How Does Commission Work for Mortgage Brokers?
How Does Commission Work for Mortgage Brokers?
Are you considering a career as a mortgage broker and wondering how you’ll get paid? Understanding the mortgage broker commission structure is essential before diving into the industry. In this guide, we'll break down everything you need to know, from how commissions work to how much you can earn, so you can make an informed decision about your career.
What Are the Main Ways Mortgage Brokers Earn Money?
Unlike salaried positions, most mortgage brokers earn through commission-based income. This means your earnings are directly tied to the number of mortgage deals you complete. But how exactly do brokers make money?
What is a Procuration Fee (Proc Fee)? The procuration fee is the primary source of income for mortgage brokers. Lenders pay a percentage of the total mortgage amount as a commission for arranging the deal. Typically, this fee ranges between 0.3% and 0.5% of the total mortgage value.
Example: If you arrange a £200,000 mortgage, and the lender offers a 0.4% proc fee, you earn £800.
Do Mortgage Brokers Charge Client Fees? Some mortgage advisors also charge their clients a direct fee, either in addition to or instead of the proc fee. This can be a fixed fee (e.g., £300 - £1,500 per case) or a percentage of the loan amount.
Example: If you charge £500 per case and complete five mortgages per month, that’s an extra £2,500 in earnings.
Can Mortgage Brokers Earn from Selling Insurance? Many brokers boost their income by selling life insurance, critical illness cover, and income protection. These products provide recurring commissions, creating a passive income stream.
Example: A life insurance policy with a £50 monthly premium might pay out 200-250% of the first year’s premium (around £1,000 - £1,250 upfront), plus a small renewal commission.
Want to know more? Watch this YouTube video on adding value beyond mortgages.
Do Mortgage Brokers Get Paid for Referrals? Some brokers earn additional income through referral fees by recommending solicitors, surveyors, or estate agents. These fees must be disclosed to clients and comply with regulatory guidelines.
What is the Difference Between Employed and Self-Employed Mortgage Brokers?
The way a mortgage broker earns commission depends on whether they are employed or self-employed.
How Do Employed Mortgage Brokers Get Paid?
Base salary plus commission.
Lower commission rates but financial stability.
Typically work for a brokerage or a bank.
How Do Self-Employed Mortgage Brokers Earn?
Keep a higher percentage of commission but must cover business expenses.
Responsible for lead generation, marketing, and compliance.
Greater earning potential but variable income.
Curious about starting out? Check out this video on transitioning into mortgage brokering.
How Much Can Mortgage Brokers Earn?
Your income depends on the number of mortgages you close, the commission percentage, and whether you charge client fees. Below is a rough guide to mortgage broker earnings:
Entry-Level Mortgage Brokers (0-2 years): £20,000 - £40,000 per year.
Mid-Level Mortgage Brokers (3-5 years): £50,000 - £80,000 per year.
Experienced Mortgage Brokers (5+ years, self-employed): £80,000 - £150,000+ per year.
For a deeper dive into earnings, watch this video on mortgage broker salaries.
What Are the Challenges of a Commission-Based Career?
While the commission-based structure offers significant earning potential, it comes with challenges:
No Guaranteed Salary: Income can be unpredictable, especially early in your career.
Delayed Payments: Lenders often take weeks or months to pay commissions, making cash flow management crucial.
Self-Employment Costs: Marketing, compliance, CRM software, and professional indemnity insurance add expenses.
How Can You Maximise Your Earnings as a Mortgage Broker?
Increase Your Conversion Rate: Work on closing more mortgage leads effectively. Watch this video on closing mortgage deals.
Diversify Income Streams: Sell insurance, protection plans, and charge client fees.
Improve Lead Generation: Use content marketing to attract new clients. Learn more in this video on mortgage lead generation.
Build a Strong Referral Network: Partner with estate agents, accountants, and financial planners.
Optimise Your Time: Check out this video on time management for mortgage brokers.
Is Becoming a Mortgage Broker Worth It?
A career in mortgage brokering offers high earning potential, flexibility, and career growth, but it requires resilience, networking skills, and financial planning. If you’re willing to hustle, stay consistent, and build a client base, the rewards can be incredible.
Interested in the journey? Watch this video on what to expect in your first year as a mortgage broker.
Final Thoughts
If you’re considering becoming a mortgage broker, take the time to research your options, understand the commission structure, and build a strategy for long-term financial success. With the right mindset, skills, and business model, you can turn this into a highly rewarding career.
For more insights, explore my YouTube channel, where I share valuable tips for mortgage brokers looking to grow their business!
