What does a mortgage broker do that you can't? And why should you pay for their services when there are loads of other costs when moving home or remortgaging?
If you're asking yourself these questions, it can be more than tempting to cut out the middleman. However, you may want to think twice.
Mortgage advice, from a reputable broker, can be an invaluable service – and here's why…
An important thing to understand is that when you receive mortgage advice, your mortgage broker has a duty of care to you. They have to recommend a suitable mortgage and be able to justify why the particular mortgage they have chosen is right for you. If their advice is not up to scratch, you can complain and be compensated.
In contrast, if you go directly to a high street mortgage lender, don't take advice, and end up with a mortgage that later becomes unaffordable, you may not have so much legal recourse. (However, under the rules of the Mortgage Market Review, it's the lender's responsibility to ensure affordability – so even if you buy direct, you could have some recourse. Nonetheless, a broker can still offer a valuable layer of protection.)
There's an awful lot to think about when choosing the right mortgage. It's not as simple as just opting for the cheapest fixed or tracker rate mortgage you can find!
Mortgage brokers have to be qualified to give you mortgage advice, whereas you may not get that kind of guarantee if you ring up a lender's call centre. That said, new regulations mean that all call centre staff need to be advisers or must refer you to someone who is, and if you went in-branch, you'd be able to arrange an appointment with one of their mortgage advisers.
An independent mortgage broker will look for the best mortgage for you. They aren't on the lender's side, they're on yours, and they'll give you access to far more products than if you went direct. You'd get unbiased advice and could choose from a range of lenders and subsequent products, rather than being restricted to the single range of the lender you go to.
Mortgage criteria has tightened massively over the past few years, with the Mortgage Market Review being the latest, and arguably widest-ranging, development. It's been designed to ensure borrowers can prove affordability, even in the event of a rate rise, and those extra checks have understandably increased application times.
That's why it's so important to stay in the loop – and to have a mortgage broker on your side who understands it all. A broker deals with lenders on a day-to-day basis, so they'll know what the application process is like for each one and can tell you which lender can process your application with minimal delays.
They also know the background criteria that a lender has and can bring this experience to bear when advising you and processing your application.
Then there's the fact that, because a mortgage broker may put a lot of business to a particular lender in a year, they can exert influence and chase things in a way you just can't do by yourself – and that can be invaluable should things get held up.
A mortgage broker won't just advise you about your mortgage. They will also look at any related life insurance, payment protection and even buildings and contents insurance you have.
They will recommend insurance based on your new mortgage arrangements to make sure you are fully protected in the event of:
Mortgage advice tailored to your situation is a service. In order for the mortgage broker to be able to offer this service they need to make money.
They do this by one or both of the following:
Mortgage brokers are required to provide you with a Key Facts document about their services that details any fees or commission they charge or earn.
You will also be provided with a Key Facts Illustration (KFI) about the specific mortgage being recommended.
Details of your broker's fees can be found in section 8 of the KFI.
Details of any commission earned by your broker for introducing your business to the mortgage lender can be found in section 13 of the KFI.
Mortgages are a lot more difficult than they first appear. Knowing what rate, what term, what lender, what features and what insurance to get are all time-consuming and complex matters.
Comparing mortgages on a site like moneyfacts.co.uk is a good place to start – it's great to get an idea of what's out there. But choosing a mortgage is a process far more complicated than simply opting for the lowest rate or the best incentives.
A mortgage broker takes your whole circumstances into account to recommend a suitable product, and it's that thorough, professional look at your finances that makes advice well worth paying for.
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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
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