Need help finding a home loan?

Need help finding a home loan?

With thousands of mortgages out there to choose from, many home-buyers and those looking for a new deal may feel they need a helping hand.

Many people will opt to use a mortgage broker, who can survey the market and hopefully find the one that's right for you. Some brokers charge a fee of up to 1.5% of the loan amount, or even more in some circumstances, while others don't charge anything. But are no-fee brokers becoming an endangered species?

National phone and internet-based mortgage broker Purely Mortgages (purely.co.uk), which opened for business last autumn, made much play of the fact that it was fee-free - but a few weeks ago the firm decided to abandon this strategy and it now charges a flat fee of £195 for its services.

However, there are still some broker firms that don't make people cough up a fee. The best-known is Bath-based London & Country Mortgages (lcplc.co.uk). It doesn't do face-to-face advice - it operates by phone and post - and says it is committed to staying no-fee. It adds that it makes its money from the commission paid by the bank or building society.

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That is something some people won't be aware of: in most cases, a mortgage broker earns commission from a lender when he or she recommends one of its mortgages. This commission is known as the "procuration fee". These fees can vary but for standard loans they are typically around £200-£300.

It is still possible to get face-to-face advice and not pay a fee. Mortgageforce (mortgageforce.co.uk), a national mortgage broker with 118 outlets stretching from Aberdeen down to the Isle of Wight, says around 80% of its customers don't pay a fee. The other 20% are people whose circumstances are more complicated, and it adds that even then, the fee never exceeds 1%.

Many of the best-known names charge a broker fee, including John Charcol, Savills Private Finance and Chase de Vere Mortgage Management. Brokers who charge argue that with them, you are paying for a "Rolls-Royce" service where they take away all the hassle.

So, should you pay a fee? If your requirements are complex or specialist, you may feel you want to pay someone. If your needs are straightforward and/or you are happy to sort it all out over the phone or the internet, you probably won't.

London-based John Charcol (johncharcol.co.uk charcolonline.co.uk) offers a free-to-use online service called Charcolonline, which won't specifically recommend a product, and the phone-based Charcol Direct, where its advisers do the legwork for a flat fee of £199.

Both offer access to "the best of the high street [lenders] and other specialist providers". John Charcol itself charges up to 1% of the loan amount for its 'gold-plated' service which offers face-to-face advice and lots of hand-holding, though it says the average fee is 0.4%.

Likewise, London-based Savills Private Finance (spf.co.uk) charges up to 1% but says the typical fee is 0.4%. How much you pay will depend on your circumstances and the loan amount. Chase de Vere Mortgage Management (cdvmm.com) charges standard borrowers a maximum of 1.5%, and those with adverse credit histories and buy-to-letters up to 2.5%.

However, it deducts all commissions from the lender, which means customers typically pay around 0.8%.

What you pay

Broker - Fee

London & Country - No fee

Mortgageforce - Most pay no fee

Purely Mortgages - £195

Bradford & Bingley - £199

My Mortgage Direct - £199

Charcol Direct - £199

Alexander Hall - £399 (1)

John Charcol - up to 1% (2)

Savills Private Finance - up to 1% (2)

Mortgage Advice Bureau - up to 1%

Chase de Vere - up to 1.5% (3)

Hamptons - See note (4)

Notes: All costs relate to standard mortgages. In some cases buy-to-let investors and those with adverse credit histories may pay more.

1) Or 1% with procuration fee rebated

2) Typical fee: 0.4%

3) Procuration fee rebated, so average paid by borrower is 0.8%

4) Hamptons: 1.5% with procuration fee rebated, or a fee of typically 0.33%-0.5%

Guardian Unlimited © Guardian Newspapers Limited 2005