What’s the point of a mortgage broker?

Why when the internet provides limitless amounts of information and advice available at your fingertips would anyone still choose to use a mortgage broker? Add in the advent of comparison sites, and surely anyone internet savvy can find their own mortgage.

In many ways, the internet’s biggest benefit – its pervasiveness – is also its greatest drawback. With so much information out there it’s almost impossible to know which of it is reputable or accurate, and which of it applies to you. This is especially the case if you’re looking for a specialist mortgage either because of your personal circumstances or because of the peculiarities of the property you want to buy.

This is where a mortgage broker comes in. Combining up to date knowledge and experience of the mortgage market, mortgage brokers are the right people to cut through the confusion and find the most appropriate deal for you. We’ll take a look at the edge a mortgage broker can give you, as well as discussing what you should look for in a broker and what to ask them before you decide to give them your business.

What is a mortgage broker?

A mortgage broker is a financial advisor who specialises in giving advice about mortgages. Mortgage brokers are specifically trained and qualified in giving this advice, and like all financial advisors in the UK, have to be regulated by the Financial Conduct Authority (FCA). A mortgage broker works on your behalf to source the most appropriate mortgage for circumstances. They essentially act as a middleman between you, the borrower, and the lender, the bank or building society that lends you the money.

What is an independent mortgage broker?

Some mortgage brokers only work with a small number, or panel, of lenders. This clearly limits the number of mortgage deals that they can search when they are looking for a deal for you.

Whole-of-market brokers on the other hand have access to a much wider range of lenders, giving them more options. In addition, some also have access to direct offers from lenders that may not be advertised more widely.

The Financial Conduct Authority states that a firm shouldn’t call itself an independent mortgage adviser unless the firm’s product range across the market is ‘unlimited’.

The FCA advises any firm that wishes to be considered independent should ensure that its selection of products is broad enough to be representative of products from across the market. In addition, the range of products offered should be reviewed regularly, and shouldn’t materially disadvantage any customer. The firm should ensure that its selection of mortgage products is kept up to date.

When you are looking for a mortgage broker, using whole-of-market brokers increases the likelihood of your broker finding the most suitable deal for you.

Mortgage brokers match lenders to your situation

Mortgage brokers have an intimate knowledge of which lenders are happy to provide mortgages for specific types of circumstances and situations. 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 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.

If you are a buy-to-let landlord then a mortgage broker can help find those lenders that accept portfolios of certain sizes and houses of multiple occupancy.

They make it easier to find and complete a mortgage

Finding and then completing a mortgage is a stressful process. A mortgage broker can take away much of the administration and handling of the lender away from you. 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 usually have dedicated contacts in 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)

■ Redundancy

What are mortgage broker 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 income from 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. where the mortgage adviser receives a percentage of the total mortgage loan from the mortgage 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.

You’re protected if the mortgage advice was incorrect

When you receive mortgage advice, your mortgage 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 their advice is not up to scratch, you can complain and be compensated.