Hi apk
The answer is: It depends!
You may have approached a broker who has access to lenders which do not pay a referral commission, and therefore the borrower pays the broker.
The mortgage broker is not an agent for a particular lender unless specified to you, eg a Mobile Lender acting for a particular bank or other lender, and mobile lenders are usually restricted to dealing with only that brand. Mobile Lenders are not brokers
A mortgage broker usually has a panel of lenders and they are remunerated, usually by way of commission, for introducing a customer to a lender. After settlement of the loan the broker is paid.
However, some customers do not fit the usual pattern or lending criteria and the broker may have access to some alternative lenders which do not pay them a commission. In that case, the broker may charge the customer for the introduction.
Without more information from you it is not possible to say whether the broker you have approached is charging you ‘their usual fee’ or requesting something extra.
If you are not happy with their services then use another broker.
In 2002 I wanted to do a small property development. I was going to work full time on the project, hence would not qualify with the ‘usual’ lenders as I would not have any income during the course of the project, plus I had no track record in development. Few lenders would provide venture capital for such a small project in those circumstances.
The broker I went to was able to source appropriate funds for me, and charged me 1% brokerage plus administration costs. The interest rate on the loan was also increased to pay him a monthly trailing commission. I was more than happy to pay these fees as without his expert help I would not have got the loan for the project.
However, now that I am a broker myself, I have never charged anybody anything, no matter how complex the deal. Over the years I have, on a couple of occasions, referred customers to the lender which lent me the money in 2002 for the development project, but have chosen to not charge for this referral even though the lender has not paid me a commission. In other words, my customer benefited from my expert knowledge simply from doing business with me.
Each customer is different, each deal is different, and circumstances change.
There is no ‘rule’ about charging a customer a commission and there is no ‘rule’ which says that a broker may not be paid by both the borrower and the lender.
Some brokers charge, others don’t, so you must make your own decision as to whether you want to deal with that broker now that you know their fee for service.
Cheers
Kristine