Compare Brokers
Comparing different mortgage brokers can be one of the best ways to save money on their fees. To save on the leg work, we can connect you with brokers who will contact you directly. This helps you find a broker that fits your requirements and budget.
Save money on your mortgage broker costs
Accredited mortgage brokers
Used by over 1.5 million movers in the UK
How Is My Mortgage Broker Paid?
There are several pricing models a broker can use and you have the right to know how your broker is being paid. Fees largely depend on whether they charge you, in addition to the lender. If they only take a lender commission, usually their services are free for you as the borrower.
Below we look at the methods brokers use to charge their fees and who foots the bill:
1. Lender Commission (Free for the Borrower)
When a broker earns a commission, also known as a procuration fee, it is the lender who pays the broker. This is typically 0.35%* of the loan amount but can be more. In this case, you will not pay a fee.
2. A Fixed-Fee
A fixed-fee model is when a broker charges you a flat fee for their services. The cost will depend on the broker you choose and can be influenced by how much time is spent on your case.
3. Percentage of the Mortgage Loan
Some brokers will charge you a percentage of the loan amount. This is usually at a rate of 0.35%* but can be up to 1%. The larger your total mortgage loan is, the more expensive the broker fee will be.
4. An Hourly Rate
If you have a straightforward application, an hourly fee may suit your needs. This is a less common option, but it could be a cost-effective way of using a broker if you only need a few hours of professional advice. However, costs could add up quickly if your case is complex.
5. A Combination of Lender Commission and Fixed-Fee
Some mortgage brokers will charge you a fee and earn a commission from the lender. For example, if someone is remortgaging and the remaining loan is under £50,000, the loan amount will likely be too low for sufficient commission. As a result, the broker may charge you a fixed fee for their services.
Naturally, this is less popular among consumers. Boon Broker’s research found that 76.1% of respondents did not believe it was fair for brokers to charge a fee if they received a commission from the lender.
Which Payment Model is Right for Me?
The main advantage of a commission-only broker is that the service is essentially free. However, they may be tied to specific lenders, meaning that you might not be getting the best deal available on the wider market.
In contrast, while paying a broker’s fee can add to your costs, it could mean a better deal as they are less likely to be limited to specific lenders. As a result, the long-term savings on your mortgage could far outweigh the broker fee.
Ultimately, the right broker for you will largely depend on your financial circumstances and lifestyle. If you have bad credit or a complex income, you may benefit from a broker with access to the whole market and experience in securing deals for non-standard cases. Meanwhile, someone with a good credit score and regular income may find the best deal among a few select lenders.
Find a Mortgage Broker
Compare My Move can connect you with up to 5 trusted mortgage experts in your local area when you fill out our online form to compare brokers.
Not only can this help you find the right deal and save on your overall costs, but it can also give you peace of mind. Our partners are all regulated by the FCA and undergo a strict verification process. This ensures the highest standards of service from our partner network.
FAQs
Are Mortgage Brokers Required to Disclose Commission?
Yes, a mortgage broker is expected to explain how they earn their fee, especially if they are FCA-registered.
What is a Lifetime Mortgage Broker Fee?
A "lifetime broker membership" is a loyalty program offered by some mortgage brokers. This can cover your initial mortgage and any subsequent mortgage and remortgage applications. Costs vary depending on the broker and the service they offer.
