Choose the right mortgage broker

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by Kay Murchie

The Financial Services Authority is investigating mortgage brokers. It seems they could be selling more costly sub-prime deals with higher commission when those borrowers could be eligible for a cheaper product.

Some brokers would generally charge around 4% - £4,000 on a £100,000 loan, however 10% is likely on smaller loans. These expenses are usually in addition to valuation, legal fees and stamp duty. It is therefore crucial to select the right broker and enquire how much money they are making from you and if they are informing you of the full range of mortgages on offer.

Brokers make money in 3 ways. In addition to the fee, they receive commission which is known as a procurement fee, by a building society or bank lending you money – which gives them two profits for one job. They also receive money from selling you insurance.

A recent study from Moneyfacts, the data analyst, shows that commission paid on standard mortgages has rocketed by 140% in the last decade, primarily because the average mortgage has risen from £54,000 in 1997 to £130,000. The positive is that many brokers are considering the fee-free option and borrowers could save several thousand pounds by avoiding mortgage brokers who charge large fees.

The brokers charging the highest fees generally do not give any advice on the best available deals.