Mortgage brokers are financial advisors that specialise – as their name suggests – in mortgages. They work with individuals looking for mortgages, carrying out affordability assessments, explaining the application process, and recommending the best deals based on a borrower’s personal circumstances.
Different Types Of Mortgage Brokers
There are three types of mortgage broker, including ones who:
- Work with only one lender
- Work with a set group of lenders
- Are independent and not tied to any lender(s)
Not all lenders work with mortgage brokers, HSBC for example, and some will only work with specific brokers. It’s important to bear this in mind as even independent brokers can’t recommend these mortgages to you so you may be missing out on a good deal.
Who Do Mortgage Brokers Work With?
Anyone who wants to get the best deal on their mortgage can work with a mortgage broker; there are no restrictions. However, they can be particularly useful in certain circumstances, including if you:
- Are self-employed or have irregular earnings
- Want to raise a mortgage on one property to pay the deposit on another
- Are a first-time buyer and need help navigating your way through the sometimes confusing mortgage application process
- Need a bridging loan
- Have poor credit or are concerned about being accepted because of your financial situation.
The Benefits Of Using A Mortgage Broker
There are five key benefits of using a mortgage broker:
1. They work for you
Mortgage brokers have a responsibility to provide you with the best advice and only act in your best interests when it comes to recommending a mortgage. That advice should be unbiased. If required, they need to be able to evidence why they recommended a specific mortgage and, if they are proved to have acted against your best interests when making the recommendation, you may be able to be compensated.
If you feel you received bad advice from a mortgage broker you should first complain in writing to the lender, financial advisor or broker. If they don’t respond satisfactorily in eight weeks, you can raise your complaint with the Financial Ombudsman Service.
2. They are qualified and regulated
Mortgage brokers must be qualified in order to give advice. Their qualifications are approved by the Financial Conduct Authority, which also regulates the industry, and covers the mortgage market, law, and regulations.
There are different qualifications and levels available. CeMAP is considered the industry benchmark and a mark of excellence and professionalism; check if your broker has this qualification.
3. They know the industry
Mortgage brokers have one job, and that is to work with you to find the best mortgage deal. To do that, they need to know the mortgage industry inside out. This includes what type of mortgages are available and what interest rates lenders are offering as well as any relevant legislation.
Look for a mortgage broker who has been working in the sector for at least a couple of years and can evidence good relationships with lenders as they may be able to negotiate a better deal for you.
4. They reduce the risk of a lender turning you down
Following the financial crash of 2008, the government introduced stricter rules and regulations for lenders about who they could offer a mortgage to. This included introducing the Mortgage Market Review (MMR), an affordability assessment for borrowers. The MMR has made it more difficult for people to get mortgages, especially if they don’t have large deposits or have a low credit rating. A mortgage broker will complete an affordability assessment and only recommend mortgages that are suitable based on your financial situation.
5. They can offer related financial advice
When you take out a mortgage, you also need to think about building and contents insurance and related insurance such as death, critical illness or redundancy, which will help you make mortgage payments if something happens to you or your family. A mortgage broker can advise you on insurance options, helping find you a good deal.
Insurance companies may pay mortgage brokers commission for recommending their policies; if they are, it might be better to shop around for other deals.
Mortgage Broker Fees
Mortgage brokers are paid by either charging you or the lender a fee. Most brokers will charge a one-off fee that covers all advice, recommendations and support. Any fees will be included in the broker’s Key Facts Illustration document, and you shouldn’t be charged more than this.