How much do mortgage advisors charge?

May 30, 2024 by Alan

Mortgage Advisors

If you’ve been considering becoming a mortgage advisor, it’s understandable you might be curious to discover what they charge.

In this article, we’ll take a deep dive into everything you’d like to know regarding mortgage broker fees, including overall costings, payment types and more.

Mortgage advisor payments – understanding fees and commissions

The price of qualified mortgage advice can vary considerably from £400 to £500, to absolutely no fee whatsoever when the mortgage advisor instead receives a commission from the bank or lender.

In some cases, the advisor will charge a fee or a commission. However, others receive a commission on top.

Those enlisting their services are always entitled to know how their advisor is paid in advance. Clients can ask them whether they will take a fee from them, a commission from the lender or bank, or both.

Mortgage advisors should clearly state how much their commission or fee will be, and confirm that fees are only payable if the mortgage agreement goes ahead, but customers should always request confirmation.

Some advisors give their clients a choice of letting them take a commission or being paid a fee.

Fees or commission – which is best?

No major disadvantage exists to a mortgage advisor being paid by commission rather than a fee.

An advisor who is paid by commission should still provide independent advice on the most suitable mortgage product for their clients, but consumers are advised to ask for confirmation.

It’s important to note that a mortgage advisor is independent rather than tied, as a tied provider is obligated to only provide guidance on a specific range of mortgage products.

In some instances, it can be worthwhile for clients to pay a fee upfront if it will secure them the best deal possible; for example, when a broker who finds a good deal will not pay a commission, or not a high enough commission to justify the work. In cases where the mortgage deal provides long-term value, borrowers can offset the cost of the mortgage advisor’s fee over time.

How much commission does a mortgage advisor receive?

Most lenders will pay advisors a commission of around 0.35 per cent of the total loan. For example, with a £100,000 mortgage, a standard commission paid by the lender would usually be £350. The client doesn’t pay this, and it won’t impact their costs.

How large a fee should an advisor charge?

A mortgage advisor’s fee can differ from broker to broker. It can range from around 0.35 per cent of the loan size, matching standard commissions, or be as much as 1 per cent.

Mortgage advisors should always confirm the fee they charge with a quote in writing. Clients should always request written confirmation should the deal fall through, so they will not be required to pay any fees.

The aim of using a mortgage advisor is for clients to secure a mortgage deal that means they spend less money in the long term. To this end, advisors can be called to justify the fee that they charge their clients.

Are mortgage advisor fees worth the cost?

A mortgage advisor’s fee can be quickly recouped if the option is even just a little better than the second-best available offer. For instance, if a client borrows £150,000 with an interest rate of 5 per cent, their monthly repayments work out as £877, and they would repay £263,162 in total over a 25-year period.

If their mortgage advisor could improve this by as little as 0.1 per cent (providing a rate of 4.9 per cent), then they’d repay £868 each month and £260,411 in total, saving them £2,751 overall.

Even with a mortgage advisor’s fee as high as £500, the client would still save £2,251, and they’d recover the £500 fee in just a few years.

It’s worth noting that this example is only illustrative, but demonstrates how just a small difference in the interest rate charged over time can create an opportunity for significant savings, making the advisor’s fee worthwhile.

Are you interested in high earnings with a career as a mortgage advisor?

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