Brokerage Fee

What is Brokerage Fee?

A brokerage fee is a fee charged by a broker to execute transactions or provide specialized services. The fee is for services such as sales, purchases, consultations, and delivery. A brokerage fee compensates a broker for executing a transaction. (It is usually, but not always) a percentage of the transaction value.

Brokerage fees vary according to the Industry and type of broker. In the Real Estate industry, a brokerage fee is typically a Flat fee or a standard percentage charged to the buyer, the seller, or both.

Mortgage brokers help potential borrowers find and secure mortgage loans; their associated fees are between 1 percent and 2 percent of the loan amount.

In the financial securities industry, a brokerage fee is charged to facilitate trading or to administer investment or other accounts.

Types of Paying a Brokerage Fee

Consider the example of online trading, here are the types of paying brokerage fee:

Payment as the Trading Occurs

The fee is paid as a percentage of the trade that the trader does. There might be an option of some minimum amount of fee till a pre decided number of shares.

Prepaid Fee

A pre fixed amount is paid in advance to the broker in order to trade. This might even have a validity time. But, the more amount that is paid in advance, the lower would be the overall fee.

Fixed Fee

This concept is different from the prepaid fee because a fixed amount would have to paid at a time to the broker. That is, the size of trading is not important.

Different brokers charge different fees. So, depending on the requirement, selecting the right method and the right method is essential to obtain profits.