Whether you’re a first-time buyer trying to secure your first mortgage or have bought many properties over the years, a mortgage broker can be vital to securing the best possible deal. Securing a mortgage can be stressful, especially if you don’t have much experience in this area or have unusual circumstances. If you’re not sure, maybe it’s time to ask yourself ‘What is a mortgage broker and how can they help me?” Let’s find out.
What is a mortgage broker?
A mortgage broker is a professional or company that acts as an intermediary between you (the borrower) and potential mortgage lenders. Their job is to help you find the best mortgage deal available based on your individual financial situation. Rather than you contacting lenders directly, the mortgage broker does the legwork on your behalf, sifting through different options and presenting those that best meet your needs.
What does a mortgage broker do?
The role of a mortgage broker extends beyond simply finding you a mortgage. There are several key tasks they can help you with along the mortgage application and approval process including:
Advice
A mortgage broker will be able to assess your circumstances and any expected changes, they will be able to make recommendations on the most suitable products and explain the features, benefits and associated costs.
Financial assessment
Your mortgage broker will fully assess your financial situation. This helps them to understand your borrowing capacity.
Product recommendations
Based on your financial profile, your broker will suggest mortgage options that fit your needs, whether you’re looking for a fixed-rate, variable-rate, or tracker mortgage.
Whole of market access
There are lots of mortgage lenders that only operate through Mortgage Intermediaries, by using a mortgage broker they can provide product options from these lenders, who you may not have access to if you choose to go direct.
Application management
Your broker will guide you through the application, making sure all paperwork is completed correctly and submitted on time. They liaise with the lender on your behalf, ensuring that any queries or issues are addressed quickly.
Continuing advice and support
Whether you want clarification of specific terms or need some of the jargon in your contract simplifying, your mortgage broker will be on hand to ensure everything is crystal clear and you’re confident in your decision.
What are the pros of using a mortgage broker?
If you’re not sure about working with a broker, then it’s important to take some time to weigh up your options. These are some of the key advantages that come with working with a mortgage broker:
Convenience
One of the main benefits of using a mortgage broker is convenience. Rather than spending hours researching different lenders, comparing deals and dealing with paperwork, the broker handles all of this for you. They have access to a wide range of mortgage products and can quickly identify which deals are most suitable for your circumstances.
Expertise
Mortgage brokers are experienced professionals with in-depth knowledge of the UK property market. They are up to date with the latest lending criteria, helping you navigate complex situations like poor credit history or changing financial circumstances. This expertise is invaluable when trying to secure a mortgage, particularly if you’re unfamiliar with the process.
More choice
If you’re self-employed, on a zero-hour contract or have an unusual income structure, securing a mortgage directly from a lender can be more difficult. Many high street banks may be unwilling to lend in such cases due to rigid lending criteria. A mortgage broker, particularly one with access to the whole of the market, can present you with options from specialist lenders who are more flexible. This can increase your chances of finding a suitable mortgage.
What are some cons of using a mortgage broker?
Of course, as well as the pros, there are some drawbacks to using a broker which you need to consider, including:
Cost
Mortgage brokers don’t work for free. The fee for their services may be a flat rate or a percentage of the loan amount or they may receive a commission payment from the lender.. It’s important to clarify how your broker is paid before engaging their services, as this can affect the overall cost of your mortgage.
Restrictions
Not all mortgage brokers have access to the entire market. Some brokers are tied to a specific panel of lenders, meaning they can only offer products from those institutions. While this may still provide a range of options, it might restrict your choices. If you want to access a broader selection of deals, you could look for a whole-of-market broker.
Cost limitations
Your budget may influence whether you choose to use a broker or not, but in many circumstances, they can help you secure a better mortgage deal, so keep this in mind when considering their fees.
How much does a mortgage broker cost?
Mortgage broker fees can vary depending on the broker’s structure and the complexity of your case. Some brokers work on a commission basis, earning a fee from the lender once the mortgage is secured. Others may charge a fee directly to the borrower, which could be a flat fee ranging from £300 to £500 or a percentage of the loan usually around 0.3% to 1%.
You can find brokers who offer a combination of both – a smaller upfront fee supplemented by commission from the lender. When considering a broker, always ask for a clear breakdown of their fees. Remember to weigh the cost against the savings they could secure for you through a better mortgage deal.
Is a mortgage broker right for you?
Your confidence in understanding the property market and individual circumstances will dictate whether a broker is a good choice. They can be particularly useful for:
- First-time buyers – if you’re newly entering the property market, working with a mortgage broker can be invaluable. They can help ensure you avoid costly mistakes and simplify the mortgage process.
- Unusual finances – self-employed people and those with fluctuating incomes or even people with a less-than-perfect credit history can work with a broker to ensure they access the best possible deal for their situation.
- Busy lifestyles – many of us are time-poor and this, combined with not being an expert in this field means working with a broker is a great idea. They do all the legwork for you to ensure you get a deal which suits your needs.
If your financial situation is straightforward and you’re confident in your ability to find and apply for a mortgage directly, you may prefer to go it alone and save on broker fees. Many high street banks and building societies offer competitive rates and will work directly with borrowers.
Working with a mortgage broker gives you a valuable ally in your quest for the best possible mortgage deal. They offer convenience, support and guidance through what can be a complex process but this, of course, comes at a cost. At Pepper Money our focus is financial inclusion and with a broker, more people can access homeownership. Find a broker to suit your needs and secure a mortgage deal you’re more than happy with.