As a mortgage broker do you charge fees? And if so, how much?
This is a debate that constantly raging in my communities.
I’m going to talk to you about the different ways in which I believe mortgage brokers should charge.
You’ll find out also how new brokers should charge and how that compares to how experienced mortgage brokers should charge.
Finally, we will look at how the industry should behave when it comes to charging fees for our services.
To understand mortgage broker fee structures we first need to understand how mortgages have changed.
What has changed in the mortgage industry?
If you are a mortgage broker you may remember pre credit crunch days. Then it was extremely easy to get mortgages.
A buyer looking to buy a property below 75% of the property’s value, nine times out of 10, didn’t even need to have bank statements. You didn’t even need to have proof of income.
Even if you were self-employed, it would be easy as anything because you would just sign a piece of paper to say, I’m self-employed I can afford it.
And the bank would give you the money.
Then the credit crunch happened in 2009, and the industry massively changed.
The banks now want everything and the kitchen sink. So your client needs to supply their credit report, bank statements, company accounts, payslips, everything in order to be able to assess their circumstances.
For the mortgage lenders we carry the compliance, the risk, keep track of ongoing issues, and the potential of complaints. And with ever changing criteria, we have to do all the hours of research and professional development.
You have to do what is right for your business, but as an industry, to be truly valued we should charge fees.
Gary Das
You wouldn’t catch an accountant or solicitor working for free, they charge for every element.
The fact we get a proc fee means we can charge the client less. The proc fee we get from the lender only comes on completion.
If we don’t charge and client cancels, we don’t get paid despite 20-30 hours of work.
The challenges posed by the mortgage process
Around 2016, 2017 I was charging my fee on application. At that time my fee was £1000.
The number of enquiries coming in was increasing because of the Social Media posts that I was doing.
But I ran into problems because the mortgage broker process had changed. The amount of documents a client needs to supply has increased drastically.
You’d speak to a client, and before you can give an indication of an interest rate, before you even want to open your sourcing tool, before you even want to do a fact find you need to get documentation.
The difficulty came about that clients were taking a long time to return their documentation.
At one point my PA was chasing around about 40 clients who were just dragging their heels on getting documentation back to us. And I needed the documentation in order to be able to do an assessment.
Any research you do up until that point, like interest rate, potential loan of value, deposit amount, is irrelevant. Until you get the documentation in, you can have a rough idea is whether it’s going to work or not, but you don’t know.
So my PA had 40 clients to chase before I could start any work. She was chasing for documents and they were dragging their heels.
Mortgage brokers can solve the client documentation problem
How to get a financial commitment from the client
I spoke to my business coach at the time and he was like,
“Well, Gary, What’s your fee?
You’re charging £1000. So why don’t you charge £250 upfront as an instruction fee?”
“Why don’t you turn around to clients and say, Hey, look, I’ll send you an email with a list of all the documentation. We’ll give you a call in two days time, And at a point, if you’re happy with everything that we do, we take a instruction fee of £250”
And the whole point is that from there on in, they are financially committed.
Guess what happened?
They’d either bugger off because they didn’t want to pay the 250 quid, which opened up more space in my diary for more people. Or they got their documents back within seven days, because all of a sudden, they had an incentive because they’d already put money into the process.
By charging an application fee I was now dealing with serious clients.
Charging an application fee filters out legitimate clients from time wasters.
What if you can’t get the client a mortgage?
Now when I mention taking an upfront fee a question I often get is, “what happens if you can’t get a client a mortgage? What happens if they’ve got a CCJ, missed payments, or this is not something you can do?”
Well, you don’t just take their money. You tell them what they need to change. You make sure that they go ahead and do it.
And in three, six, or nine months time, once they put the things right, or saved a bit more deposit, you then go again. Providing nothing additional has been chucked in like an extra CCJ or missed payments you don’t charge them again.
And then you charge the balance of your mortgage fee on application.
So for me that means £250 up front, and a balance of £750 on mortgage application.
Now for some brokers that sounds like a lot, a thousand pound for a self-employed mortgage. For others, that won’t sound like a lot at all, but that’s going to depend on where you are positioned in the market.
Where should you, as a mortgage broker, position yourself in the market?
Where you position yourself in the market is going to have a big impact on the advisor fees you charge.
We are niche. We are experts in my brokerage in terms of what we are do. We’re not just experts, we are award-winning at what we do. We are the award winning best small broker of 2019.
So you can be Lidl, you can be Tescos. You can either be the Sainsbury’s, John Lewis or Marks and Spencers.
It just depends where you want to position yourself.
And if you are positioning at the bottom of your industry, not mentioning any mortgage names that literally don’t charge a fee, but brokers leave all the time. They don’t invest in customer service.
The problem with the brokers that don’t charge fees is they don’t have the level of customer care and customer attention.
I believe that particularly in the larger organisations, I’m talking about the big corporates here, because the mortgage brokers are employees they are not as invested.
They’ve got too many leads and they’re not that bothered.
And actually they they’re the ones who turn around and say, “you can’t do that” because it sounds too complex. Whereas we, within Active, will do anything complex.
Does having a mortgage niche reduce your market?
I have an abundance mindset in the sense that where one client says no, another client says yes.
To use a medical analogy, I don’t believe that you should be a general practitioner, because a GP is someone who earns less.
You should be a consultant. And a consultant is somebody who charges more. They work in private hospitals. They are the best in the industry. And that’s because their knowledge is far superior to everybody else because they only do one thing.
The clients that I work with want results.
I know that I can afford to charge my clients more, which I can put more effort into the service that can enable me to recruit more PAs, to provide a better service, and to get them better and faster results.
Drop the scarcity mindset
The problem for most mortgage brokers is you have a scarcity mindset. You don’t focus enough. You try to do absolutely everything.
You want to be a mortgage broker. You want to be an equity release expert. You want to be a will writer. You want to be a protection expert.
It does not work. If you want to build a business that is going to be able to scale you want to provide the best possible service to your client.
Yes, you want to make sure that you don’t lose your clients to anywhere else. But if you want to build a business that is actually going to be award-winning and the best of what it’s going to possibly be, then you have to be a consultant, not a GP.
That then enables you to charge consultant fees instead of GP fees, and that enables you to put more into your customer service. That in turn enables you to get more results
So find a niche and become an expert in that niche
How to set fees as a new broker
When the credit crunch hit, my diversification was to move into life insurance. So from 2009, till 2015, I actually built a near seven figure life insurance, critical illness, income protection, health insurance and commercial insurance business.
At this time, I wasn’t doing mortgages.
In January 2016 I found a niche in getting back to mortgages through my own personal experience. I was moving home as a company director, with my wife being a self employed sole trader.
Self certified mortgages had been abolished in 2014 due to massive changes in regulation around affordability.
My own challenges in getting a mortgage prompted me to speak to 180 lenders to find an absolute plethora of things that are available for self-employed people.
I had the confidence in myself through that knowledge and that experience that I could start charging £500 straight from the off.
By March, June time, we started to get some real completions and got more of an understanding because you have to work on a case by case basis. I then started to test an increase of my fee to £750, and then to £1000.
Make sure that you are focusing on the most important areas within your business in order to be able to get your clients the best possible results.
You need to make sure that your skills and your expertise are focused when you start out.
As you begin to learn, develop, improve, and grow, you increase the fees that you charge to your clients. Then you begin to actually feel more valuable too.
As a mortgage adviser you doesn’t start off at £150 per hour. With experience fees go up.
It’s the same as footballers. The more their profile increases the more they earn. You know, you play in third division, versus Premiership, versus Championship, versus World Cup.
You’re on different amount based on how good you are.
It comes back to your specialism and comes back to your niche and comes back to how much you put yourself out there.
As you gain more experience and as you become a better adviser and broker, and as your specialism improves, then you increase your fees.
We charge anywhere from £500 through to £2000, depending on the complexity of the case each and every single adviser within my brokerage is an expert in a specific and particular area.
If you are a new mortgage broker, or just looking to up your game, get the Ultimate Strategy Call Script for Mortgage Advisers
- Ask these 3 VITAL rapport-building questions and build longer-lasting client relationships
- Discover your clients dominant problems and overcome them to position yourself as the consultant that will cure their pains
- Position your fee in a way that avoids resistance and open the door for future conversations about protection
When should you charge your fee?
Your job as a mortgage broker or mortgage adviser is to get your client their mortgage offer.
If the mortgage doesn’t go through after that point, that is not your fault.
If you get them a mortgage offer, your job is done.
Yes, you help them go through to completion. Yes, you chase the solicitors. Yes, you hold their hand.
But if something cooks up before they exchange, that is not on you because you got them an offer.
So the latest point you should charge a fee is at offer stage. You should charge an application fee because going through the point of application to offer is complex.
Find out more:
Which financial services mortgage network to use in the uk?
How mortgage advisers can gain CAS
Going self employed as a mortgage adviser
So to sum up:
As an industry, to be truly valued we should charge fees.
Key Points:
- Mortgages require much more specialist knowledge now than they did in the past
- Your fee will depend on where you are positioned in the market
- Your fees should reflect your level of experience and level of service
- Be an expert in your niche, not a general practitioner
- Charge an instruction fee to time wasters out from the genuine clients
I hope this inspires you about fees. I hope you gained some confidence from this.
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Feel free to reach out to me directly. If you have any questions, put a comment below, let me know what your thoughts and feelings are.
Have fantastic day.
