What was the closing commission?

Deductibility of Closing Commission

The unique advantage of the closing commission was that it was fully tax deductible. This meant that consumers could get some of this cost back through their tax return, making it less burdensome.

The Disadvantages of the Closing Fee

Despite the tax advantage, the closing commission had major drawbacks:

• Undue conflict of interest: Many mortgage brokers preferred mortgages from providers who offered them the highest commission, regardless of whether it was the best choice for the client.
• Less transparency: Consumers often did not know how much of the amount went directly to the advisor and whether that affected the advice.

Why was closing commission abolished?

The elimination of the closing commission was a direct response to the problems that this expense caused. Let’s look at the main reasons.

Making customer interests more central

The government and financial regulators such as the AFM felt that the financial sector needed to become more transparent and customer-oriented. It wasn’t fair that consumers sometimes got unsuitable mortgages because advisers preferred higher fees.

Promoting transparency

With the abolition of closing commissions, it became mandatory for customers to pay directly for mortgage advice. This gave them more insight into what they were paying and for what. Stimulating competition By eliminating the closing commission, it became easier to compare mortgage providers on the basis of rates and conditions. This made the market more competitive and fair.

How does it work now?

Since 2013, the system has changed, and instead of a closing commission, consumers now pay directly for advice. This is often charged by a flat fee or an hourly rate.

Customized mortgage advice

The fees consumers pay depend on their specific situation. Examples:

• Standard situations: For someone employed with a simple file, the time investment is smaller, and thus the cost is lower.
• More complex applications: Business owners or people with multiple homes typically pay more because their financial situation is more complex.

Cost Ranges

Many mortgage consulting firms use fee ranges. These are based on the amount of time required to complete the advice and processing. With some advisors, the fees range from €1,500 to €3,000, depending on the complexity.

The benefits of the new system

The new system, in which consumers pay directly for advice, has several advantages.

Independent advice

Because advisors are no longer paid by mortgage lenders, they can work more independently and customer-focused.

More transparency

Clients know exactly what they are paying for and how much time the advisor spends on their case.

Flexibility

Depending on the complexity of the application, clients can choose an approach that suits them.

The Role of Mortgage Advisors

Mortgage counseling agencies play a crucial role in the new system. They make sure clients are well informed about costs and options.

Examples of situations

• Remodeling: For a client who wants to extend an existing mortgage for a remodel, the time investment is relatively small.
• Complex Files: An entrepreneur with multiple businesses and real estate requires more time and attention, which increases costs.

Why use a consultant?

Although fees must be paid immediately, studies show that good advice often leads to better mortgage terms, saving costs in the long run.

Conclusion

The elimination of closing commissions in 2013 resulted in a fairer, more transparent and customer-focused system. Although consumers now have to pay directly for advice, in return they get more clarity and independence in the service they receive. It is important to be well informed and choose an advisor that suits your situation.

Frequently Asked Questions

1. What is the difference between the closing commission and current advisory fees? The closing commission was a percentage of the mortgage charged by the provider. Today’s advisory fees are paid directly by the client to the advisor. 2. Are mortgage counseling fees deductible? Yes, mortgage advice and brokerage fees are deductible, provided the mortgage is taken out for an owner-occupied home. 3. How much do I pay on average for mortgage advice? Costs usually range between €1,500 and €3,000, depending on the complexity of your situation. 4. Is it mandatory to use a mortgage broker? No, it is not mandatory, but it is strongly recommended to avoid errors or adverse conditions. 5. Can I compare fees from multiple advisors? Yes, it is wise to compare quotes from different consultants to find the best value for money.