Worried about finding a mortgage or daunted by all the options available? If so, a broker can help.
Brokers work directly with lenders to help you find the best mortgage deals. On top of that, they help you complete confusing paperwork and chase up your application to ensure it’s progressing smoothly.
What is a mortgage broker?
A mortgage broker (or mortgage advisor) arranges mortgages between you and the lender. Brokers can operate as individuals or as part of a specialist company. They are great at scouring the market for deals which may not be available on the high street or if you’re a buyer in a more unusual financial situation. Given their expertise in the market, they can help all sorts of buyers – from those buying a property for the first time to people looking to remortgage.
Mortgage brokers also manage the essential paperwork the lender requires, ensuring it is all correctly completed.
Do mortgage brokers charge a fee?
Most do, some don’t. Some mortgage brokers advertise ‘fee-free’ services, but those who do are usually paid on commission by certain mortgage lenders. Of course, this restricts your mortgage options significantly and is less versatile than other paid options.
How much does a mortgage broker cost?
Broker fees and services vary significantly. The more experienced they are, and the more services they offer – the higher the price. Average fees are about £500, which can be charged differently. For example:
- Fixed costs – This is the simplest option, where the broker offers a fixed price for their mortgage advice.
- As a percentage – Like an estate agent, some brokers charge you based on a percentage of your mortgage amount.
- By the hour – some brokers choose to charge money by the hour. As such, they usually provide estimated costs based on the complexity of your situation and how much work it will require.
- Costs on commission – Some brokers work on commission from specific lenders to fund their ‘free service’. However, you might want to avoid being tied to these lenders, so it’s worth finding out who pays the broker commission.
However, if the broker wants you to pay their fees, you’ll need to ensure that they’re appropriately qualified first. And that they give you a good estimate of the cost in advance.
Are mortgage brokers worth it?
Like with any service provider, this depends upon the quality of the broker. There are a range of advantages and disadvantages you’ll have to weigh up.
Why should you use a mortgage broker?
They save time & effort
Unlike the average person, brokers know the market inside out. This means that they can save you the time it takes when applying for a mortgage. They’re already aware of the best and worst lenders, so they can quickly point you in the right direction.
Good access to lenders
Some lenders only work through brokers. This is because the broker brings in good clients and generates more business. Brokers have access to mortgage offers that you can’t find, and often better you with better interest rates.
Because of their special relationship with lenders, a mortgage broker can sometimes help you sidestep fees. It’s common for the lender to pile on administrative costs, application fees and more – but a broker can leverage their relationship to waive these added costs.
Good for new buyers
An independent mortgage advisor can take you through the whole buying process; they are a great choice for first-time buyers who don’t understand the market. They can do a lot better than a simple mortgage calculator and basic tools available to the average buyer. Their expertise can save even more time and money in this circumstance.
If you’re in a more complex financial situation, mortgage brokers can find the niche deals which work for you. For example, if you’re self-employed or have an irregular income. Equally, they’re experts at finding different types of mortgages – from interest-only deals to mortgages with a longer term than usual. Specialised buy-to-let mortgage brokers can also help you find the best deals for your BTL mortgage.
Help saving money
If you’ve got a tight budget, the broker will look at all the options available to find you a mortgage. They will also know which lenders are more lenient and, therefore, more likely to accept your application.
Unique property buying
If you’re looking to buy a period property, a building constructed with unconventional materials, or a flat above a shop – a broker can help. They can help you overcome the challenges of getting a mortgage for these buildings and lead you to the right deal.
Why you shouldn’t use a mortgage broker
They don’t always get the best deal
When you choose a broker, you’re dependent upon their skill and expertise. If the broker doesn’t have good connections or enough market awareness, they may not get you a good deal. In fact, the advantage may be so small that it’s better to choose a high-street lender. This is why it’s important to shop around and look at the average mortgage rates first.
Most mortgage brokers charge a fee, so you need to make sure the cost is worth it. For example, you need to factor it into your mortgage costs before you decide on their services. On the other hand, brokers who work on a lender’s commission may steer you into a more expensive service and not offer entirely independent financial advice.
Brokers will contact lenders to find a deal for you. Based on their conversations with the lender, they will present you with a ‘good faith’ mortgage estimate. However, the lender may adjust the mortgage estimate based on your actual application – meaning you pay more in the end. This is why it’s important to work with a skilled broker to ensure that any estimates they give are sufficiently accurate and stated with caution.
Some lenders exclude brokers
This is because they want your business directly. Their deals may be better than the ones offered through your broker, but the broker won’t be able to access them. This is another reason why it’s important to explore the options available first before you choose a broker.
Why use a mortgage broker instead of a bank?
Primarily because they’re employed to find the best deal for you and pay careful attention to your situation to find the right mortgage, they can also offer a wider range of products and find deals you couldn’t get on your own. This is especially true if you’re in a unique financial situation, a first-time buyer, or want to buy a property that’s hard to mortgage conventionally.
How to choose the right mortgage broker
If you decide to use a broker, they really must be regulated by the Financial Conduct Authority (FCA) and have the appropriate experience. For good measure, the most reputable firms should be part of the Association of Mortgage Intermediaries (AMI) too. They are another regulatory body for intermediary services, including brokers and independent financial advisors.
If you’re looking for a place to start looking, Unbiased and the Personal Finance Society allow you to search for qualified brokers. Equally, word of mouth is an excellent way to find an advisor. Suppose a friend or family member has used a broker who fought for them, found excellent deals, and remained responsive and helpful throughout the process. If so, that broker is worth looking into.
How long does a mortgage application take through a broker?
The average mortgage application can take 2-6 weeks to complete, and using a broker does not reduce this period by a set amount.
However, there are several ways a broker can speed up the process. They make it as efficient as possible and reduce unnecessary delays by:
- Dealing with the mortgage application and Agreement in Principle
- Filling out complex paperwork and transferring it to the correct people
- Working with underwriters to resolve any queries
- Contacting the lender on your behalf
- Pursuing slow conveyancers and underwriters for application updates
In summary, because it’s the broker’s full-time job, they can pursue all relevant parties daily for updates and fight your corner throughout the application process. It’s likely you’d need more time, energy and expertise to do this on your own.
Like any service, finding the right provider is critical. The best mortgage brokers are qualified, experienced and proactive, resulting in a better mortgage deal. Alternatively, you may prefer a hands-on approach and want to manage the process yourself. If you explore your options before you make a decision, you increase the chance of a positive outcome – whether or not you choose a broker or lender.