How Do Mortgage Advisors Get Paid?

Many people think about hiring mortgage advisors when looking for a mortgage. But have you ever considered how mortgage advisors are paid? 

This might worry you before hiring a mortgage advisor, as you may think you’ll have to pay them the entire fee. 

So, to help you understand how mortgage advisors get paid, here’s a short guide that can answer your questions.

Let’s begin.

How Do Mortgage Advisors Get Paid in UK?

Long story short, mortgage advisors are usually paid on a procuration fee basis, which means they receive a procuration fee from the lender for every mortgage they successfully complete on behalf of their customers.

Depending on the complexity of the borrower’s case, the advisor might also charge a separate fee for their advisory services and for arranging the mortgage which is quite common. 

This fee can be charged either as a fixed fee or a percentage of the loan amount sanctioned based on the broker.

During the initial discussions, mortgage advisors usually offer you a full breakdown of their fees. 

How Much Do Mortgage Advisors Get Paid?

Different mortgage advisors have different payment models. 

Some are employed with a company and earn a basic salary plus commissions, while others are self-employed and have a fully commission-based fee structure.

The actual amount a mortgage broker will be paid depends on the following factors:

• Whether they are independent brokers or employed with an organisation
• The loan amount
• Any associated products taken, such as life insurance

Fees vary from firm to firm and advisor to advisor. Usually, advisors charge a fixed fee from £100-1,500 or a percentage between 0.35% and 1% fee, meaning if your loan amount is £300,000, the advisor fee would be £3,000 maximum. 

As explained above, some advisors can also charge an upfront fee, also known as a commitment fee, depending on your case. Upfront fees usually range from £100 to £250. This is over and above the success fees, you might be charged if the mortgage is sanctioned.

Does The Borrower Need To Pay The Advisor/Broker Directly?

Yes, however, this varies on a case-to-case basis as it can be packaged in with the lender. 

You will need to transfer fees directly to the advisor or their company. This should all be mentioned in their advisor’s fee structure. If you have any doubts, please talk with the broker.

Types Of Mortgage Brokers

You might be surprised that there are different types of mortgage brokers. Some are associated with specific lenders, which can result in biased advice. These advisors or brokers are called tied brokers.

Moreover, some brokerage firms are owned by lenders, so even though they can give you multiple options, it might not always be in your best interest. 

Working with such tied brokerages could limit your options or result in you not getting a good enough deal.

Apart from the above distinction, mortgage advisors also specialise in certain types of mortgages, such as:

• Overseas mortgage brokers
• Shared ownership brokers
• Bad credit mortgage brokers
• Second charge mortgage brokers

Other than this, some whole-of-market advisors are independent but have good relationships with many lenders. 

Such brokers will usually help you get the best deal in the entire market. They also help expedite the application process.

What Do Mortgage Brokers Do Anyways?

After all this talk about how mortgage advisors get paid, you might wonder what they do to charge these fees. 

An independent and experienced mortgage advisor’s help can be the difference between a successful mortgage application and a failed one. 

Independent brokers are duty-bound to find the best mortgage deal based on your unique financial needs. 

They also need to ensure that the mortgage you get is affordable, that you know all the pros and cons of the deal you’re getting, and that you know all the terms and conditions of the agreement.

They’ll also help you with the paperwork and filling out the application to ensure it doesn’t get rejected on a technical basis. 

If you have a tricky case, such as a bad credit rating, a mortgage advisor can argue with the lender to get the mortgage through.

However, remember that the broker is not the same as the lender. They are simply experts who help you get the best mortgage products.

Is Hiring A Mortgage Advisor Worth It?

Hiring a mortgage advisor involves an additional cost, but it can be worth a lot in terms of how much you save. Let’s illustrate with an example.

Suppose you borrow £200,000 at a 5% interest rate for 25 years. Your monthly repayments would be £1,169, and you would pay back a total of  £350,700. You can easily calculate this using a mortgage repayment calculator.

Now, if you hire a mortgage broker, they get you an interest rate of even 4.9%, just 0.1% less than that of the original rate. 

Then, over 25 years, you pay back £347,400, which is £3,300 less. So, even with a mortgage broker fee of £500, you save £2,800, which is substantial.

Remember that this is just an example, but it shows the savings you might generate with a mortgage broker’s help. In reality, a mortgage broker can get you much better deals, making hiring them worthwhile. 

Frequently Asked Questions (FAQs)

1. What are the essential skills needed to become a mortgage advisor?

Apart from formal education in business management, finance, maths or accountancy, the following are some of the essential skills needed to become a mortgage advisor:

• Numeracy skills
• The ability to think critically
• Customer service skills
• IT and communication skills
• Last, but not the least, Negotiation skills

2. Are there mortgage brokers who work for free?

Yes, fee-free mortgage brokers charge nothing from the customer and make their money from the lender itself.