Should I use a mortgage broker?

What is a mortgage broker?

A mortgage broker is an adviser that specialises in finding lenders who can offer you the ideal mortgage for your needs. They do this by providing tailored advice and scouring the market to find and recommend suitable mortgage deals, often finding several to choose from based on your unique circumstances. They will then manage your mortgage application from start to finish, aiming to give you the best possible chance of securing the outcome you want.

Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and must have specific qualifications to provide advice and brokerage services. This means you can be confident that you’ll have the right mortgage for your needs.

Mortgage broker vs. lender

It’s worth clarifying that a mortgage broker is not the same as a mortgage lender. A broker acts as an intermediary by providing advice and support to secure a mortgage, while the lender actually sells and arranges the mortgage loan.

A broker typically isn’t tied to any provider or product and can instead offer whole-of-market advice, while a lender can only offer products from its own range. It can get a little more complicated when a broker works on behalf of a specific lender, but the core difference – advice vs. selling – remains.

Why use a mortgage broker?

While you can always compare mortgages and apply for one yourself, a mortgage broker can make the process easier, and could even save you money by helping you access the very best deals. Here are a few benefits of using a mortgage broker:

You will have a wider choice of mortgages

By using a mortgage broker, you will have access to more mortgages than are available directly to you as a consumer. This is because a broker can access mortgage deals not available to the public – some lenders offer deals exclusively via brokers, for example – yet they’ll still only recommend mortgages that are most relevant to your requirements.

The best mortgage brokers will work with you from the outset to determine your precise needs, covering everything from affordability to credit scores. This means you’ll have an invaluable level of support, and because they can access so many deals, you’ll have a much better chance of finding the mortgage to suit.

Mortgage brokers match lenders to your situation

Mortgage brokers have an intimate knowledge of which lenders are happy to provide mortgages for specific circumstances, and therefore which ones are most likely to accept your application. This can be particularly helpful if you have requirements that might be classed as “non-standard”.

For example, some mortgage lenders will not accept properties that have a thatched roof or are of an unusual construction type, others may not accept settled county court judgements (CCJs) and some will have different criteria if you are self-employed or still in a probationary period at work.

A mortgage broker can also help if you need to buy a property more quickly than a traditional mortgage process would allow, or if you are looking to build a new home or development.

And, if you are a buy-to-let landlord, a mortgage broker can help find those lenders that accept portfolios of certain sizes and houses of multiple occupation.

They make it easier to find and complete a mortgage

Finding and completing a mortgage can be a stressful process. Mortgage brokers remove a lot of the paperwork and hassle of securing a deal by taking on the administration for you and dealing with the lender themselves.

For example, they will know exactly what each lender will require from you at the beginning of your application, reducing the time spent going back and forth with new requests for information. And mortgage brokers often have dedicated contacts with each mortgage lender, meaning they have a direct route to help progress your mortgage application.

They will consider your wider mortgage needs

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 death, critical illness (such as cancer, heart attack or stroke) and redundancy, for example.

You're protected if the mortgage advice is incorrect

When you receive mortgage advice, your 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 you find at a later date that their advice is incorrect, you can complain and may be eligible for compensation.

Risks of not getting advice

One of the biggest risks of not getting advice is that you won’t have the right mortgage at the end of the process. This could mean you’re left with a higher mortgage rate or higher fees, either one of which could add thousands of pounds to your mortgage payments.

There’s also the chance that you could be denied a mortgage altogether. If you approach a lender which isn’t suitable for your circumstances or you’ve got more complicated needs, you may find it difficult to be accepted, but a broker can help you avoid that possibility.

Do mortgage brokers charge fees?

Mortgage brokers may charge you a fee for their mortgage advice, or they may offer their advice for free and instead earn their income from commission paid to them by the mortgage lender. They may also earn commission on mortgage protection and insurance products.

Mortgage brokers can charge their fees in different ways:

• Fixed fee. This is usually a single fee that is fixed for the totality of their mortgage advice to you.
• Hourly rate. This is a variable charge, meaning the more hours you use the more you will be charged.
• Percentage fee. This is where the adviser receives a percentage of the total mortgage loan from the lender as a commission. The broker must disclose this percentage fee to you, including the percentage rate. You may or may not also be charged a separate direct fee from the mortgage adviser.
• Combination of fees. A combination of different fee types shown above.
• No fee. The mortgage adviser may choose to not charge you a direct fee. In these cases, they almost certainly will receive a percentage as commission from the mortgage lender.

Mortgage brokers are also required to provide you with a Key Facts document about their services that details any fees or commission they charge or earn.

What should you ask a mortgage broker?

You should ask any potential broker several questions before agreeing to proceed with them. These include:

Are you approved by the Financial Conduct Authority?

Your adviser must be regulated by the FCA and you can check this on the FCA register. The risk of not using a regulated advisor is that you will not have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if things go wrong.

Are you qualified and what experience do you have?

Your mortgage adviser should be qualified to the required level and should have an annual statement of practice. Try to find out about the type of mortgages they have handled in the past and see that these match your circumstances. You can also check if they are a member of the Association of Mortgage Intermediaries – while this is not mandatory it does show your broker is active in their professional community.

Do brokers offer independent advice?

Mortgage brokers can offer whole-of-market advice, which means they are independent and can consider mortgages from all possible lenders.

Some advisers are restricted, which means they can only offer advice for specific lenders and their products. An example of this would be a mortgage adviser in a bank, who may be restricted to only the products available from the bank they work for. Some advisers may do both, in which case you should agree the basis of how you will work together.

It's always worth checking whether an adviser looks at whole-of-market, a specific panel of lenders or solely their own products.

How will you charge for your advice?

Make sure all fees are agreed upfront. Your mortgage adviser may offer a free consultation and after this they may charge an advice fee, or they could provide their services free of charge if they are receiving a commission from the mortgage lender.

If you have ongoing mortgage advice needs, don’t be afraid to negotiate the price of any fees and charges.

How do you provide your advice?

Find out if your mortgage adviser will see you in person, by phone or email, or a combination of all three to help identify and assess your mortgage needs. You also need to check if the costs of receiving your advice in different ways will vary.

You should also check that you will receive a report of recommendations or options as part of their mortgage advice. This may be called a ‘suitability report’. This report outlines the broker’s decision and why they decided that a particular product was the most suitable for your situation.

How to prepare for a meeting with a mortgage adviser

A mortgage interview is all about proving eligibility for a mortgage, so be prepared for your finances to be thoroughly scrutinised.

You will need to bring evidence of your income and outgoings (plus those of anyone else who will be taking the mortgage with you), so make sure to have some recent bank statements and payslips to hand (three months’ worth is usually sufficient). You should also check which insurances you have in place and be clear on the value and construction type of the property you want to buy.

You should also consider the type of mortgage you’re looking for. For example, would you prefer to fix the rate of interest to guarantee the repayments, or would you prefer a variable rate that you’re not tied into to give you more scope to pay off your mortgage early? Your broker will be able to help you answer these questions, but it’s a good plan to have some idea of what you’re looking for at the outset.