Why should I use a mortgage broker or mortgage advisor?
Updated: Mar 20, 2020
Taking a mortgage is one of the biggest liabilities in your life and the options and consequences should be explored thoroughly. It's something you can do all on your own, or you can use the services of experts in their fields — mortgage brokers or mortgage advisors.
Today we are going to answer some common questions about how the cooperation with mortgage brokers works, what to expect when working with one, and why you need one. We include some real-life examples to give you some context and guidance so you can decide works best for your situation.
How much does a mortgage broker cost?
It is common in some countries that mortgage brokers are paid by the clients; however, not in the Czech Republic. This is one of the first questions clients ask, and it's a very good question: “How much do I pay for your service?” They're often surprised by the answer, since the broker's commission is free of charge as it is always paid by the bank. There is even a law (257/2016, §83) that brokers cannot accept any payments except of real costs they have for verification, valuation and other small fees related to brokering the deal.
In case the deal is not completed, the broker is never entitled to payment for “compensation of his/her time,” etc. In fact, such behaviour should be reported to the Czech National Bank immediately.
How much is the broker actually paid?
With the recent updates to the law, the broker's commission is now transparent information for the client and the client always knows how much the broker's company is being paid. In real life the commission can be 1–2% of the loan amount (depending on the company). We also have the same percentage for all banks in the Czech Republic, making it fair play for everyone.
Once again, why do I actually need a broker? I think I could talk to the banks myself.
Consider this: The majority of people buy only one or very few properties in their life, making this a one-time life experience. Mortgage brokers, on the other hand, do this for a living and have experienced dozens of such cases, bringing valuable insights, an ability to negotiate with different banks, provide discounts, and help with other topics and services. Oh, and did we mention the language barrier? Even today, most mortgage bankers are still not able to have a full conversation in English explaining all the conditions!
How do I know the broker is legit?
Everyone who wants to provide loan brokerage services must be certified by the Czech National Bank to do so. You can check the person or the company at this link: https://apl.cnb.cz/apljerrsdad/JERRS.WEB09.DIRECT_FIND?p_lang=en .
In the last few years, the market has become regulated by ČNB, the EU introduced GDPR (data protection) and the law now requires more documents to oversee brokers' work to make sure brokers do what they are supposed to. A good broker will also provide references from previous clients.
Are there any cases where a broker is not needed?
There are a few examples which come to mind, but in real life it doesn’t happen very often. For example, bank employees usually don't use brokers since they have special conditions with their bank. Another type who doesn't need a broker could be a very loyal client who wants to have all their products with a certain bank (maybe they already have a few mortgages with them) and is familiar enough with the banker to make sure he/she explains everything the client needs to know.
If you find these tips useful and are thinking of using the services of a mortgage broker, you can reach us for a no-obligation consultation. We can meet over a coffee, tea or, since we are speaking of Czech Republic, beer is also acceptable.
In our company we offer also professional help with searching for properties, assistance with viewings and everything else property-related for both first-time buyers and experienced investors.
Robin, CEO of Expats Finance and expats mortgage advisor