A common question that people have is “Are mortgage brokers free?” The answer is Yes & No. It depends on the mortgage broker and the situation.
Some mortgage brokers are free, in fact many are free. This is because the lender will pay a commission for the broker settling the loan. However, other specialist mortgage brokers will charge a fee. Furthermore, some mortgage brokers are free in situations such as a standard home loan but then charge a fee in other situations, usually if the loan amount is small and/or the loan is complex and time-consuming to arrange. Cash back brokers charge a fee but then give you back the commission. The fee structure of these brokers makes the fee similar to the amount of commission that the broker would have received.
A specialist mortgage broker or finance broker is someone that has specialist knowledge in a certain area of finance. This could be a specialist development finance broker. They have specialist knowledge in that area, meaning that you are most likely to get a better result than if you just use a run of the mill broker. However, these mortgage brokers are often not free. They can charge an upfront fee that is usually a small percentage of the loan amount.
Mortgage brokers are usually paid a commission from the lender for settling the loan, the commission is a percentage of the loan amount. If the loan is small then the commission amount will also be small and not worth the time it takes to arrange the loan. A similar situation occurs if arranging the loan will be time-consuming and complex. In this case, the mortgage broker may charge a fee to compensate them for the time to arrange the loan.
Cash back mortgage brokers give you back the commission but then charge you a fee (of a similar amount to the commission) to arrange the loan. Some people like this approach but it really does not make much difference to the client. In fact it can just cloud the fact that the broker is not really doing a great job for the client.
A good mortgage broker franchise should have a great team of mortgage brokers. Usually they don’t charge to arrange your loan but if they need to, they will tell you what the cost will be in advance!
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