Buying a property can be one of the most complicated and stressful times of your life. The role of a mortgage broker is to make it easier for you to buy your property, by guiding you through the range of mortgages on offer and finding the best deal for you and your circumstances. Whether you are a first-time buyer, are re-mortgaging or are buying to let, a mortgage broker may make the entire process a lot easier.
What do mortgage brokers do?
Mortgage brokers have specialist knowledge of the lending market. They guide potential buyers, who need to find a mortgage to purchase a property, through the huge range of deals, interest rates and incentives available. The mortgage broker offers financial advice and recommends the most appropriate mortgage for the buyer.
Are all mortgage brokers the same?
Be aware that there are three types of mortgage broker.
- Some are tied to specific lenders or just one lender, which means that they will only recommend these specific mortgages. This type of broker usually charges commission on the mortgage rather than an upfront fee.
- Other brokers can recommend lenders from a ‘panel’ or selection, which represents a limited section of the entire market. They can still claim to be ‘whole of the market’ brokers, as long as the panel on offer is representative of all lenders.
- There are also independent brokers, who are not tied to any lenders. They can recommend lenders from the whole of the market. This means they may be in a better position to offer genuinely impartial advice, although the advantage of tied brokers is sometimes that although they have a limited range of products to offer, they may have better deals on them. ‘Whole of the market’ mortgage brokers usually charge a flat fee upfront.
How do I find a mortgage broker?
Ask around. Word of mouth is the best recommendation for any service. If you think the property you are buying may be difficult to get a mortgage for (for instance, if it is situated above a commercial property, lenders may be reluctant to provide a mortgage), try asking the vendor (the current owner), if he or she can recommend a mortgage broker.
If you are still having problems finding a broker, follow up adverts you see in the press. It is a competitive market, so some may be offering incentives.
Do not settle for the first broker you see. Fees vary, so phone a few to get the lowest price.
At what stage in buying my property do I employ a mortgage broker?
You have been house hunting, have spotted the perfect property and now need to know if you can borrow enough money to snap it up and make it your own.
Alternatively, you may find it useful to have an initial consultation with a mortgage broker before you find a property so that you have a rough idea of how much you will be able to borrow.
What will happen at my first meeting with my mortgage broker?
A broker will assess your financial circumstances in order to establish how much money it is possible for you to borrow. You will be asked about your credit history, income, outgoings, and will be asked to provide a pile of documents to prove your circumstances. Be prepared to dig out pay slips, bank statements, P60s, utility bills, passports…
The broker will discuss the repayments you can afford, the best interest rate, whether it is fixed rate or variable, and will try to get you the best deal for your circumstances.
You will be guided through a lender application form by the broker. Once you have completed this, stating the amount you wish to borrow (on the advice of the broker) this will be submitted to the lender for approval. Following credit checks, the lender may send round a valuer to look at the property you are hoping to buy. The aim of this visit is to establish that, if you are unable to keep up mortgage repayments and the lender needs to sell your property to regain the loan, the property is definitely worth as much as you are asking to borrow. The lender will then make you a mortgage offer.
If you are not happy at any stage, tell the mortgage broker. They will be aware that you can find your own mortgage, without their services, so should be happy to answer any questions you have. Since 2004, mortgage brokers in the United Kingdom have been regulated by the Financial Services Authority.
What are the advantages of visiting a mortgage broker?
- An independent mortgage broker will be impartial. The role of the broker is to find the best deal possible for you and your circumstances. An independent broker will not be affiliated with any lenders and is therefore in a strong position to find you the best mortgage.
- Tied brokers may offer a smaller selection of products than independent brokers, because they will be linked to one, or a few lenders. This may mean, however, that they are able to offer lower interest rates or better incentives because of this affiliation.
- Whether tied or independent, brokers are often able to offer better interest rates than are available if you went directly to the lender.
- Brokers may be able to recommend a solicitor to use for your property purchase.
- A mortgage broker is a go-between for you and the lender. He or she should be able to answer any questions you have and take some of the stress out of organising a mortgage. Following up phone calls, chasing up documents and posting forms – it is the broker who will be doing this, not you. This is particularly useful if you have a full time job and find it difficult to have time off.
How much will a mortgage broker charge me for their services?
Independent mortgage brokers charge fees of around £200, whereas tied brokers charge commission. Do your research to get the lowest price before you commit to any one broker.
If you want to swot up on mortgages, and have a list of questions to ask, try booking an appointment with a mortgage broker. An initial consultation should be free, and will help to clear up any confusion. If you then decide to save money by finding your own mortgage, without a broker, you will feel more confident.
- To find out if the broker is affiliated to any lenders.
- To ask whether the broker charges commission or a fee, and what this is.
- To ask about any specific deals you have seen advertised, and if the broker can improve upon the deal offered.
- To check with the lender the broker has recommended, to see if you can get the same deal if you go to them directly. This could save you the mortgage broker fee.
- To ask how long it is likely to take between the first meeting and being lent the money. Follow this timescale, and if things are taking longer than expected, chase it up.
- You are paying for the services of a mortgage broker, make the most of it and do not feel guilty for asking questions and chasing up delays. Get your money’s worth!