Truth About Your Property Brokers Fees for your Investment

Truth About Your Property Brokers Fees for your Investment

It is not generally known that mortgage brokers are paid by the
lenders in the form of a marketing allowance (or procuration fee).
This will be anything from 0.25 to 1% of the mortgage amount
and it is paid regardless of whether the broker charges the client a
fee or not. The reason this is not generally known is because
brokers do not generally tell you! And while they are now obliged
to reveal this fact (in the KFI) to residential borrowers and to
disclose the full cash amount received, they will not necessarily do
this for the BTL borrower (see above). The point to remember is
this: if you pay your broker a fee he is paid twice!
In addition to a fee payable on completion, some brokers also
charge an administration fee, payable immediately and usually
non-refundable. This can be anything from £100 to £500. If your
broker feels the need to charge a fee before doing any work for
you, how confident can he be that he will secure a mortgage?
So what should you do? The obvious answer is to find a broker
who does not charge a fee. If you can’t find one ask how much
the broker will receive from the lender and negotiate on any fee
he wishes to charge you. If the broker is reluctant to discuss these
matters look for another broker.

WHERE TO FIND A BROKER
The obvious source is local and national newspaper advertising.
There is, however, an organisation called IFA Promotions that
carries details of independent financial advisers in your area.
Their website is www.unbiased.co.uk. In this case you will know,
before you start, that your broker is independent.

WHAT TO ASK
Wherever you find your mortgage broker, there are some basic
questions you need to ask before you commit yourself, body and
soul, to their financial advice:
- Is the broker authorised by the FSA to conduct mortgage
business?
- Does he have access to the whole market?
- Does he provide advice?
- Does he charge a fee?
- What procuration fee will the broker receive from a lender?
- Does he charge an up-front admin fee?
- Does he use a packager?
If the answer to any of the first three is no and the answer to
either of the last two is yes, you should definitely go elsewhere.