How are mortgage brokers paid
Broker or bank for mortgage lending? Despite commission: agents are worthwhile for customers
Since last year brokers for real estate loans have to disclose to their customers what commissions they receive from banks or insurance companies for their services. For this purpose, the agent must hand over the so-called ESIS, the “European standardized information sheet” to each customer. This shows the respective amounts that the agent receives for referring the customer to the mortgage lender. This makes the commission regulation much more transparent, because the commissions are paid in the form of an interest surcharge and are therefore hardly comprehensible for the customer without the ESIS.
One percent commission for a loan over 100,000 euros makes up 1,000 euros. These increase the interest rate fixed at 20 years, however, by 0.08 percentage points and thus cause actual interest costs of 1,520 euros. It gets even more expensive if an agent is not satisfied with a one percent commission, but demands up to 2.5 percent - and receives it. That does happen, especially with smaller brokers. In the example above, 2.5 percent would lead to an increase in interest rates of 0.2 percentage points and lead to a cost increase of 3,850 euros.
Whether intermediary or bank: the customers always pay for sales
In view of these figures, it is not surprising that some builders consider whether and how they can bypass commission payments. But the calculation is not that simple, because the debit interest to be paid is very similar - at least up to the amount of one percent commission - at banks and brokers. The reason: Sales costs money, regardless of whether the banks do it themselves or work with an intermediary. Correspondingly, about one percent is included in bank interest for advice and preparation of customer documents.
Nevertheless, it is worthwhile to take a close look before concluding a loan agreement and to request both bank and broker offers. There are always outliers up and down - and that can quickly save four to five-digit sums in individual cases.
Calculate agency commission even before the specific offer
So if we assume a commission of one percent, bank and broker offers do not differ that much. But how realistic is this one percent - and is the commission even taken into account in interest comparisons?
In fact, FMH-Finanzberatung was the first company in Germany to publish the broker offers initially with 0.5 percent and later with one percent commission in its interest rate comparisons. In the meantime, other comparison providers have also followed this example - including even the consumer advocates of Finanztest.
This development is encouraging because it helps to reduce lure offers from intermediaries. No mediator can exist without a commission or consulting fee, even if in some comparisons there are still mediators without a commission portion if the comparison provider does not take it very seriously with the research. But in the end no small broker can come up with significantly better interest rates than the well-known brokers in the FMH comparison tables. These meanwhile generally take away 1.3 percent commission across the board.
Therefore, brokers for real estate loans are also worthwhile
When it comes to the question of “bank or agent”, the commission is not decisive. Rather, the difference in service is relevant. Because it can be worthwhile to involve an intermediary. The big providers, who can prove a mediation volume of 50 million euros up to two-digit billion amounts per year, offer particular advantages. Two of them are particularly important:
- Knowing about processing times: Intermediaries usually know very quickly and with a high degree of probability which financier will approve the customer request, how long the process will take - and when the money will ultimately flow. This can give builders a tangible advantage. After all, what use are the best interest rates to a buying customer under time pressure if the loan approval alone takes six weeks or more?
- Variety of offers: Construction financing depends on many factors, such as the lending limit, the discounts for different repayment rates and loan volumes, fixed interest rates, options for special repayments and changes in repayment. All of these points can of course also be clarified during a bank interview. If, however, it turns out during this appointment that the conditions are not ideal, customers can forego a loan and ring another door. Starting the whole procedure all over again takes too long for many - and so they accept a more expensive and less suitable offer. This cannot happen with a professional broker, because they not only have one financier on offer, but usually ten to 15 options to choose from.
Tip: Don't be fooled by statements made by intermediaries who claim to have 300 or more banks on offer. Such numbers can only be obtained if you include all regional providers. But they are of little use to you, because if you live in Bielefeld, a bank in Nuremberg will not give you any money.
Conclusion: The agent definitely pays for itself up to 1.5 percent commission
In summary, it can be said: The broker's commission does not usually make a home loan much more expensive compared to the pure bank offer - provided that the broker does not go too far. In addition, there is neutral advice with valuable information, for example on processing times, as well as a variety of offers that leaves more leeway in the selection of the individually suitable offer.
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