Mortgage package offers cheaper alternative

A good mortgage broker will help potential property buyers shop around for the best mortgage, whether that entails the highest loan approval, the cheapest interest rate, the longest available terms or the best available compromise on all three.

Although some intermediaries will be happy to refer customers to solicitors who will do the conveyancing work on the property, for the most part it is up to individuals themselves either to ring a local solicitor's office or open the Golden Pages and pick out a name at random.

Increasingly, mortgage intermediary firms are offering what they describe as "all-in-one" packages or "one-stop shop" services that include legal fees.

The latest firm to join these ranks is Easy Mortgages, which uses part of the commission it receives from lending institutions to subsidise its clients' legal costs, thus reducing the overall outlay.

Easy Mortgages uses lenders' commission to give discounts on the legal fees normally charged by its partner, John Glynn & Company Solicitors.

On a purchase price of €250,000, John Glynn & Company's normal legal fees - based on 0.5 per cent of the purchase price - are €1,250 excluding VAT, or €1,512.50 including VAT.

Easy Mortgages discount on a property with this purchase price is €400. This means the fee plus VAT totals €1,028.50, giving an overall saving of €484, according to Mr Ivan McMahon, sales and business development director of Easy Mortgages.

The discount on legal fees increases in tandem with the purchase price.

For example, the buyer of a property with a purchase price of €450,000 will receive a discount of €1,150 on legal fees, based on the original fees arriving at a value of €2,250. So legal costs on the property will be €1,100 plus VAT, or €1,331. This is €1,391.50 cheaper than the standard 0.5 per cent plus VAT option.

Easy Mortgages has saved its clients an average fee of €600 per legal transaction, according to Mr McMahon. In Tallaght, Dublin, where the company's head office is based, there are already nine established brokers, he adds. "It's getting very competitive out there and the mortgage market is saturated," he says.

For example, Ezhome offers what it calls a complete home-buying service for a flat rate regardless of the price of the property. As a result, it undercuts Easy Mortgages on higher value properties, although not on lower value ones.

Its service costs €995 plus VAT - €1,203.95 - and includes legal services as well as the organisation of mortgage finance, home insurance, life assurance and other outlays.

Ezhome claims that on a typical €235,000 first-time purchase, buyers can expect to save up to €4,000. According to the firm, its customers have collectively saved just over €1 million in professional fees by choosing its service.

This is largely because a lot of solicitors still charge 1 per cent of the purchasing price plus VAT for conveyancing work, although a 0.5 per cent charge is becoming more common in Dublin. Unlike some discount brokers or intermediaries that work on a fee basis such as REA Mortgage Services, Ezhome keeps the commission it receives from lenders.

Under the REA Homebuyer Package, fees are set according to the loan amount rather than the purchase price.

So a property with a purchase price of €250,000 could have a 90 per cent loan of €225,000. The REA fee for its service, including solicitors' fees, is €2,495 plus VAT, or €3,018.95.

REA then refunds the commission it has received - in this case €2,250. So the net cost for legal and other fees on this loan is €768.95. This compares favourably to a solicitor who charges 0.5 per cent of the purchase price plus VAT, or €1,512.50, giving customers a saving of €743.55.

It also makes the REA service more competitive than both Easy Mortgages and Ezhome on a purchase price of this value.

Again, on a purchase price of €450,000, REA is cheaper than solicitors charging 0.5 per cent, with a net cost of €1,388.95 on a 90 per cent loan of €405,000.

A solicitor charging half a per cent of the purchase price plus VAT will cost €2,722.50, or a massive €1,333.55 extra.

REA's service on this loan is roughly the same price as Easy Mortgages service on a €450,000 purchase price and €185 more expensive than Ezhome's flat rate package.

The savings consumers can make by using mortgage brokers' packages have been calculated by comparing their prices to traditional percentage-based solicitor's fees.

But some solicitors are also offering conveyancing for a flat-rate fee of less than €1,000 plus VAT. Solicitors offering competitive set fees include the Dublin-based Mary Keane Solicitors and Dermot Deane & Co, as well as a nationwide group of 32 solicitors under a network called HomeBuy/HomeSell.

The Director of Consumer Affairs, Ms Carmel Foley, believes these set fees make far more sense than traditional percentage-based fees.

"The average consumer is certainly questioning that just because a house price might be double in Dublin what it is in a more remote part of the country, how can it be justified that they would charge so much more for the same service," Ms Foley says.

"Clients are very irritated by the current structure," she adds.

New house buyers are often content to pay up to 1 per cent of the purchase price without question, according to the deputy Government chief whip, Mr Billy Kelleher, who wants solicitors to display their fees prominently in order to help buyers shop around.

Ms Foley agrees. "It seems to me to be basic good practice for any profession to spell out in advance any charges the client is likely to incur. The fact that there is no price display order in place shouldn't stop them from being upfront and transparent."

Mr Deane says the conveyancing market has become more competitive since he first introduced a flat-rate service, largely because mortgage brokers have started offering lower rates as part of consumer-friendly packages.

The downside to being knocked down so far on price, he says, is that solicitors offering flat rates are overloaded with work.

Mr Deane believes the conveyancing system in relation to unregistered titles needs to be reformed by the Government. "The problem is there is far too much paperwork."

One property could require a draft of 100 A4 pages, Mr Deane says, while the equivalent in the UK would amount to just 10-20 pages.