DO I NEED TO USE A MORTGAGE BROKER?
If you’re looking for a mortgage, you might be wondering whether or not you should talk to a mortgage broker or go directly to the lender.
These days, brokers do more than simply churn out a list of available mortgages for a hefty fee, so it could be worth your while to see what they can offer.
Why should I use a mortgage broker?
Legislative changes, most notably in the Mortgage Market Review in 2014, have resulted in a tightening of the rules with regards to mortgage “affordability” checks, the qualifications of all mortgage brokers, and the information brokers must provide to borrowers about their services and their fees.
Since the changes, both lenders and brokers must consider your financial situation and assess your affordability when suggesting suitable mortgages for you. Moreover, they must be able to prove they have done this.
Whilst this legislative revolution has made it harder to obtain a mortgage, it’s also made it far safer to use a mortgage broker.
You can now trust they will undertake a full comprehensive financial assessment and therefore only give you a range of mortgages you will almost certainly be eligible for.
With the huge expense of buying your first home or moving house, it may be tempting to consider the ‘cheaper’ option of applying for a mortgage with your own bank, or by going direct to another lender for your mortgage.
However, avoiding paying broker fees (though there are plenty of reputable fee-free brokers out there) to save a few pennies now could could cost you thousands over the next few years if you opted for a bad mortgage.
Even if you think you do not need the advice of a broker and know enough about the mortgage market without one, you may be missing a trick.
Some brokers have access to a larger range of mortgages (such as via exclusive deals with lenders) and can help speed up the application process by getting you fully prepared and steering you towards mortgages you will most likely be accepted for.
Can I get a mortgage directly from a lender?
If you have done your research and found your perfect mortgage, are confident that you have found the best deal, or you simply want the convenience of asking your current bank for a mortgage, then that’s your prerogative.
Indeed, there can be some merits to going directly to a lender for your mortgage…just be aware of the pitfalls too:
Some banks offer preferential mortgage rates if you already have a current or savings account with them.
Some lenders have exclusive ‘direct only’ deals that a broker would not have access to.
You avoid paying broker fees.
The advice you get from lenders will only refer to their own products rather than an unbiased view of the market as a whole.
You will not gain access to any broker-only deals, even if they’re offered by your chosen lender.
How do I get a mortgage through a broker?
If you are planning to employ the services of a broker, do your homework first: ask friends and family for a recommendation, check the internet for reviews, and suss out their fee structure.
Ask them outright how many lenders they work with – the more lenders, the more options you have at your disposal and the more likely you could be to get a good deal.
Generally, there are three types of broker:
Tied brokers: These are usually recommended to you by a particular mortgage lender and only offer deals from that one mortgage provider.
Multi-tied brokers: These offer a limited range of mortgages from a panel of mortgage lenders.
Independent brokers: Also known as ‘whole of market brokers’, these investigate the entire mortgage market to find the best product for you. However, “whole of market” does not cover every single deal, as the name suggests. (Avenue Financial Solutions are independent brokers)
This is because some lenders, like First Direct, do not work with brokers and only offer mortgages to borrowers directly.
Since the legislative changes, mortgage brokers have to state from the outset exactly what range of mortgages they can offer. For the most wide-ranging advice and products, it is always advisable to choose an independent broker that offers a ‘whole of market’ service.
A broker’s advice will be tailored to your individual financial situation and needs and can therefore advise you on your suitability to all products.
Can gain access to the whole of the mortgage market, meaning that they have a greater chance of finding that perfect mortgage for you.
Have access to ‘broker only’ deals
Do the searching for you and liaise with your chosen lender, which can save you huge amounts of time and stress.
Expert in their field so could help you find the very latest deals and have in-depth knowledge of the habits and anomalies of different lenders.
For example, if you are time-strapped, they may be able to tell you which lenders work quickest or if affordability is your main concern, brokers may know which lenders take certain expenditures into consideration during your affordability assessment (including school fees, childcare costs, commuting costs, pension contributions).
Mortgage brokering is a business, and brokers may charge a fee for their services. This can be in the form of an hourly rate, a flat fee, a commission-based fee paid by the lender, or a combination of all three.
Whichever way they charge, brokers are obliged to outline all fees in an initial disclosure document. If your broker is charging a fee and is paid a commission by the lender, it’s worth asking if they will offset some of their commission against the cost of your deal (you never know!)
You may miss out on direct-only deals which could be cheaper than those offered via a broker. That said, a good broker may include these offers in any market assessment, but you will have to make the application directly.
When deciding on whether or not to use a mortgage broker, a balanced approach may be the best solution.
Do your own research online first, ask your current bank and other direct-only lenders what deals they have available and then speak to a reputable mortgage broker to see what else is available and suitable for your personal circumstances.
That way you’ll get the holistic advice and information you need in order to get the very best mortgage for you.