Mortgage advice - free advice versus charging fee

I recently spoke to a fellow broker who does not charge a fee. He does not have a minimum loan amount and was completing a £40,000 shared ownership mortgage, which paid him commission of around £100. A LOT of work goes into all mortgage applications, from lengthy calls and meetings, researching the very fast-paced changing market, meaning the research often starts again following deal changes, application, suitability report, case tracking, hand holding, support to completion. That is a lot of work to do for free. How many mortgages would he need to complete at that level to make ends meet? We brokers also have rising bills and mortgages to pay for. Most people understand that if you want a good service you usually have to pay for it. If the client has built a good relationship with a broker, and trusts that adviser to work hard for them, most clients are willing to pay for that service. However, that said, it is important to be flexible. I charge a fee of £495 on full application, however should this be difficult for the client to find upfront as they are putting everything they have into their deposit, or other mortgage fees for example, especially during the current cost of living crisis we are all facing, I am more than happy to come to an agreement for this to be paid on offer, or on completion if this is more comfortable for the client. My clients who pay me a fee to complete their mortgage application can rest assured that I will work my absolute hardest to provide the best service they can get for their hard earned money.

This topic is a VERY sensitive subject. There are no right or wrong answers as each person is very much making a decision based on their own process. I charge a fee, mainly as I am self-employed and have overheads that need to be paid before the mortgage completes, which can be months down the road, as that is when the fee from the lender is paid. And in a situation when a mortgage does not complete and that reason is out of your hands, you have been paid something for your time. As mortgages can be a lot of work, especially if there are tricky parts to deal with, like missed payments or being self-employed. All business models are different, each broker is different. Some fee free brokers are great and some not so, the same for fee chargers. Please ensure you do your research on the broker you choose to use. If you are comfortable and feel confident with them, then choose them. It should be about the service, not the fee. Would you use the cheapest builder to build you a house, or would you use one that is tried and trusted with good reviews but may be more expensive?

Many brokers charge a fee, many don't. It is down to the individual business model. We charge a fee and our fee depends on the complexity of the case. We also have cases that don't warrant a fee. But our experience and service dictate that we do. There are some excellent fee-free companies out there, but also when speaking with a broker and if they are not charging a fee ask yourself are you paying for that fee elsewhere? Many fee-free companies are well know for forcing overpriced life insurance policies on their clients and many are "selected panel" meaning they do not have access to the whole broker market meaning you might not be getting the best deal available to you. As always do you research, sometimes deals are too good to be true.

There is enough space in our industry for both fee-free and fee-charging brokers. Each company will have a different business model for what they want to offer their clients. Ultimately, the cost of the broker is irrelevant as the client will likely proceed with wherever they see the value. Our industry is full of brokers who will bash the other's business model around fees, but if you stick to your core value of looking after the client well, these firms will succeed over time. I'm sure every business would love to earn more money. However, there is a fine line here in adding value to a client's experience and being a financial burden to them. Our fees range from £0 to £400 depending on the type of mortgage transaction we complete. We're one of the few local businesses that are very transparent with these, where clients can view precisely what they would be charged before even picking up the phone. We've no plans to change our fees at Dimora. Despite this, I'm sure there will be some firms that will panic if business slows down and will jump to fee free to try and attract business and others who will increase theirs to try and combat their rising costs.

Free? Whoa there, as my Aberdonian Grandmother used to say, "nothing in life is free". That is especially true with financial and mortgage advice. Mortgage advice is typically paid for by one or a combination of: Procuration Fees (or Commission) paid by the provider for using their mortgage product. Explicit fees - A fixed flat rate, or based on the mortgage size or hourly rate. Procuration fees to be clear are ultimately paid for by the client through their interest payments. Even inhouse mortgage advisers in banks are not "free", as the cost of employing them ultimately is met by the revenue generated by, you guessed it, the mortgages their clients take out with the bank. The mortgage market is actually in a relatively healthy place with a range of advice fees being charged to clients, typically based on the complexity of the matter. Undoubtably some Mortgage Advisers are under charging for their expertise but as mortgages become harder to obtain due to the cost of living crisis I would not bet against mortgage advice fees creeping up.

Finanze offer a bespoke private service to property investors, many of whom are high net worth portfolio landlords. Alongside the products that exist in the market, we have also developed custom facilities either at the request of clients or to improve our offerings as a whole. We pride ourselves on going the extra mile to support our clients to ensure they get the best pricing to improve their profitability. In return we charge our clients a fee for our professional services. We don't however charge anything for the upfront time and advice. Many of our clients will reach out to us months ahead of making offers just to get a feel for the market, current economic conditions and a better understanding of process. They all get given as much time as they need to become comfortable with the lending process. Upon confirmation they wish to proceed, we will go to every relevant lender in the market to get pricing and after analysis to determine the best lender for the client's needs. Up until then, there is no charge for our time. Upon acceptance and the decision to move to application we charge them a fee of £299 as an application administration fee. Following the valuation of the property and the formal offer from the lender we charge a further offer fee of 0.5% of the gross loan, as a form of success fee. In reality it's an offset to all the time spent in advance in guiding and preparing the client. This fee is charged regardless of whether the client decides to proceed or not, after all we have been engaged to find the client the most appropriate finance for their situation - not to find and secure them a property. That's up to them and their estate agent. We will continue to hold their hand until the transaction is complete and then accept whatever the lender chooses to pay us as a procuration fee. This, of course, is made clear to the client when they receive the formal offer. Sometimes depending on the size of the deal we have reduced this to improve the terms for the client's benefit. We have recently increased pricing by £100 on our application administration fee, to account for increases in our own supplier costs but have no intention of changing this further in the medium term. As it stands, our volume continues to grow adding circa £5m weekly in gross loan volume therefore clients are clearly happy with the fees we charge and see it to be an equitable rate for the quality of service we deliver.

Whether a broker does, or does not, charge a fee is down to their individual business model and how they service their clients; a long-established firm with more qualified/experienced advisers, backed up by an office support team, is a more costly business model than a newly qualified one-person start-up. As long as the client is aware of the fee structure and the costs they are likely to incur then it is down to them to decide if a fee is seen as good value. The way brokers get paid is via a procuration fee from the lender when the mortgage is completed; this is normally a percentage of the loan amount, an average fee being about 0.35% of the loan. So, giving advice on very small loans is actually going to be costing the broker money, unless they are charging a fee. The alternatives are to stop offering advice to very small mortgages, or having "high pressure" selling of other services to make the case financially viable. Neither are options that most brokers would like to force upon their clients. The scale of brokerage fees, like any business, is driven by the cost of running that business. If the costs rise then you have to either raise your fees (as you can't impact the procuration fee you receive from the lender), or take the hit and earn less. The cost that most brokerages struggle with is the regulatory charges; paying for the FCA, FOS and FSCS. These bills seem to rise and rise each year, well over the cost of inflation, and so are the main triggers for brokers having to increase fees, far more so than energy or fuel prices. At Carl Summers Financial Services, we have a maximum fee of £495 currently, but that is only charged for more complex cases, with a typical fee £395. We may even charge less for a particularly simple transaction. Clients pay our fee at the point of making the formal mortgage application to the recommended lender; the costs of the initial meeting, research and even approaching the lender to check the client passes their credit score, is all done at our cost.

There is no need for brokers to charge fees for standard purchase and remortgage cases as the lender pays healthy procuration fees already, so in my opinion brokers that charge fees on top are either greedy or not doing enough volume to operate on a fee free basis. I believe that the majority of buyers who paid a fee for mortgage advice did so because they were unaware they could get the same outcome for free from a fee-free broker and I suspect over time fee-charging brokers will see a big reduction in enquiries.

As specialists in Self Employed Mortgages, we do charge a broker fee for our services. There's a lot more work involved compared to sourcing a mortgage for an employed applicant. So we feel our broker fee is entirely justified. In my opinion, fee-fee brokers devalue the service they provide. It's a race to the bottom, born of either being a generalist broker, not having any other point of differentiation, or both. For us, it's just not economical to work on a small deal without a fee, especially when you consider the cost of acquiring the customer in the first place.