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How do mortgage brokers get paid?

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 6, 2023

How Do Mortgage Advisors Get Paid?

An experienced mortgage broker can help you get in-depth advice and expertise in the housing market to get the best mortgage deal possible, however, each mortgage broker offers a different level of service and will not have the same fee structure.

While some mortgage brokers are paid a fee, others receive a commission from the lender or a combination of both. So, who is responsible for paying the fees or commissions?

This comprehensive guide will explain exactly how mortgage brokers make their money.

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How Does A Mortgage Broker Charge?

Mortgage brokers have various pricing structures, and their fees will vary significantly. Every mortgage client’s needs will be unique, some of which may be more complicated and time-consuming.

Because of this, the average mortgage broker fee is usually charged to cover the costs of consultations, negotiations, and various other services. A reputable broker will always be upfront about their mortgage broker fees.

While there are no standard fees for mortgage brokers, you can expect the pricing structure to include the following:


A fee-free mortgage broker does not charge applicants mortgage broker fees; instead, they earn money by charging a commission to mortgage lenders. This pricing structure is cost-effective, and you receive expert mortgage advice at no cost to you.

Hourly rate

Some mortgage advisers will charge you an hourly rate, which can quickly become expensive, especially if your application and circumstances are a little complex. Before agreeing to an hourly rate, ask your mortgage broker for an estimate of the hours they will charge you.

Percentage fee

Using this pricing model, a mortgage adviser charges a percentage of the mortgage taken out by an applicant. The percentage a mortgage broker charge is usually between 0.5% and 1% of the mortgage loan.

Fixed fee

Mortgage brokers offering a fixed-fee service will typically charge you a flat fee at a fixed rate. The average broker fees can range between £300 and £500; however, some can be much higher. Most mortgage brokers can charge the broker fee before or after the completion of the mortgage application.

Combination fee structure

The combination fee structure is when mortgage brokers receive a commission from the lender while charging you an hourly rate.

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What Do Mortgage Broker Fees Cover?

Mortgage advisors and brokers charge you to deliver a service. These services include:

  • Comparing the whole-of-market to find the best mortgage deals.
  • Overseeing the entire mortgage application process.
  • Negotiating the terms and conditions of your mortgage loan.
  • Comparing various mortgage products to suit your needs.


How Do Mortgage Advisers And Brokers Make Money?

Mortgage advisors and brokers operate independently and do not work for banks. While some may earn a salary, independent brokers and advisors will make their money on a commission basis.

Commission and procuration fees

The mortgage lender will pay a broker a commission after closing the mortgage loan. This is also known as a procuration fee. Procuration fees can vary, and it does depend on the mortgage lenders.

The percentage a mortgage lender would pay a mortgage advisor will typically be between 0.3% – 1%. For example, if a mortgage lender’s procuration fee is 0,50% and your mortgage is for £150,000, your mortgage broker will receive £750 in commission from the lender.

Some larger mortgage brokers charge you an upfront fee or a commitment fee. In most cases, brokers and advisors who apply costs do so to cover enormous overhead costs, including employee salaries and office costs.

Referral fees

Some lenders, financial companies, and banks offer an incentive through a referral fee to mortgage advisors and brokers. Like paying brokers a commission, lenders will pay mortgage brokers a percentage of the mortgage loan amount.

Mortgage brokers offer the same incentives to an estate agent for recommending their services.

Because mortgage brokers and advisors have a preferred list of lenders, it does not mean they are always paid a commission or a referral fee.

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What do independent mortgage advisors charge?

Most independent mortgage brokers and advisers offer first consultations as free and will charge you a flat fee or a fixed rate on top of earning a commission.

Flat Fees

The average flat fee an independent mortgage advisor will charge is £500. Typically the range can be anywhere from £300 to £600.

The benefit of being charged a flat fee is knowing exactly how you will pay. The drawback of a flat fee is that this fee usually has to be paid upfront.

Fixed Rates

Most independent brokers’ fixed-rate fees come from a percentage of the overall amount of the mortgage loan. Their broker fee works exactly the same as a procuration fee, where the percentage amount does not exceed 1%.


Are broker fees refundable?

Some mortgage brokers offer a refund on their broker fees, while others may not. Before signing an agreement with your mortgage broker, ensure that they have a refund policy in place and under what circumstances they will refund you.

Brokers and advisers will refund their broker fees if you fail to secure a mortgage loan. Some mortgage advisors will happily include the refund in your agreement if it is not stated in your contract.

You have the right to file a complaint if you feel that the mortgage product or lender needs to meet your individual needs or are not completely satisfied with the level of service you received. You could receive a refund in most cases, but it depends on the broker.

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Which Mortgage Fees Do You Pay?

While some mortgage brokers and advisors do not charge you a fee, there are different broker fees you need to be aware of. You can pay the mortgage broker fees upfront or add them to your mortgage and have a mortgage lender pay them.

Adding the broker fee to your mortgage is a better option if you do not have the money to pay the upfront fee. However, you will be charged interest on those fees, which will be more expensive than if you paid upfront.

Most mortgage brokers and lenders charge additional fees that include:

Arrangement fees

Depending on your mortgage loan size, some lenders will charge you an arrangement fee. Instead of paying it upfront, this fee can be added to your mortgage loan amount. The drawback to adding the arrangement fee to your mortgage loan is the higher interest rate.

Arrangements charges are for a mortgage product, also known as a product fee or a completion fee and can cost you approximately £2000.

Valuation fees

Mortgage valuation fees (not to be confused with a property survey) cover the costs of sending a surveyor out to the property. The lender’s survey is to determine the property’s market value. You can expect to pay between £250 – £1,500, depending on the size of your property.

Booking fees

Booking fees are charged by specific mortgage lenders to “lock in” your mortgage loan, specifically with fixed interest rates. They are also called reservation or mortgage application fees and are typically nonrefundable. The booking fee rate will depend on the amount of your mortgage loan.

Higher lending charges

Not all mortgage lenders will charge you a high lending fee. This fee only applies when lenders can not cover the costs, you have a low down payment, and they cannot recover the money after selling your home.

Legal and conveyancing fees

When buying your home, you will need a solicitor to handle any legalities. Your legal fees will vary depending on the services rendered by the solicitor.

The services can include:

  • Conveyancing.
  • The technical term for the process of transferring the property title onto your name.
  • Ensuring that all the required documentation is up to code and in order.

If you are remortgaging your home, some lenders will refund the costs of your legal expenses and the conveyancing fees. This could be an upfront payment or an amount you would pay after completing the transaction.

Exit Fees

If your mortgage loan is paid in full before the end of the agreed term, lenders will charge you an exit fee, also known as a discharge and mortgage release fee. Depending on who your provider is, you can expect to pay up to £300.

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When It May Be Necessary To Pay A Mortgage Broker

Mortgage brokers typically charge you a fee if they do not receive a commission from the lender. This usually happens when mortgage lenders are finance lenders (not a bank) and require the broker fee to be added to your mortgage amount.

If your mortgage declines or change your mind after being pre-approved for a mortgage loan, your broker could charge you a cancellation fee. Switching lenders could also result in you paying fees, and your broker may be required to return the commission they earned in some instances.

The best way to avoid unnecessary fees is to ensure you receive a list of fees from mortgage advisers or brokers before proceeding with your mortgage loan application.



Can a broker charge clawback?

Mortgage brokers will often be charged a clawback fee from banking institutions and lenders if you should pay off or remortgage your home within two years. Banks usually retain the full broker commission, and prepayment costs vary from lender to lender. It is important to note that brokers and banking institutions can only enforce clawback clauses if they are written and signed by both parties or when the bonus is awarded.

Are mortgage brokers FCA regulated?

Most mortgage advisers and brokers are regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). An approved mortgage qualification is required for each advisor to provide mortgage advice.

Do mortgage brokers have hidden fees?

The FCA and the PRA regulate mortgage advisors and brokers who would disclose their broker fees.

Are mortgage broker fees refundable?

Brokers who charge upfront fees and get paid through lender commissions will offer you a refund if you fail to get a mortgage.


Final Thoughts

While many reputable mortgage brokers and advisors can help you get the best possible mortgage rate and deal, not every broker has the same pricing structure. Most mortgage advisors and lenders make their money through commissions, and others charge you a fee.

Regardless of their pricing structure, you should choose a mortgage advisor that works on your behalf. Some brokers do not require you to pay their upfront fees until your mortgage application journey has been completed, while others charge an hourly rate.

To avoid being caught off-guard, contact us now and ask your mortgage broker to outline the fees before signing the agreement.

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