One of the most important steps to buying a house is securing a good mortgage deal. It can seem daunting with the number of lenders offering deals, which is why you may want to ask a mortgage broker to assist you in finding a good deal.
Whilst it isn’t a legal requirement to use a mortgage broker, they can be helpful in guiding you through the process of mortgages and applications. Getting a mortgage is a massive financial decision and it’s important that you find the correct one to suit your current situation and projected financial situation.
There are over 5,500 mortgage broker businesses in the UK to choose from, so it’s a good idea to find out information about them before you sign a contract or get too involved in the mortgage process.
In this article, we’ll look at how you can find a good mortgage adviser and how they can help you to compare deals on the mortgage market and submit an application to a lender.
What is a mortgage advisor?
A mortgage advisor, otherwise known as a mortgage broker, is a person who can help you compare mortgages and arrange a deal between you and a mortgage lender. They will base their research on your circumstances so that they can find lenders that are likely to offer you a mortgage deal.
The mortgage adviser will charge a commission or fee to you (as the applicant), to the lender, or to both as payment for their assistance in the mortgage process. The adviser will have expert advice on the state of the mortgage market, which can help you if you have special circumstances that a standard advisor may not be able to work with. For example, you may be self-employed and therefore don’t have payslips to use as evidence when proving your income.
Due to their knowledge, mortgage advisers can help speed up the process of speaking to different lenders, comparing deals and finding you a mortgage that fits your requirements. They can tell you how to improve your application and make sure that you have the correct paperwork to aid your application.
How do you find and choose a mortgage advisor?
There are various factors to consider when you are looking to hire a mortgage adviser. It’s a good idea to find out if they are a whole-of-market broker. This is because certain brokers and advisers will only recommend mortgages that are from select lenders. Bank or building society mortgage lenders will only discuss their company’s range of products.
It’s helpful to find a whole-of-market adviser as they can review a wide range of lenders and deals, without any bias. This can help you to find the cheapest option or best deal for you, which could save you time and money.
Mortgage brokers are under no obligation to tell you about ‘direct-only’ deals, which are mortgages that you could find without the assistance of a broker. However, your mortgage adviser may bring them to your attention if they work out cheaper or better deals.
Whilst many mortgage brokers still operate by working with customers in person or over the phone, there is a growing trend of ‘robo mortgage advisers’. These advisers offer web-based services, which means that customers can complete and review their mortgage applications solely online. Some people prefer this option, but it’s not something that everyone can work with.
What are the benefits of consulting a mortgage advisor?
You will be able to view more mortgage deals by going through an advisor as they have a large network that contains many mortgage deal options. They will also be able to deal with the search and comparison of lenders, applying on your behalf and communicating with the lenders.
Mortgage brokers should be able to tell you which lenders are likely to accept your application and advise you against deals that you are unlikely to be accepted for. They will check your finances and ensure that you meet the lender’s affordability criteria and can pay the interest rates. They can also make sure that you have the relevant paperwork so that your application isn’t halted or rejected. Your credit report could be affected if a lender rejects your application, which is why it’s best to apply when there is a high chance that your application will be accepted.
You can also complain if the mortgage that you get turns out to be unsuitable. This isn’t an option if you act without the advice of a broker.
What are the risks of not using a mortgage adviser?
You are solely responsible for your decision if you decide not to consult a mortgage adviser. Acting by yourself could mean that you get a mortgage that isn’t suitable for your situation, which can cost you lots of money in the future. You may also apply for mortgages even if you don’t fit the lender’s criteria, which means that you will get rejected.
Mortgage advisers have access to more information about mortgages, which you won’t be able to use if you look for a mortgage by yourself.
What are the disadvantages of consulting a mortgage adviser?
Your main goal when looking at mortgages is likely to try and find one that is affordable, with low-interest rates and fees. However, mortgage brokers are often given a fee from the lenders for finding customers. This means that some mortgage advisers may want to maximise their commission by getting you a mortgage that isn’t necessarily the most affordable option.
Mortgage brokers may not source the cheapest mortgage deal for you, as they may be influenced by options where they have a personal interest. For example, mortgage brokers who work for a bank and building society will only tell you about deals that are offered by those in the bank or building society’s range. You may be missing out on better deals because the mortgage broker isn’t obliged to tell you about other options.
Despite their knowledge, mortgage brokers don’t always give you an exact estimate for a mortgage deal. They may present you with a ‘good faith estimate’, which means that the lender may change the terms when you actually come to sign the contract. This could result in you paying more than you initially thought you would.
Whilst many mortgage brokers have access to deals that customers don’t, some lenders don’t work with mortgage advisors so you won’t be offered these deals if you go through a broker. It’s worth doing your own research to see if you can find alternative deals from the ones that your mortgage broker is suggesting.
What are key questions to ask mortgage advisers?
It’s a good idea to find out some of the following information when finding and comparing mortgage advisers:
- whether they are whole-of-market
- if they will only tell you about deals that are direct from lenders
- fees and charges
- what their service includes
- when they will be available to contact
- whether they offer mortgage protection insurance
What should I look for in a mortgage deal?
Rather than blindly trust your mortgage adviser, it’s important that you evaluate the deal yourself so that you can decide if it seems like a good option. You may want to consider some of the following factors before you agree on a deal:
- if the deal is fixed-rate, a tracker mortgage or discount
- the overall mortgage fees
- if the mortgage offers cash-back or other incentives
- the lender’s reputation — especially concerning customer service
How much do mortgage advisors cost?
You can expect to pay up to £500 in mortgage broker fees, although some brokers don’t charge a direct fee. Instead, some mortgage brokers earn commissions from lenders for mortgage deals that they help arrange. Others will charge you a fee, whether it be a flat rate or based on a percentage of the amount you want to borrow.
Whatever payment system they use, mortgage brokers need to outline the fees and commission rates that they receive from lenders before they enter into a contract where they act on your behalf.
Alternatively, your mortgage lender may give you the option to pay them a flat rate or take a commission instead. The commission will vary depending on the value of the property that you are buying. The percentage is usually between 0.4% and 1%. You may want to avoid brokers that are charging a commission that is higher than 1%.
Although a good mortgage broker working on commission should be unbiased, it’s a good idea to check that they aren’t influenced by certain products and will advise you on a range of products.
It can be better to work with an adviser who is paid a flat rate as they can help you find the best mortgage deal for your individual needs. They won’t be likely to avoid a cheaper deal because it doesn’t pay commission or because it wouldn’t be worth their time because the amount is so low.
Summary
There are various factors that can influence your decision when you are choosing a mortgage broker. An independent mortgage broker is unlikely to be biased when advising you on different mortgage deals. It’s worth asking if they will tell you about all available mortgage deals in the pursuit of finding the right mortgage deal for your individual circumstances. Some mortgage advisors will only inform you about deals that are offered by the bank or building society that they are employed by, for example.
Most mortgage brokers will charge a commission percentage that is based on the size of the loan that you take out. They may alternatively set an upfront fee, which means that what you pay won’t be influenced by the size and cost of your property. You will need to find out how they expect to be paid before you engage in work with them to find a mortgage.
Alternatively, you may decide to source and compare mortgage deals yourself, without consulting a mortgage broker. There are both advantages and disadvantages to this approach, so it’s a good idea to look at your options. It is possible to find a good mortgage deal independently, but a mortgage adviser is able to guide you through the process if you are unsure about your options.
