Which advisers would you put your house on?

Some charge a fee, others earn commission. Emma Lunn asks who you should turn to for help in finding a home loan

To fee or not to fee? That is the question for the one in every two borrowers who use a mortgage broker to help them pick the right home loan from the thousands on offer.

Unlike a "tied" adviser, who works for just one lender, brokers can offer guidance on products from a range of providers. They'll scour the market for you and do all the administrative legwork in setting up the loan.

But this service - whether face-to-face or on the phone - usually has a price. Some brokers, such as Purely Mortgages, charge a flat £195 fee. Others - including Chase de Vere, Hamptons International Mortgages and Savills Private Finance - charge a percentage of your loan amount, usually between 0.3 and 1.5 per cent.

Say, having saved a £16,000 deposit towards a £160,000 home (the average UK price), you needed to borrow £144,000. With a "percentage" broker, this could mean a charge of between £432 and £2,160.

But not all brokers levy fees. Others earn money instead solely from commission, or "procuration", from the lender whose product they recommend and the customer buys.

Many fee-charging brokers also receive commission, though this is often rebated to the customer to reduce the fee.

In both cases, the sum involved is usually 0.3 to 0.4 per cent of the mortgage size, so a broker gets £300 to £400 commission on a £100,000 mortgage.

For specialist deals such as self-certification, buy-to-let or mortgages for people with poor credit records, the commission is usually between 0.5 and 2 per cent as more work is involved.

Fee-free brokers may sound appealing but they have their critics. Varying commission rates from lenders lead some to question whether the customer is recommended the best product for their needs, or one paying the best broker commission.

Also, some of these brokers work from a panel of lenders rather than the whole of the market, so the deals are limited.

"With a fee, you're not taking the same risk that advice will be influenced by what the broker earns in commission," says Ray Boulger, senior technical manager at John Charcol.

London & Country (L&C), one of the few fee-free brokers, denies the danger of biased service. It also asserts that this approach is good for the customer. "Paying a 1 per cent broker fee is equivalent to adding 0.5 per cent on to the rate of a two-year mortgage deal, so it can certainly have an impact on the overall value," says a spokesman.

Not everybody can make this system work, though. Purely Mortgages launched in summer 2004 as a fee-free broker but last month began charging a fee, blaming high loan- processing costs.

Some companies give you a choice of ways to find a mortgage. John Charcol offers either a flat £199 fee for telephone advice or a percentage for face-to-face guidance. Apply for a loan via its website and there's no fee to pay, but the service is limited to a 36-lender panel and there's no online advice.

In most cases, it is not possible to add the broker fee to the mortgage and it should be factored in when you are working out what you can afford.

Given his self-employed status, Keith Youens picked L&C to help him and partner Faye Hartley find a specialist loan to buy their home in Surrey in May. "We gave them all the information and they came back with a few different options."

The couple chose a tracker mortgage with Intelligent Finance at 0.49 per cent above the base rate until May 2007.

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Client Services Manager - Relationship Management - London

    £30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

    Recruitment Genius: Credit Controller / Customer Service

    £18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

    Recruitment Genius: Tax Assistant

    Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

    Recruitment Genius: Outbound Sales Executive - OTE £25,000

    £16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

    Day In a Page

    Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

    Celebrities call on David Cameron to take more Syrian refugees

    One young mother tells of torture by Assad regime
    The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

    The enemy within

    People who hear voices in their heads are being encouraged to talk back
    'In Auschwitz you got used to anything'

    'In Auschwitz you got used to anything'

    Survivors of the Nazi concentration camp remember its horror, 70 years on
    Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

    Autumn/winter menswear 2015

    The uniforms that make up modern life come to the fore
    'I'm gay, and plan to fight military homophobia'

    'I'm gay, and plan to fight military homophobia'

    Army general planning to come out
    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
    America: Land of the free, home of the political dynasty

    America: Land of the free, home of the political dynasty

    These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
    A graphic history of US civil rights – in comic book form

    A graphic history of US civil rights – in comic book form

    A veteran of the Fifties campaigns is inspiring a new generation of activists
    Winston Churchill: the enigma of a British hero

    Winston Churchill: the enigma of a British hero

    A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
    Growing mussels: Precious freshwater shellfish are thriving in a unique green project

    Growing mussels

    Precious freshwater shellfish are thriving in a unique green project