How much does a BTL mortgage broker charge?
How much does a mortgage broker cost?
One of the major downsides of using a buy-to-let mortgage broker is that invariably their services are not free. Most mortgage brokers charge a fee. This is to cover the time taken for advising you the landlord as their client and also the costs of administering the buy-to-let mortgage application. This fee will vary from mortgage broker to mortgage broker and also depends on whether a landlord is taking out more than one buy-to-let mortgage and the size of that mortgage. Typically a fee would be anything from £150 to £500.
BTL mortgage brokers can afford to be flexible with their fees because they often receive what is called a procuration fee from buy-to-let mortgage lenders. This is effectively commission from the mortgage lender for selling one of their BTL mortgage products. It is well within a landlord’s rights to find out how much this procuration fee is, because a buy-to-let mortgage broker will normally receive a procuration fee, it means that they can often be flexible about how much brokerage fee they charge a landlord.
This is something that it is useful for landlords to be aware of, especially if a landlord may be buying or remortgaging several residential investment properties at one time. In this case a landlord should look to negotiate with a buy-to-let mortgage broker to pay a reduced fee or in the case of a portfolio of buy-to-let properties for them to waive their fees altogether.
Is it possible to find a FREE mortgage broker?
It is possible for landlords to find mortgage brokers that provide a fee free buy-to-let mortgage broking service.
Some mortgage brokers will not only NOT charge a mortgage brokers fee, but they also share some of the commission or procuration fee as it is called in the industry for selling a buy-to-let mortgage product with a landlord. This means that a landlord will actually get some cash back from buying a buy-to-let mortgage. For example MoneyBack mortgages.
One thing to be aware of when using mortgage brokers that don’t charge a brokers fee is that they have to earn their money somehow. This means that these buy-to-let mortgage brokers are more likely to recommend a mortgage product to a landlord that pays a larger procuration fee. This might not always be the best BTL mortgage product for a landlord.
Landlords no longer in the ‘driving seat’
The other downside of using a buy-to-let mortgage broker is that a landlord is taken out of the ‘driving seat’ in respect of pushing their BTL mortgage application forward.
A good BTL mortgage broker will do all the chasing for a landlord, ensuring that the lender processes the mortgage application quickly and efficiently. A bad one won’t and a landlord can find that the BTL mortgage broker becomes the ‘piggy in the middle’. The landlord not being unable to speak directly to the mortgage lender whilst the mortgage broker appears incapable of stirring the BTL mortgage lender into action.
Do you want to search independently or go direct to a buy-to-let mortgage provider instead.
Financial Services Authority (FSA)
What is perhaps most shocking to landlords is that most Buy-to-Let mortgages are not regulated by the Financial Services Authority (FSA). Most of us have heard of the Financial Services Authority (FSA). It was established by the Government to protect the interests of consumers and it now regulates a whole host of financial products from pensions to residential mortgages.
However, at the present time, buy-to-let mortgages are not regulated by the Financial Services Authority (FSA). This is because they are classed as a commercial product. The assumption is that people operating in this sector are ‘commercially aware’ and do not need the same level of protection. This means that someone without qualifications or experience could set themselves up as an adviser and if they do not give you the landlord correct advice you will have no comeback with the Financial Ombudsmen Compensation Scheme.
Many brokers are registered with the FSA because they sell other products that require registration. Therefore, Property Hawk would always advise landlords to check with a mortgage broker first that they are regulated. Whilst this in it self will not protect a landlord when buying buy-to-let mortgages it does indicate that the broking company is probably not a ‘bunch of cowboys’ & that they are likely to be a responsible organisation.
There is a trade body called the National Association of Commercial Finance Brokers NACFB which some mortgage brokers belong to. Membership is voluntary and it sets out guidelines for its members to operate within. However, they have no direct powers to act in the consumer’s interest against anybody that breaks this code.