What does a mortgage broker do, and how are they paid?
A broker assesses your circumstances, searches lenders, recommends a product and manages the application. How they are paid determines whose interests the advice serves, which is the question worth asking first.
What they actually add:
Access. Some lenders deal only through intermediaries, so a portion of the market is invisible if you go direct.
Knowledge of lending criteria, which is the real value. Lenders differ enormously in how they treat self-employment, contract work, bonuses, recent job changes, adverse credit, lending into retirement, and unusual properties — flats above shops, non-standard construction, short leases, ex-local authority. Matching a case to a lender likely to accept it prevents the credit-file damage of repeated declined applications.
Paperwork and chasing, which matters more than it sounds in a chain.
Protection advice, which is also where commission concentrates.
How they are paid:
Procuration fee from the lender on completion, typically a modest percentage of the loan.
A fee from you, either flat or a percentage, sometimes charged on application and sometimes on completion.
Commission on insurance — life cover, critical illness, income protection — which can exceed the mortgage fee. This is not improper and it is a reason to be clear about what you are buying and why.
What to establish before engaging: whether they are whole of market, restricted to a panel, or tied to one lender — all legally defined terms; the total cost in cash, including any fee payable if the purchase falls through; whether protection advice is bundled; and whether they will tell you when going direct to a lender would be better, which good brokers do.
When a broker is most worth it: complex income, adverse credit, unusual property, buy-to-let and limited company structures, and a first purchase where process management has real value.
When to go direct: a straightforward employed applicant with a clean file and a standard property, where the best rates are frequently available directly.
UK-focused. General information, not financial advice.