How Much Does It Cost to Hire a Mortgage Broker?

Purchasing a new home is a very exciting moment, but it can also be scary if you don't have the necessary knowledge and support.

Using the services of a mortgage broker, who provides advice and recommendations on picking the best package, is one of the ways that many individuals get help when buying a home.

In the United Kingdom, we rely significantly on brokers, with over 80% of mortgages secured after seeking guidance (FCA).

Handshake over house

A mortgage broker is a person or firm that can help you (the borrower) get a loan from a mortgage lender. Whether you're a first-time buyer or want to re-mortgage your present property, they will work closely with you to determine what type of mortgage you require and then discover a package that meets your needs.

A mortgage broker can guide you through each step of the process when locating and applying for a mortgage and will ensure that you obtain the best deal possible based on your unique circumstances.

For example, they could assist you with assessing your financial condition, recommending the best mortgage for your needs, and scouring the market for deals that meet your specifications.

A mortgage broker is a type of financial counsellor who specialises in mortgages. They work hard to locate the best mortgage for you, with rates within your budget.

They can show you the best options, and their in-depth understanding of the property industry allows them to find the best lenders and mortgage deals available.

Mortgage brokers have a fiduciary duty to you, which means they must be able to back up any suggestions they make. Mortgage brokers will provide recommendations based on your unique circumstances. Among the criteria they consider are:

  • The magnitude of your down payment
  • Your selections for monthly repayments
  • Rates of interest
  • Credit history and outgoings are examples of personal information

This information allows them to determine which mortgage offers you'll be eligible for and how much you'll be able to borrow based on your financial situation.

This article will go through the different factors that affect the cost of a mortgage broker fee. We will go through the additional costs, the different types and the benefits you experience when hiring a mortgage broker.

Therefore, if you are looking to move home and want help with a mortgage, you will know what costs to expect here.

It's a good idea to keep expenses down when applying for a mortgage, and that's where a mortgage broker comes in. They must evaluate deals and save you money.

But what fees do mortgage brokers charge, and how can you determine a typical cost for a mortgage broker in the United Kingdom? For their services, a mortgage broker will charge a fee, which may include:

  • Searching the entire market for the greatest offers for you.
  • Calculating your affordability to locate you a low-cost mortgage
  • Negotiating the terms and conditions of your mortgage
  • Organising and completing your paperwork
  • Keeping track of your mortgage application and making sure that all deadlines are met
  • We will compare various mortgage options to see which one is best for you.

It all depends on which broker you select and when they want to be paid. Although this isn't always the case, some fee-charging mortgage brokers do need upfront payments from customers before they begin their search for lenders, and these fees can range from £300 - £600.

Other mortgage brokers charge a flat fee with a fixed rate, which is chargeable whenever supplied mortgage advice or services. This can increase mortgage broker costs, so always know how much you'll be charged before meeting with a mortgage broker.

Many of the brokers we work with are paid only after the loan is closed through lender commission, and those who do charge a fee will reimburse the upfront charges if they are unable to secure you a loan.

Mortgage lenders have been required to add any mortgage-related expenses, such as redemption and appraisal fees, in the yearly interest calculation since March 2016. The Annual Percentage Rate of Charge, or APRC, is a method of computing interest.

A mortgage Illustration document should include all charges associated with the mortgage product. It's also known as a European Standard Information Sheet (ESIS) or an upgraded key facts illustration with any relevant additional information supplemented as needed.

The arrangement charge, also known as the product fee or completion fee, is a fee for the mortgage product.

You may be able to add this to your mortgage, but doing so would increase the amount you owe and your interest and monthly payments. This normally costs between £0 - £2,000.

When you simply apply for a mortgage, you may be charged a booking fee, which is normally non-refundable even if your mortgage falls through.

Some mortgage lenders include it in the arranging fee, while others charge it separately depending on the size of the mortgage. This costs £99 - £250.

The valuation charge will be used to appraise your property and ensure that it is worth the amount you want to borrow. On certain mortgage transactions, some lenders will not charge this fee.

You can also hire a professional to do a property survey to determine what repairs or maintenance are required. The lender's survey focuses solely on the property's worth, not on prospective issues or future costs.

Depending on the value of the house, this can cost anywhere between £250 - £1,500.

This fee pays for your mortgage provider to transfer the money to your solicitor and is sometimes referred to as CHAPS (Clearing House Automated Payment System).

It's usually non-refundable, so you won't receive your money back if the sale falls through. This usually costs between £25 - £50.

The mortgage account fee covers the lender's administrative costs associated with establishing, maintaining, and closing your loan.

If you've already paid this cost, you're unlikely to be charged an exit fee though an early repayment charge may still apply if you terminate your mortgage early. This usually costs between £100 - £300.

If you choose to use a mortgage broker, the cost is for them to arrange the mortgage or give you advice. Some mortgage brokers do not charge a fee instead of taking a commission from the lender.

Depending on the size of the mortgage, an average of £500 - £800 or a commission is charged.

Mortgage Broker Prices

The table below will breakdown the different prices of hiring a mortgage broker:

Job Fee/Cost
Arrangement fee £0 - £2,000
Booking fee £99 - £250
Valuation fee £250 - £1,500
Telegraphic transfer fee £25 - £50
Mortgage account fee £100 - £300
Mortgage broker fee £500 - £800


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What are the Additional Costs of Hiring a Mortgage Broker?

When hiring a mortgage broker, additional jobs may pop up that could add to your overall budget.

Therefore, we have created this section to show you the different additional costs that you should expect when hiring a mortgage broker. Therefore, if you are figuring out how much you will need, then this will give you an overall estimate.

House Survey Cost

A new build survey costs between £260 - £620 on average. A condition report is no different. A home buyer's survey will set you back from £360 - £620, while a house building survey would set you back around £460 - £980.

Mortgage valuation, on the other hand, is classified as a valuation report rather than a form of house study. This might cost anything between £275 - £650.

The type of house survey, the size and type of property being surveyed, the number of surveyors engaged, the convenience of access, and the location of your property are all major cost-affecting elements for a house survey. Because contractors charge various labour rates across the country, this is a cost consideration.

House survey

The greatest labour fees are usually found in the southeast and London, with costs in the north of England, Scotland, and Northern Ireland being lower than the national average.

A surveyor will charge between £100 - £180 per hour on average. The labour cost for a new build survey will range from £200 - £540.

The time it takes to complete the task, convenience of access, the size/type of property, the value of the property, and the location of your property are all factors that influence labour expenses.

The length of time it takes to complete a house survey varies based on several criteria. In this section, we'll look at how long each of the house surveys we've spoken about thus far would take on average, as well as some of the most important time-related aspects.

A new construction survey and a condition report would each take two to three hours to complete. In the case of a home buyer, the reporting time is approximately three hours.

A house building survey should take between four and five hours to complete. The length of a house survey is determined by the ease of access, the size/type of the property, and the number of surveyors involved.

Electrical Safety Certificate and PAT Testing

Electrical safety certificates typically range in price from £100 - £350.

You should expect to pay roughly £100-200 for a standard-sized residence, whether it's a house or an apartment.

Most PAT testing fees are between £1 - £2 per appliance tested. Some service providers may charge you a little less than £1 per item. Most testers will establish a minimum charge to ensure that the journey is worthwhile.

If you simply need a few items checked, you'll almost certainly have to pay a standard fee in addition to the cost of the appliances. Landlords are required to have an electrical safety certificate.

Except for individuals who own a residence in multiple occupancies, landlords are not legally required to receive this certificate.

However, having this certificate promotes tenant safety and helps a landlord satisfy their legal obligations. The average cost of an electrical safety certificate for a landlord is roughly £175.

The cost of an electrical safety certificate and PAT test varies depending on where you live in the United Kingdom.

The cost of living in your part of the United Kingdom will influence the pricing that individuals or businesses establish, and supply and demand levels in your area will also play a role in the total cost.

Another factor to consider is how quickly your property can be accessed by nearby service providers. Their gasoline expenses will rise as their route lengthens, thereby increasing your entire payment.

Duration

The cost of engaging a mortgage broker is usually determined by the length of time involved. The longer it takes, the more expensive your labour will be.

However, there are rare instances in which this may not be the case. Consider the situation when you are paid a specific fee for a job. Otherwise, your bill will be determined by the length of the job.

Location

The cost of living in your part of the United Kingdom will influence the pricing that individuals or businesses establish, and supply and demand levels in your area will also play a role in the total cost.

Another factor to consider is how quickly your property can be accessed by nearby service providers. Their gasoline expenses will rise as their route lengthens, thereby increasing your entire payment.

Types of Mortgage Brokers

Figuring out all the different types of lenders who specialise in house loans and refinancing might be one of the most perplexing aspects of the mortgage process.

Direct lenders, retail lenders, mortgage brokers, portfolio lenders, correspondent lenders, wholesale lenders, and others are among the various types of lenders.

Many applicants go right into the process, looking for what appear to be reasonable terms without considering the type of lender they'll be dealing with.

However, if you want to be sure you're getting the greatest price, or if you need a jumbo loan or have other unusual circumstances, knowing the different types of lenders involved can be extremely beneficial.

Below are descriptions of some of the more common varieties. So, if you are unsure what type of mortgage broker to go for, then this section of the article will break down the different types so you know what to expect when hiring one.

Mortgage Lenders

Lenders who make the loan and offer the funds to purchase a property or refinance an existing mortgage.

They have creditworthiness and financial resource requirements that you must meet to qualify for a loan, and they determine their mortgage interest rates and other loan terms accordingly.

Couple at desk with lender

Mortgage brokers, on the other hand, do not make loans themselves. They work with several lenders to identify the one that would provide you with the greatest rate and terms.

You borrow from the lender, not the broker, who only serves as an intermediary when you take out a loan.

Wholesale Lenders

Wholesale lenders are banks or various other financial institutions that do not deal directly with customers and instead sell their loans through intermediaries such as mortgage brokers, credit unions, and other financial institutions.

These are frequently major banks with retail businesses that deal directly with customers. Banks like Bank of America and Wells Fargo have both wholesale and retail activities.

The wholesale lender is the one who makes the loan and whose name is usually on the loan documentation in this sort of lending. In most circumstances, the third party - bank, credit union, or mortgage broker - is merely serving as an agent for a fee.

Retail Lenders

Retail lenders are exactly what they sound like: they are lenders who provide mortgages to individuals directly. They can either lend their own money or operate as a broker for others.

Again, retail lending could be only one service provided by a bigger financial institution that also provides commercial, institutional, and wholesale lending, as well as a variety of other financial services.

Warehouse Lenders

Warehouse lenders are like wholesale lenders in certain ways. Instead of offering loans through intermediaries, they lend money to banks or other mortgage lenders with which they can issue their loans on their conditions. When the mortgage lender sells the debt to investors, the warehouse lender is repaid.

Portfolio Lenders

Portfolio lenders, on the other hand, make house loans with their own money and keep the loans on their books, or "portfolio." They can set their terms for the loans they provide because they are not bound by the demands of outside investors.

Portfolio lenders are a suitable fit for "niche" consumers that don't fit the traditional lender profile, such as those seeking a large loan, evaluating a unique property, having bad credit but decent money, or exploring investing in real estate.

You may pay a higher rate for this service, but that isn't always the case; because portfolio lenders are selective in who they lend to, their rates might be cheap.

Correspondent Lenders

"Correspondent lender" is a final term you may hear. While some lenders are defined by the process that leads up to the loan, correspondent lenders are defined by what happens after the loan has been provided.

Correspondent lenders work with a sponsor, an investor who buys any mortgages they produce that meet certain requirements.

money calculator and house model

When a mortgage is issued, correspondent lenders make money by collecting a point or two. Selling the loan to a sponsor right away almost ensures that they will make money because the correspondent is no longer at risk of default.

If the loan does not match the sponsor's standards, the correspondent must either locate another investor or carry the loan themselves.

Benefits of Hiring a Mortgage Broker

Many house buyers use the services of a mortgage broker to get the best terms and rates while searching for a mortgage.

However, in the aftermath of the real estate market meltdown in 2008, the business activities of brokers were scrutinised, and the topic of whether they behave in the best interests of their customers was raised.

Working with a knowledgeable, professional mortgage broker will assist you in obtaining the best mortgage possible. There are numerous advantages to hiring a mortgage broker that you may take advantage of.

As a result, we'll go over the various benefits that may be beneficial to you during the home-buying process.

May Save You Legwork

Mortgage brokers interact with a wide range of lenders regularly, some of whom you may not be aware of. A mortgage broker can also help you avoid any lenders who have onerous payment requirements hidden within their mortgage paperwork.

However, before meeting with a broker, you should conduct your research. Searching rates online, then using a mortgage calculator, is a quick method to get a sense of the average rates available for the type of mortgage you're applying for.

This type of tool will allow you to compare rates quickly and give you more information when evaluating a mortgage broker's credibility.

Couple talking with lender

Better Access

Some lenders will only work with mortgage brokers and will rely on them to be the gatekeepers who bring them qualified consumers. You may not be able to secure a retail mortgage through calling some lenders directly.

Due to the volumes of business generated, some brokers may be able to obtain special rates from lenders that are cheaper than what you can obtain on your own.

Manage Your Fees

Origination costs, application fees, and appraisal fees are just some of the fees that come with getting a new mortgage or working with a new lender. Mortgage brokers can sometimes persuade lenders to eliminate some or all these costs, saving you hundreds to thousands of dollars.

Convenient

If you don't have good working knowledge of the financial and mortgage markets, or if you don't have the time to spend looking for deals, filling out paperwork, and dealing with lenders, mortgage brokers can be quite helpful.

Experts

Interest rates vary, and mortgage packages come and go, making the mortgage market complex. Having an expert who can explain things properly and understand best practices can be beneficial. They are well-educated, qualified experts with a broad understanding of their field.

They are best positioned and obligated to assist you in making your mortgage purchasing decision, ensuring that you do not end up with an unsuitable mortgage. You can also file a complaint with the Ombudsman if something goes wrong.

Save You Money

They'll almost certainly save you money. Mortgage brokers will have access to thousands of lenders and may locate bargains for you, or they are affiliated with certain lenders and may be able to secure an exclusive deal for you.

In the end, you're more likely to get better rates if you use a mortgage broker than if you don't.

Save Time

Researching the mortgage market for the best offer might take a long time, which is good if you have a lot of time on your hands. However, if you're trying to fit a property purchase into your daily routine, your free time may be limited.

If you employ a broker, you'll be getting guidance from someone who already knows the market and will spend time searching it for a decent offer on your behalf, saving you time and effort.

Help With Paperwork

When it comes to applying for a mortgage, there is usually a lot of documentation to complete, whether it's applications to fill out or your documents to look through.

paperwork on desk

With a broker on your side, you'll have someone who knows exactly what documents you'll need and what forms you'll need to fill out, making things much easier.

Help With Insurance

It is strongly advised that you apply for insurance when you take out a mortgage to protect yourself in the future.

Life, home, and critical sickness insurance, for example, can help to ensure that you and your loved ones are taken care of in the event of an emergency.

This is something that your broker can generally assist you with. They can usually advise you on which insurance products are ideal for you, as well as assist you with the subsequent applications, in addition to giving you mortgage guidance. It's just one more thing they can do to make your life easier.

FAQs

Q: How do you choose the right mortgage broker?

A: Make sure a mortgage broker is appropriately qualified and registered before you start talking to them.

Mortgage brokers in the United Kingdom are needed by law to be registered with the Financial Conduct Authority (FCA) to provide mortgage advice.

If you're looking for a UK mortgage broker, look them up on the FCA's Financial Services Register. They are not authorised and so untrustworthy if they are not on the register.

Q: What does a mortgage broker do?

A: A mortgage broker is a professional who will assist you in locating a lender who will issue you a loan. They will research the market and apply for a mortgage on your behalf after considering your financial status and needs.

Though they may appear to be a middleman, it's important to keep in mind that a mortgage broker is also an expert in their field and will have access to various discounts you wouldn't find on your own.

Don't be scared to ask your mortgage broker questions since they will have knowledge that will assist you in the mortgage application process.

Their knowledge and skills can help save time and reduce stress, and they often have access to better bargains that can help save you money in the long term.

Q: What does a mortgage broker need from you?

A: Bring a copy of your last two years' accounts (balance sheets/profit and loss statements), as well as information on any third-party liabilities, such as leases, overdrafts, or company loans.

If you receive investment income or government support payments, bring documented proof of these as well.

Q: How long does a mortgage broker take to be approved?

A: The average time it takes for a mortgage to get approved is roughly two weeks. It may take as short as 24 hours, but this is unusual.

You can expect to wait for around two weeks on average while the mortgage lender has the property surveyed and your application is underwritten.

Q: Does hiring a mortgage broker make the process quicker?

A: Evidence of your income, residence, and credit score will be required when purchasing a home or re-mortgaging.

A mortgage broker can assist you in providing appropriate evidence, which will speed up the entire procedure.

Sources

  1. https://www.onlinemortgageadvisor.co.uk/mortgage-broker/mortgage-broker-charges/
  2. https://www.unbiased.co.uk/life/homes-property/mortgage-broker-fees
  3. https://www.investopedia.com/financial-edge/1112/advantages-and-disadvantages-of-using-a-mortgage-broker.aspx
  4. https://www.experian.co.uk/consumer/mortgages/guides/mortgage-brokers.html
  5. https://www.mortgageloan.com/understanding-different-types-mortgage-lenders
  6. https://www.atombank.co.uk/blog/benefits-of-mortgage-brokers/
  7. https://www.clearscore.com/learn/mortgages/5-things-you-need-to-know-about-mortgage-brokers
Author: Emma M

I am a Liverpool-based freelance writer with a degree in Media and Communications. I specialise in product reviews, home improvement and DIY content. I am also experienced in social media management and content marketing.