Equity release broker fees have certainly been a bone of contention in the past, but new regulations have made the industry more transparent. Advisers now need to disclose their relationships with individual lenders before concluding transactions for their customers.
Until recently, when the mortgage broking industry saw a tightening of regulations, there was a deep-seated suspicion from clients about the relationship between brokers and lenders.
The new transparent era has led to a vastly improved relationship and greater use of mortgage brokers when seeking equity release.
What Level of Broker Fees Should I Expect?
The first thing to remember is that equity release broker fees are separate from surveys and solicitors fees. This is simply a commission which is paid to the broker (often) on completion of the fundraising.
Traditional fees tend to vary between 0.3% and 1% of the funds raised. So, for example, a £100,000 equity release would generate a fee of between £300 and £1000.
The higher rates tend to apply to more specialist equity release brokers where there is an unusual financial scenario.
Are There Any Upfront Fees?
While the majority of mortgage brokers will charge on a sliding scale, dictated by the level of funds raised, you may come across brokers who charge a flat upfront fee.
Flat upfront fees tend to be at a reduced level compared to those calculated as a percentage of funds raised, but it is like they will be non-refundable.
On occasion brokers may charge a relatively small upfront fee, to cover their costs and an additional commission when funds are secured. You should ask all brokers to clarify their charging/commission structure at the earliest opportunity.
What Is Double-Dipping?
The term double-dipping relates to mortgage brokers who charge a commission for their advice and receive a commission from lenders when funds are secured.
In years gone by, this was an issue for many homeowners looking to release equity, but increased transparency means that commission/income structures need to be disclosed.
Who Pays the Broker Fees?
This is one of the factors you need to ask when organising your equity release. There are three main options, fees paid by the customer, fees paid by the lender or a mixture of the two.
At the end of the day, the broker is undertaking work on your behalf, and therefore a fee is not unreasonable. The key is to ensure you know who is paying the fee and the full level.
Would a Lender Not Simply Adjust My Equity Release Terms to Reclaim Their Commission?
If you put yourself in the shoes of a lender, business is being brought to them at no additional cost and commission is only paid on success. For many lenders, this can reduce an additional layer of marketing costs and allow them to make their overall packages more competitive.
If they were simply to adjust their headline interest rate to take into account commission paid to a broker, the likelihood is they would lose their competitive edge in the market.
The less competitive you are, the less business will flow your way and the less profit – it’s that simple.
Is an Equity Release Broker Worth Their Fee?
This is a very broad-ranging question! The Internet has changed the way in which the financial services industry interacts with customers. It is now possible to not only make online applications, but you can also check the feedback and press coverage of individual mortgage brokers.
The truth is that you get what you pay for in life and t is no different when it comes to financial services. In reality, better equity release brokers will earn their money by securing finance that may not have been possible without using their contacts.
In reality, the potential to negotiate interest rate reductions or improved terms can literally see broker negotiated deals paying for themselves through savings.
What Equity Release Options Are There?
There are four basic equity release options two which relate to younger homeowners, remortgages and equity mortgages, while lifetime mortgages and home reversion schemes are more focused on those with a minimum age of 50.
Part of the role, indeed the main role, of a mortgage broker is to make you aware of the components of each mortgage option applicable to your situation – including the pros and cons as well as the long-term financial cost.
Can I Arrange My Own Equity Release Mortgage?
The simple answer is yes. The better answer is, do you have the experience, the contacts and are you confident you have found the best deal for your situation? Even though the financial services industry has been teleported into our living rooms and offices, there is still a lot to take in.
Do you understand the concept of compound interest? What impact would a lifetime mortgage have on the inheritance you wish to leave your children?
What is the difference in interest rates between a traditional mortgage and an equity release mortgage?
Where Do I Find a Good Mortgage Broker?
As we have mentioned before, the Internet has opened up the world of financial services to every home and every office in the UK. Check out mortgage brokers in your area, specialists in your circumstances and check to see the kind of feedback they have received from customers.
There are numerous websites out there which collate such information, and then there is good old-fashioned press coverage. In this modern era, there is no place to hide for those mortgage brokers/lenders that mislead clients and overcharge.
They won’t last long in the industry!
While there are people out there who refuse to pay broker fees and are quite happy to go it alone, this has obvious drawbacks. A good mortgage broker will have contacts throughout the marketplace and an ability to deliver terms and conditions which are not always available to the general public.
In practice, you tend to find that good mortgage broker literally pay for themselves (and more) with reduced interest rates, setup fees and more client-friendly terms and conditions.
How Can Equity Tree Help?
Here at Equity Tree, we have partnered with some of the UK’s leading Equity Release broker companies.
They have already helped thousands of people release equity already, and they can do the same for you.
Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these equity release companies, click on the below and answer the questions.