Benefit of mortgage broker
Mortgage brokers act as an intermediary between an individual who wants to buy a property and those who are offering a loan to help these individuals afford their dream home. They help you as the ‘would-be borrower’ to find a lending institution with the best deal in terms of their interest rate and other factors.
Working with an experienced mortgage broker can help you find the best mortgage, but on top of that here are the other benefits of working with mortgage brokers.
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Why should I use a mortgage broker?
A mortgage broker is a perfect option if you are a potential homebuyer who needs some assistance in choosing the best lender and the best mortgage deal. Mortgage brokers know how to negotiate the best deals and can find a mortgage lender who does not have any hidden costs.
Legislative alterations have led to a tight hold on the rules about mortgage affordability checks, qualifications of mortgage brokers, and the information they have to share with potential borrowers about their fees and services.
The mortgage broker and lender must first consider the financial situation and assess if you can afford the mortgages they provide. They must prove they have done these checks. While the legislation made it harder to get a mortgage, it has made it completely safe to use a broker.
You can be at ease knowing that they will take a comprehensive financial assessment of your situation, which ensures that you will get a wide range of mortgages that you could definitely afford and be approved for.
With the already huge expense of buying property, it may seem like a better option to apply for a mortgage from a bank or go directly to the lender. While you may avoid the initial mortgage broker cost, you could face thousands of unneccessary pounds over the next few years if you choose a bad mortgage deal with fine print that you didn’t even know about!
Even if you know quite a bit about the mortgage market, you might miss a good deal by avoiding a mortgage broker, as they may have better access to a wide range of mortgages and exclusive deals with lenders.
Mortgage brokers also speed up the application process by preparing you fully and putting you in the right direction for the best mortgage you will be accepted for.
The benefits of mortgage brokers
There are many advantages to using a mortgage broker, which include their market knowledge and expertise in the field.
A mortgage broker can get the best deal for you
A mortgage broker can use their connections to find the best deal while remembering your demands and circumstances. Compared to dealing directly with lenders, brokers have access to a wide range of projects and lenders, giving you more options and leverage.
Since mortgage brokers are usually not affiliated with one single lender, they are usually not biased toward one brand/provider and can give you free advice.
They can save you time
Applying for a mortgage can take a lot of time, especially if you are doing it on your own. Since applying for a mortgage takes a lot of paperwork and phone calls, it’s even harder to do if you work full-time.
Using a mortgage broker can save you lots of time and effort as they will do all the legwork for you. This includes the paperwork, phoning various lenders, and chasing up with them for progress and updates. They also keep the mortgage process moving forward.
The broker can also work outside or around your work schedule if needed. Some brokers even offer an online application process, which is more convenient for you.
Mortgage brokers can give you expert advice
Whether it’s your first time getting a mortgage, looking to remortgage, or wanting to buy to let out property, a good mortgage broker can give you valuable advice and support you on every step. They will take time to get to know you and understand your goals to provide suitable products or lenders.
If you have questions about the mortgage process, the broker can help you clarify and provide answers, as well as help you sort out any hiccups in the mortgage application process.
A mortgage adviser can also give you insights about market trends that might affect your decision to buy property, tips on improving your credit score, and other factors of buying property. This includes taking property surveys.
Avoid rejection from lenders
Mortgage contracts need to have insurance, so they have to assess your financial situation and employment history to see whether you should be accepted for the loan. Your mortgage application could be rejected if you have poor credit, are self-employed or have an inconsistent job history, and are considered a high-risk mortgagor.
With a competent mortgage broker, you have a better chance of getting approved on your application. This is because they can negotiate deals on your behalf to convince the lender that you are a good candidate for the mortgage.
Additionally, if one lender rejects you, your advisor would know other lenders that will be more open to offering a mortgage.
A mortgage broker can get a better interest rate
Most mortgage brokers have access to exclusive deals and rates that are usually unavailable to the public. This is because they have special relationships with lenders and are able to get lower interest rates. Sometimes, they can even get you a discount!
If you have a bad credit score, a mortgage broker can make a deal with the lender to get you a better interest rate than if you applied directly. Using a mortgage broker will ensure that you get a lower interest rate, which reduces the amount of money you pay every month.
Disadvantages of working with a mortgage broker
While they may save you time on paperwork and the confusion on the research, there are also some disadvantages to working with a broker:
Mortgage broker fees may be a lot
You may be charged a hefty fee from your mortgage broker. They need to tell you what the fee is and how it is calculated before you hire them. This cost must be factored into the other costs you have when buying a house, such as legal fees, construction, and surveys.
Not all mortgage brokers look at the whole market
Some brokers earn a commission, which means that they may be biased toward one specific lender. In-house mortgage brokers will probably only tell you about mortgages from the lender they work for.
A mortgage lender who works with estate agents and housebuilders usually works from a closed panel of lenders. According to FCA, the commission is the main source of income for mortgage brokers, with it going up to 79% of revenue. However, they are still required to tell you what they will be paid before you apply with a lender.
You could miss out on direct-only deals
Using a mortgage broker may make you miss out on direct-only deals from some lenders. Additionally, brokers might not be able to advise you properly on ‘product transfers’ with the existing lender if you remortgage.
Not all mortgage lenders accept brokers
Some lenders do not work with mortgage brokers and only offer direct-only mortgage deals. This means that you may miss out on deals that only a broker can make, and be subject to high-interest rates and a deal that doesn’t really suit you or your pocket.
How does a mortgage broker get paid?
There are various ways mortgage brokers make money and charge their service fees. Sometimes, their service won’t cost you as they receive a commission from the lender. In other cases, you must pay a fee.
You have to be sure of any fees you have to pay the mortgage broker and how they are paid before working with them.
Possible ways you can be charged are:
- A straight fee- This is a fixed fee for the mortgage broker’s service; it doesn’t matter how many hours they worked.
- Hourly rate- This means that the more hours they work, the more you would have to pay them. Make sure you know the hourly rate of your mortgage broker before working with them.
- Commission-based- This is where the broker gets a small percentage of the total mortgage from the lender as a commission.
- A combination of the above three- Sometimes, a mortgage broker will get payment from you and the lender.
What do I bring when meeting with a mortgage broker?
When you come prepared for a meeting with your mortgage broker, the quicker the process becomes. It also allows the broker to prepare themselves and know how to search for the best mortgage products and lenders for you.
For your first-time meeting with a mortgage broker you will require to prepare the following documents:
- Your recent P60 form
- Payslips
- Recent bank statements
- Proof of current address
- Proof of identity – driver’s license or passport
- Self-assessment documents, if you have a business\self-employed
- Details of any debts you have
Can I go directly to the lender?
If you have done adequate research and are confident that you found the best deal for you, that’s okay!
Here are the pros and cons of going directly to a bank or building society.
Pros
- You do not pay mortgage broker fees
- Some lenders have direct-only deals, which are not accessible by a broker. You can potentially save a lot of pounds with deals like this.
- Your bank may offer lower mortgage rates if you have had a savings or current account with them for a while.
Cons
- You will not get exclusive deals that a broker usually can get from the lender.
- You will not receive proper advice, as certain lenders will only talk about their products rather than the whole market. You may be confused and forced into the deal.
- You would have to go through the application process with many lenders, which can be time-consuming. It can also affect your credit score if you’re applying to so many lenders at once.
FAQs
Can the mortgage broker get me a huge mortgage?
You will not get a more significant loan offer if your salary is low, but a good broker can reduce your monthly payments. Affordability is usually calculated over a normal 25-year mortgage term, so if you apply for a 30 to 35-year term, your repayments will be lower.
Is it worth the cost of getting a mortgage advisor?
Yes. Using a mortgage broker allows you to get access to the whole market, and they can help you with complicated financial situations, such as a bad credit score or an odd income. A mortgage advisor will be able to find a specialised lender for your situation.
What to do if my mortgage was rejected?
You can appeal the rejection, but it’s rare that the lender will want to change their mind. You should speak to the mortgage broker, as they will be able to figure out what went wrong with your application, and whether you should appeal or you should reapply with another lender. You can reapply for another mortgage within weeks or months.
Conclusion
There are many benefits to getting a competent mortgage broker. Although they do have some disadvantages, you stand to save a lot of money in the long run when you start paying your mortgage. Here at LoanCorp, you reap all the benefits from our qualified brokers so contact us now for expert advice