What is a broker?
A broker is simply a qualified and regulated mortgage adviser.
As there’s a mass of choice and deals can disappear fast, using a broker is a good idea for many people.
Quite simply, they save you trawling through deal after deal to find the cheapest one for your circumstances.
They have the experience to advise you on the best mortgage for you.
Brokers do have advantages over banks…
Just going to your existing bank or building society means you’ll only be offered its products – nothing wrong with that as a benchmark, but you really want to get the best deal from across the market.
That’s where a good mortgage broker can help. I often favour sorting your finances out yourself. But as mortgages are such a big single transaction, getting professional help can be a boon.
A broker should be able to quickly source a relevant product that fits your credit history, offer an extra layer of protection if things go wrong, and carry more clout with lenders to ease acceptance on otherwise unobtainable mortgages.
There are also some lenders that only work with brokers, and some broker-exclusive deals from lenders that are simply not available to individual customers; these are rare, but can be market-leading.
Residential mortgage brokers are strictly regulated by the Financial Conduct Authority (FCA). Yet beware. Not all mortgage brokers are equal.
The key questions to ask a broker
To ensure you pick a good broker, ask the following questions:
- “Do you check all the lenders?”
Some mortgage brokers are tied to one or a small panel and we’d dodge those.
The real choice is between one who checks all the lenders that work with brokers (these used to be known as ‘whole of market’) and ones that check all those plus the few extra ‘direct- only’ deals that brokers can’t set up for you.
- “How will you make your money?”
As mentioned earlier, brokers can make money in two ways:
- – Receiving a procuration fee from the lender. This is roughly £350 per £100,000 of mortgage. It doesn’t affect what you pay and will always be disclosed to borrowers.
- – Charging you a broker fee. If your broker does charge you a fee, this can be anywhere between £500 and £1,000
While it’s legal for them to do so, we’d avoid any broker that charges upfront or even before you complete your mortgage. In other words, don’t pay unless you get the mortgage.
Don’t think just because a broker’s charging you, it won’t be getting a fee from a lender. If the total fee from you and the lender is over £800 and it’s not complicated by issues such as your credit history not fitting, there may be room to haggle. And as the lender fee is usually a percentage of the loan amount, that really means haggling on bigger mortgages.
Mortgage brokers are regulated by the FCA, so the fact they earn commission shouldn’t influence their recommendation. The advice should be genuinely unbiased. If you’re not sure, ask the broker to explain what they based the recommendation on. If you’re not convinced, get a second opinion.
- “Are you qualified?”
Make sure you’re getting advice from a qualified adviser (the most recognised qualification is called CeMAP). They will assess your needs and eligibility before recommending the most suitable product for you. This route also offers the most protection for you as a consumer.
If the advice turns out to be wrong, the Financial Ombudsman Service will be able to investigate any wrongdoing. But if you choose a product yourself online, you’ll have no comeback if you make the wrong choice.
How to find a broker
But there are lots of extremely good local brokers and if you choose one carefully using the earlier questions, you should get decent service.
On the other hand, the big brokers boast greater market power and sometimes negotiate exclusive deals for their customers with lenders. They are independent of the lenders. If they charge a fee and are going to be paid commission on top by the bank or building society you go with, ask if they’ll rebate some of it back to you.
Here are the steps to getting a mortgage with a broker:
Choose a broker. You should be told explicitly what advice will cost at what stage and how you’ll be expected to pay.
Discuss your circumstances with the broker. They’ll recommend a deal.
Select a mortgage/accept the broker’s recommendation. The broker should recommend a mortgage deal that meets your requirements.
You (if you go direct) or your broker will make the application to the lender. Valuation and legal work. This should take anywhere from one to three months.