Mortgage broker - am I being charged too much

[BoBoo]

Hi.

We've just found out that we have to move out of our house which we've been renting, and love, in November. It seems like it might be the right time for us to buy so we're frantically looking for houses and looking into getting a mortgage.

We met an adviser today who told us that she would charge us 3% of the mortgage. I think we would be happier having someone take care of all the negotiating for us as we'd like everything to go through as quickly as possible but am not sure if this kind of fee is standard? We are in South East London and went with an adviser connected to an estate agents we have had really positive experiences with previously. Grateful for any advice.

Hmm. We have used a financial adviser for mortgaging a couple of our properties and she has always had her commission from the lender, and we have never paid a penny directly to her. I would be very wary tbh. 3% of the mortgage is a lot - the same as the stampt duty on a £499k house. Ouch.

Ditto - commission paid by the lender, not by us. It was great having someone fill out all the paperwork etc for us. I think he actually made more of his money from selling the critical care insurance etc, which 5 years ago I wouldn't have bothered with, but as I am now the main breadwinner with DC I went with his recommendation. Will look again in a couple of years but nice to know for the moment it is taken care of.

All IFAs should get their fee from the lender, not you. Sounds fishy to me.

not sure what teh standard rate is but if you are paying the adviser then you at least know that they truly are independent. teh whole business of "I"FIs being paid by the lender makes a mockery of the idea of independence. but if you go this route and pay directly go to several to make sure you're getting a decent deal.

DON'T use an adviser associated with the agency you are thinking of buying through this time - although in theory they are supposed to keep your info confidential, it is possible they will pass info about your finances onto the connected estate agent - who will then try and bid you up because they know the absolute maximum you can afford to spend. Unethical but it definitely happens.

3% sounds like a ridiculously huge amount of money. Shop around, would be my advice.

I don't think you should be paying anything either, all brokers I know get their commission from the mortgage company rather than the customer.

It depends. If you have any unusal or complex situation then paying a mortgage advisor to sort them out can be worth the money. But we're talking large offshore incomes, landed gentry type people here (my friend's a broker and she charges 1.5% and gets a commission from the lender but she really works for that money dealing with Sir So-and-so and CEOs of FTSE 100 companies who have very complicated tax dodger situations)

However, if you're looking for a standard mortgage with reasonable deposit then I'd have a look on Money Supermarket or similar for who's offering a good rate and go to them directly.

Or if you're less confident go to Halifax, Santander and Nationwide who are the biggest and see their mortgage advisors who will take you through the process and give you quotes (don't make an application or you'll bugger your credit score) and then go with the one with the best deal.

If you are looking for something non-standard (large loan to value, small deposit, unreliable income etc) then a mortgage advisor might be worth it. But not one tied to the Estate agents. You want someone independent and much cheaper!

Thanks for all the advice. Seems like I need to start looking elsewhere. She's not with the agents we've found the house we like with so there's no conflict there but I was a bit dubious about the amount of money it was going to cost. The estate agents is in a pretty plush part of London so it may just be that they're used to forking out that kind of money without question.

We have a reasonable deposit and nothing really unusual and obviously trying to keep costs to a minimum. Will do some more research.

Deffo check out moneysavingexpert (Martin Lewis) then - he's got some fantastic info and deal-search engines.
Good luck!

There was a report in the paper last week that said that you can more often get a better deal than a mortgage broker by going direct to building socities/banks.

Most mortgage advisors will advise a 2/3 year fixed deal as they make the most money from these plus money again to renew.

It is always cheaper in the long run to get a tracker mortgage if you can cope with some variation in the interest rate. Look up money saving expert.

Um it's not always cheaper to get a tracker. Particularly with the current tracker rates you could find your payments very expensive if interest rates go up. A tracker may be cheaper but as we can't see the future there is no certainty.

You have to think about what's best for you. Most mortgage advisors at the banks will offer to recommend the most suitable mortgage from their range and will be regulated by the FSA so if the quality of the advice is poor and you suffer a financial loss you have a course of redress.

Sorry all academic research shows that over a 20 year period that trackers are cheaper, mainly because there are no fees for each time you re-mortgage. I'm not saying they are the best for everybody (if you mortgage yourself to the max they are not for you) but they are cheaper over the term of the mortgage.

Use the internet to find the cheapest deals.

That might previously have been the case but doesn't mean it will be true for the future.

These days just about all mortgage deals come with a fee, including variable. Admittedly in the past you usually only paid a fee for fixed rates but that's not been the case for a few years now.

You only pay a fee once for a lifetime tracker. You pay a fee each time you re-fix your mortgage.

It's true you only pay one fee for a lifetime tracker but these are tracking much higher above boe base rate or the bank's svr at the moment than they were a couple of years ago. If rates go up to the same levels as a couple of years ago (5%) you're looking at rates around 7% whereas the rate would've been more like 5.5% previously. You also pay one fee if you go for a fix and then stay on the svr.

But we are living in unprecidented times so my point really is that no-one knows what will be best. I was querying your use of the phrase "It is always cheaper in the long run to get a tracker mortgage" and suggested "may be cheaper" is more accurate.

But it is all semantics and nobody has a crystal ball

Sorry academic research is obviously pointless

I do hope not... seeing as I am a grad student. But I also ran a mortgage brokerage for a long time and was fsa licensed which is why I'm a bit of a pedant about these things.

My intention wasn't to upset you. Not sure why you're trying to read things into my posts that aren't there?

Oooh - heated mortgage debate! Thanks for all the opinions though - it's helpful to see what everyone thinks as this is something I know absolutely nothing about.

So I'm not thinking I'm going to give a broker a miss completely. I would reconsider if it would speed up the whole process, but as all the documentation would come from us anyway wouldn't it just be adding a link to the chain?

Having a broker will not speed up the process just another link as you said. Main thing to speed the whole thing up is to get a decent solicitor.

JustAnotherManicMummy sorry but I just think that the majority of people have been hood winked by alot of mortgage brokers into deals that don't suit them and that are worse off. There is severe asymmetric information in this market between the customer and the seller of mortgages.