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Something to Consider When Deciding on Your Mortgage Broker

 

When employing the services of a mortgage broker or advisor it is vital to get the right one. There are many broker firms, and they all have their own company practices. Luckily they need to be authorised so there is protection for their customers. However, as with all services you employ you will want the one that is the most suitable for your circumstances. One of the variables in your choice of mortgage broker will be how they are paid, and here I have given you a breakdown of those methods and why I like or dislike the choices available.

Fee Charging Brokers

These brokers will charge you a fee for their service, and that fee can be up front or paid on commission. Their rational for this is that if they are not concerned about the commission a lender pays to them, then they are far less likely to be swayed in their choice of the lender they advise you to use. This could indeed be a valid argument, but I believe it would only hold water if they gave you the commission from the lender. I don’t believe you should be paid twice for the same work, and this makes me steer clear of this kind of service.

Commission From the Lender

These brokers usually earn all their money from a percentage of the mortgage total, though they may receive a bonus from big companies. Mortgage companies pay different percentage rates to brokers depending on the various types of mortgage, and as a rule the higher percentages are paid for the mortgages that earn the lender the most money i.e. with the highest interest rate. You need to tread carefully, and make sure that you are being offered the product for the right reason. Ask why a broker has chosen a particular deal, and to look at some other companies they have looked at.

Monthly Salary Plus Bonus

These types of companies will pay their brokers a nominal monthly salary, which they are able to increase through big bonuses. The bonuses are usually target driven by the value of sales or the amount of mortgages completed.  If you are going to use this type of company, be aware that they usually have a big turnover of workers and very few retained customers. The staff works under a lot of pressure from management to complete any deal, and the companies themselves are often very relaxed with the regulations put in place to safeguard the public. Unfortunately,  some people in this type of company put the value of the money they earn before the suitability of the mortgage for the customer.

Deciding on a broker involves more than discovering how they are paid, but it is something to consider. Remember that some brokers you pay a fee will continue to give you their service after a one off payment, and will help you with a lot more advice than just your mortgage. Not all brokers who earn their money by hitting targets believe that the target is everything, and commission paid brokers generally give you exactly the service you want. However, my preference is definitely for a commission earning broker as they rely so heavily on their customers returning.

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