How mortgage brokers get paid
Mortgage brokers are paid in two ways, sometimes together: a fee paid by you, and commission paid by the lender (a procuration fee) when the mortgage completes. Some brokers are fee-free and rely only on lender commission; others charge a client fee as well. Lender commission does not change your rate or get added to your loan. A regulated broker must disclose how they are paid before you commit to anything.
The two income streams
The first is lender commission, known as a procuration fee: when a mortgage completes, the lender pays the broker a small percentage of the loan for introducing the business. It comes from the lender, not from you, and it does not affect your rate. The second is a client fee charged directly to you for the broker's advice and work. Some brokers take only the lender commission and advertise as fee-free; others charge a client fee on top, particularly for more complex cases that take more time.
Fee-free is not always cheaper overall
A fee-free broker can be excellent value, but a broker who charges a fee can still leave you better off if they secure a lower rate or place a case another broker could not. The honest test is not whether there is a fee, but whether the total outcome, rate plus fee, is good and whether the broker is transparent. Be wary only of unclear or surprise charges.
Questions to ask up front
- How are you paid: a client fee, lender commission, or both?
- If there is a fee, how much is it and when is it due?
- Is the fee refundable if the mortgage does not complete?
- Can I have the fee disclosure in writing before I proceed?
Common questions
How do mortgage brokers make money?
Two ways, sometimes together: a fee paid by you, and commission paid by the lender (called a procuration fee) when the mortgage completes. Some brokers are fee-free and rely only on lender commission; others charge a client fee on top. A regulated broker must disclose how they are paid before you commit.
What is a procuration fee?
It is the commission a lender pays a broker for introducing a completed mortgage, usually a small percentage of the loan. It is paid by the lender, not added to your loan, and it does not change your rate. It is standard across the market.
Is a fee-charging broker worse value?
Not necessarily. A broker who charges a fee may still save you more by finding a cheaper rate or a lender that will lend, and complex cases take more work. What matters is transparency: knowing the fee, when it is payable, and whether it is refundable if the mortgage does not proceed.
What should I ask about fees?
Ask how the broker is paid, the amount of any client fee, at what point it is due (on application or on completion), whether it is refundable, and whether they also receive lender commission. A good broker answers all of this clearly and in writing.
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Founder, MortgageExplained
Adam spent over eight years as a mortgage adviser at Just Mortgages, with further experience in commercial finance. He is CeMAP and CF qualified. He built MortgageExplained to do one thing well: explain mortgages in plain English, so you know where you stand before you speak to a regulated broker. Every page on the site is written by Adam.
Last reviewed by Adam Parker