What is a mortgage broker?
A mortgage broker is a financial adviser who specialises in offering advice on mortgages. A key thing to remember when using a mortgage broker is that they have a duty of care towards you and are obliged to recommend the mortgages most suitable for you and be able to justify that recommendation.
Why use a mortgage broker?
What does a mortgage broker do that you can't? And why should you pay for their services when there are already 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…
1. You're protected
An important thing to understand is that 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.
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, 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.)
2. A mortgage broker is qualified
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 must be qualified to give you mortgage advice, whereas a person you speak to in a lender’s call centre may not be so well qualified. That said, new regulations mean that all call centre staff need to be advisers or must refer you to someone who is. Therefore, if you visit in-branch you’ll be able to arrange an appointment with one of their mortgage advisers.
3. A broker is on your side
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 should expect unbiased advice and to be able to choose from a range of lenders and subsequent products, rather than being restricted to the single range of the lender you contact directly.
4. They know the industry
Mortgage eligibility criteria have tightened considerably over the last few years. The rules are designed to ensure borrowers can prove affordability, even in the event of a rate rise. Understandably, these extra checks have 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 – they'll know what the application process is like for each one and which lender can process things with minimal delays.
A mortgage broker also knows the background criteria that each 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 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.
5. It's not just about the mortgage
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:
DeathCritical illness (such as cancer, heart attack or stroke)Redundancy.
6. Don't be put off by a fee
Mortgage advice tailored to your situation is a valuable service. 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:
Charging a fee. This could be a one-off fee for advice, or a fee that pays for advice throughout the term of your mortgage (if you need to remortgage, move home, etc.).Commission. Lenders and insurers may decide to pay the mortgage broker commission for putting your business their way.
7. The value of advice
Mortgages are a lot more difficult than they first appear. Knowing what rate, term, lender, features and 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. It’s this thorough, professional look at your finances that makes their advice well worth paying for.
How can I find out how much my mortgage broker makes?
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.
Published by Moneyfacts
Leanne Macardle
Editor
