How Do Property Finance Brokers Get Paid?

What is a procuration fee and how does it work?

A procuration fee — proc fee — is the primary way property finance brokers earn money. It is a percentage of the loan facility that the lender pays to the broker on completion of the deal. The borrower does not pay it directly. The lender builds it into their cost model.

Proc fees typically range from 0.5% to 1.5% of the gross loan amount, depending on deal type, lender, and the broker’s relationship with that lender. On a bridging loan of 500,000 pounds at a 1% proc fee, the broker earns 5,000 pounds. On a development facility of 3 million pounds at 0.75%, the broker earns 22,500 pounds.

The fee is earned on completion. Not on application. Not on offer. On drawdown of funds. If a deal falls through at any stage before completion, the broker earns nothing for the work done. This is one of the hardest realities of broking — weeks of packaging, lender liaison, and document chasing can produce zero revenue if the borrower pulls out or the deal collapses.

Some lenders pay the proc fee on the day of initial drawdown. Others pay within 14 to 30 days after completion. A small number hold payment until after a clawback period expires. You need to know your lender’s payment terms before you forecast cash flow.

How are proc fees calculated and what affects the rate?

The calculation is straightforward: gross loan amount multiplied by the agreed percentage. The percentage itself is where the nuance sits.

Deal type matters. Bridging loans typically attract higher proc fees — 1% to 1.5% — because they are short-term, higher-margin products for lenders. Development finance proc fees tend to sit at 0.5% to 1%, but the loan amounts are larger so the absolute fee can be higher. Buy-to-let and commercial term lending proc fees are often lower, between 0.25% and 0.75%, reflecting tighter margins on longer-term products.

Lender relationship matters. A broker who consistently submits clean, complete deal packs and maintains volume with a lender will often negotiate a higher proc fee tier. Lenders reward reliability because it reduces their underwriting cost. If your submissions are messy and your conversion rate is low, you will sit at the bottom of the fee schedule.

Loan size matters. Some lenders operate tiered proc fee structures. Below 500,000 pounds, the proc fee might be 1%. Between 500,000 and 2 million, it drops to 0.75%. Above 2 million, it might be 0.5%. This is not universal, but it is common enough that you should check fee schedules before quoting a client.

Do brokers charge the borrower a fee as well?

Yes, in most cases. Beyond the proc fee from the lender, brokers typically charge the borrower a direct arrangement fee or broker fee. This is usually between 1% and 2% of the loan amount, though it varies by firm and deal complexity.

This fee is agreed upfront with the borrower and is either payable on completion (deducted from the loan advance) or invoiced separately. Some brokers charge a smaller upfront engagement fee — 500 to 2,000 pounds — to cover initial packaging costs, with the remainder payable on completion. This protects the broker from doing significant work on deals that never complete.

The borrower fee and the proc fee are separate income streams. On a 1 million pound bridging deal, a broker might earn a 1% proc fee (10,000 pounds) from the lender plus a 1% arrangement fee (10,000 pounds) from the borrower. Total: 20,000 pounds per completed deal.

Transparency is non-negotiable. Disclosure of all fees — both from lender and to borrower — is a regulatory requirement under FCA rules for regulated deals and a professional expectation across the market. Hiding the proc fee or being evasive about borrower charges destroys trust and referral potential.

What is the difference between retained and non-retained fee models?

In a retained model, the brokerage firm retains all proc fee income centrally. Individual brokers or deal executives within the firm earn a salary, and possibly a bonus or commission, but they do not receive the proc fee directly. The firm uses proc fee income to cover overheads, packaging costs, compliance, and profit.

In a non-retained model — common in networks and self-employed broker arrangements — the individual broker keeps the proc fee and pays the network or firm a desk fee, a percentage override, or a per-deal charge for access to lender panels, compliance support, and branding.

The choice between models affects how you scale. Retained models give you more control over cash flow and quality. You can invest in packaging infrastructure, hire support staff, and standardise processes because the revenue flows through the business. Non-retained models offer higher individual earnings per deal but make it harder to build operational consistency across a team.

If you are running a firm of 2 to 15 people, the retained model is almost always more sustainable. It lets you pay for the systems and people that keep deal quality high as volume increases.

What is the difference between net and gross fee calculations?

Gross fees are the total proc fee amount before any deductions. Net fees are what lands in your account after splits, overrides, and costs.

If you operate under a network, your gross proc fee might be 1% of the loan, but the network takes a 20% to 30% override. On a 10,000 pound proc fee, you receive 7,000 to 8,000 pounds net.

If you are directly authorised and run your own firm, your gross and net are closer — but you still deduct compliance costs, PI insurance, FCA fees, and operational overheads.

Understanding the net number is critical for business planning. Too many brokers quote gross deal values and gross fees when forecasting. When the net figure comes through — after network splits, VAT, referral fees, and overheads — the margin per deal can be surprisingly thin. Know your true net fee per deal type and build your volume targets around that number.

Are there volume incentives or bonus structures from lenders?

Some lenders offer volume-based incentive schemes. These take several forms.

Tiered proc fees increase the percentage as annual volume with that lender grows. Submit 10 deals and your proc fee might be 0.75%. Submit 30 and it rises to 1%. This rewards consistency and loyalty.

Retrospective bonuses pay an additional lump sum at year-end if you exceed a volume or quality threshold. These are less common but exist with several specialist lenders.

Preferential access is the non-monetary incentive. High-volume brokers with clean submission records get faster turnaround, direct access to underwriters, and early sight of new products. This is worth more than a few basis points on the proc fee — speed and certainty close more deals.

The common thread: volume incentives reward brokers who submit consistently and cleanly. If your packs are incomplete, your conversion rate is low, or your deals regularly stall in underwriting, you will not hit the thresholds that unlock better economics.

When does a broker not get paid?

You do not get paid if the deal does not complete. That is the fundamental risk of broking. Every hour spent on a deal that falls through is unrecoverable cost.

Common reasons for non-payment: borrower pulls out, valuation comes in below expectations, lender declines at credit committee after initial indicative terms, legal issues surface during due diligence, borrower cannot evidence source of funds.

Some of these are within your control. A weak deal pack that leads to a late-stage decline is a packaging failure. A borrower who was never properly qualified is a pipeline management failure. The broker who packages thoroughly and qualifies early will have a higher completion rate — and therefore a higher effective hourly rate — than the broker who submits everything and hopes for the best.

This is where operational discipline pays for itself. Every deal that completes because the pack was right first time is revenue earned. Every deal that falls over because of avoidable errors is revenue lost and time wasted.