How much does a Mortgage Broker cost? 2023

What does a Mortgage Advisor (sometimes referred to as a mortgage broker) do? 

A mortgage application can be a daunting and time-consuming process, so if you feel like you need some help navigating it, you’re not alone. That’s where a mortgage advisor comes in - they’re qualified in helping you to get the best mortgage based on your situation. 

A mortgage advisor will be able to find out whether you qualify for a mortgage or not, and if you don’t, they’ll be able to advise you on what to do next. A mortgage advisor can also save you time by liaising with lenders on your behalf. 

In a nutshell, a mortgage advisor is tasked with getting your mortgage processed as quickly and efficiently as possible by liaising with key parties, including mortgage lenders, solicitors, and estate agents. 

How much does it cost to hire a Mortgage Broker? 

In the US, mortgage brokers make their money by charging a commission on your total mortgage. This is known as a loan origination fee. Usually, this sits at the 1% mark, though the total fee will depend on the value of the loan. For example, if you are borrowing $300,000 then you would need to pay your broker $3,000. 

Sometimes, the commission can be added to the value of the loan. However, with the added interest this would generate it would be cheaper to pay this upfront if you can.

What changes the cost of a Mortgage Broker? 

The price of a Mortgage Advisor can vary depending on several factors: 

• Administration fees

• Fee structure 

• Yield spread premium 

Administration fees 

Some mortgage brokers will add an administrative fee to their standard rate. If you aren’t happy with paying this, you should be able to negotiate to get this fee waived with your mortgage advisor. 

Fee structure

There are two main types of ways that mortgage advisors can charge for their services - borrower fees and lender commissions. You will be charged differently depending on which fee structure your mortgage advisor uses. 

• Borrower fees - As the name suggests, the borrower pays the fees to the mortgage advisor. The price is usually 1% to 2% of the total loan amount. These can be paid as a lump sum or added to the total loan amount. 

• Lender commissions - Lender commissions, which are usually 0.5% - 3% of the total loan amount, are paid to the mortgage advisor by the lender. The lender will usually then pass them onto the borrower by adding them to the overall cost of the loan. 

Whether you opt for a mortgage advisor who charges borrower fees or lender commissions could impact the final amount you pay, so it’s worth discussing this with your mortgage advisor at the outset. 

Yield spread premium (YSP) 

In a nutshell, a yield spread premium is a form of compensation that a mortgage advisor receives from a lender for reducing the upfront costs for the homebuyer and increasing the interest rate. A mortgage that includes a yield spread premium will usually mean that you won’t have to pay the mortgage advisor’s fee (otherwise known as the origination fee) upfront. 

However, if this is the option you go for, be mindful that you may end up paying more throughout your mortgage loan to cover the higher interest rate. 

Getting a Mortgage Broker - is it worth the cost? 

It’s safe to say that getting a mortgage is one of the biggest financial commitments you’ll ever make, so it’s well worth getting expert advice before committing to anything. The average person takes out one mortgage in their lifetime, whereas a mortgage advisor has years of experience working in the industry, so they’ll know how to get you the best rate in the market based on your individual needs. While getting a mortgage advisor may seem like a big upfront cost, it will save you a lot of money later down the line. 

Not to mention that your mortgage advisor will save you the back and forth that comes with dealing with lenders directly, as well as bypassing the obstacles that getting a mortgage normally involves. 

Getting onto the property ladder is easier than you think - find a trusted Mortgage Advisor on Bark.