Should I use a mortgage broker?

A mortgage broker specialises in finding lenders who will meet your needs for a mortgage. They do this by providing you with advice and recommending the mortgages most suitable for you. They will then manage completing your mortgage application. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and need to achieve specific qualifications to be a mortgage broker.

A mortgage broker will only recommend mortgages that are most relevant to your requirements and they must be qualified to give mortgage advice to you. They will also be able to access mortgage deals not available directly to the public and will have an intimate knowledge of which lenders are most likely to accept your mortgage application. Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage and if you find at a later date that the advice you have received is not correct, you may be able to claim against them.

When you receive mortgage advice, your mortgage broker has a duty of care to you. They must recommend a suitable mortgage and be able to justify why the mortgage they have chosen is right for you. If their advice is not up to scratch, you can complain and be compensated.

Mortgage brokers must achieve a suitable mortgage advice qualification as required by the FCA to be able to give advice.

By using a mortgage broker, you will have access to more mortgages than available directly to you as a consumer. This is because there are mortgage lenders who only lend through mortgage brokers and many lenders who create exclusive mortgages only available through a mortgage broker.

Mortgage brokers have an intimate knowledge of which lenders are happy to provide mortgages for specific types of circumstances and situations. For example, some mortgage lenders will not accept properties that have a thatched roof or are of an unusual construction type, others may not accept settled CCJs and some will have different criteria if you are self-employed or still in a probationary period at work.

A mortgage broker can also help if you need to buy a property more quickly than a traditional mortgage process would allow or if you are looking to build a new home or development.

If you are a buy-to-let landlord then a mortgage broker can help find those lenders that accept portfolios of certain sizes and houses of multiple occupation.

Finding and then completing a mortgage is a stressful process. A mortgage broker can take away much of the administration and handling of the lender away from you. For example, they will know exactly what each lender will require from you at the beginning of your application, reducing the time spent going back and forth with new requests for information. And, mortgage brokers usually have dedicated contacts in each mortgage lender, meaning they have a direct route to help progress your mortgage application.

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 cover you have.
They will recommend insurance based on your new mortgage arrangements to make sure you are fully protected in the event of:

• Death
• Critical illness (such as cancer, heart attack or stroke)
• Redundancy

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Mortgage brokers may charge you a fee for their mortgage advice or they may offer their advice for free and instead earn their income from commission paid to them by the mortgage lender. They may also earn income from commission on mortgage protection and insurance products.

Moneyfacts has chosen Mortgage Advice Bureau as its preferred mortgage broker. They offer fee free mortgage advice for Moneyfacts visitors that call on 0808 149 9177 or email moneyfacts@mab.org.uk.

• Fixed fee – this is usually a single fee that is fixed for the totality of their mortgage advice to you.
• Hourly rate – this is a variable charge, meaning the more hours you use the more you will be charged.
• Percentage fee – this is where the mortgage adviser receives a percentage of the total mortgage loan from the mortgage lender as a commission. The broker must disclose this percentage fee to you including the percentage rate. You may or may not also be charged a separate direct fee from the mortgage adviser.
• Combination of fees – a combination of different fee types shown above.
• No fee – the mortgage adviser may choose to not charge you a direct fee. In these cases, they almost certainly will receive a percentage as commission from the mortgage lender.

Mortgage brokers are also required to provide you with a Key Facts document about their services that details any fees or commission they charge or earn. You can find your broker’s fees in section 8 of this document and any details on commission is in section 13.

You need to check your broker is registered with the FCA, holds the correct qualifications, if they give whole of market advice and are independent and how they intend to charge their fees.

Your adviser must be regulated by the FCA and you can check this on the FCA register. The risk of not using a regulated advisor is that you will not have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if things go wrong.

Your mortgage adviser should be qualified to the required level and should have an annual statement of practice. Try to find out about the type of mortgages they have handled in the past and see that these match your circumstances. You can also check if they are a member of the Association of Mortgage Intermediaries – while this is not mandatory it does show your broker is active in their professional community.

Mortgage brokers can offer whole of market advice, which means they are independent and can consider mortgages from all possible lenders. Some advisers are restricted, which means they can only offer advice for specific lenders and their products. An example of this would be a mortgage adviser in a bank, who may be restricted to only the products available from the bank they work for. Some advisers may do both, in which case you should agree the basis of how you will work together.

Make sure all fees are agreed up front. Your mortgage adviser may offer a free consultation and after this they may charge an advice fee or provide this free of charge if they are receiving commission from the mortgage lender. If you have ongoing mortgage advice needs, then don’t be afraid to negotiate the price of the adviser’s fees.

Find out if your mortgage adviser will see you in person, by phone or by email or a combination of all three to help identify and assess your mortgage needs. You should also check that you will receive a report of recommendations or options as part of their mortgage advice. This may be called a ‘suitability report’. You also need to check if the costs of receiving your advice in different ways varies.

You will need to bring evidence of your income and outgoings (plus anyone else who will be taking the mortgage with you); your bank statements and pay slips are useful for this. You should also check which insurances you have in place and be clear on the value and construction type of the property you want to buy. You should also consider if you would prefer to fix the rate of interest on your mortgage and if you are happier with potentially a lower rate variable mortgage that comes with the chance it may change in the future.

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