Buying a new home means finding the right people to help. From your conveyancing solicitor to your surveyor, having the right people on your side makes a property purchase much easier. But what about a mortgage broker?
There are pros and cons to using a mortgage broker. However, you’re not required to use one from a legal perspective, and there are other ways to find the perfect mortgage for you. Do you need a mortgage to buy a house? In most cases, yes. Do you need a mortgage broker to buy a house? Not necessarily.
Here’s what you need to know about mortgage brokers.
What Does a Mortgage Broker Do?
The simplest explanation of what a mortgage broker does is that they act as an intermediary. They can help you find the right mortgage and will then arrange a good deal on that mortgage. Qualified mortgage brokers are specialists in finding the mortgage that most suits your finances and circumstances.
Generally, a mortgage broker will save you time by shortlisting the best mortgages for you, helping you with your mortgage application and dealing with a lot of the paperwork on your behalf. However, there are three different types of mortgage brokers. These are:
- Tied mortgage brokers: These brokers can offer you a mortgage only from a specific single lender.
- Multi-tied mortgage brokers: These brokers can offer you a mortgage from a select panel of mortgage providers.
- Whole-of-market brokers: These brokers have access to all of the mortgage products available on the market.
As you can imagine, whole-of-market mortgage brokers tend to be the best option if you decide to use a broker. They can find you better deals from a wider range of lenders, including help to buy mortgages, and have far fewer restrictions.
The Benefits of Using a Mortgage Broker
It costs money to use a mortgage broker of any kind. While you’re probably already feeling quite daunted about the cost of buying a home, there are benefits to using a mortgage broker.
If you don’t use a mortgage broker, you can go from bank to bank looking for the best deals. Doing it yourself takes time, but you will find a lot of information regarding the fees that come with each provider, and the different interest rates they offer. This can be time-consuming, though, which is where your mortgage broker comes in.
Not only will they compile and compare all of the different deals available to you, but they may also have established relationships with different mortgage providers. That relationship can work in your favour because it can help to speed up the application process.
A good mortgage broker will also be tapped into the mortgage industry as a whole. They will know about upcoming changes in the market, and they’ll have insights into low-interest-rate mortgages that you might not be able to find on your own.
So the benefits of using a mortgage broker include:
- They know the market and are aware of the best mortgages available and any special deals they may have access to.
- They can match lenders to suit your specific needs and circumstances.
- They will liaise with mortgage lenders on your behalf, reducing the stress and boosting the chance of getting mortgage approval.
So there are clear benefits to using a mortgage broker, despite the cost attached.
Who Should Use a Mortgage Broker?
Anyone can get a mortgage broker when they want to buy a house. They have some clear advantages for specific types of buyers, though, especially those in unique situations. Hiring a mortgage broker is particularly useful if you:
- Want advice on all of your mortgage options
- Are remortgaging and looking for deals that you can’t find on your own
- Work as a freelancer or are self-employed and have irregular earnings
- Want to raise a mortgage on a second property so that you can pay the deposit on your first property
- Are looking for a bridging loan to cover the financial transition between selling and buying a new home.
So while you don’t need to use a mortgage broker, they certainly can help. The more unique your situation, the more useful you may find using a broker to be.
How to Choose a Mortgage Broker
If you’ve decided to use a mortgage broker, you need to pick the right one for you. Here’s what to look for before you commit.
Whole of market
If you’re using a mortgage broker, you want to ensure they have access to the best mortgage deals available. A whole-of-market mortgage broker won’t be tied to specific lenders, so they won’t be stuck trying to flog you a deal based on those limitations.
Talk to different brokers and ensure they are whole-of-market brokers. If you choose a broker tied to a specific lender, you’re not getting full access to all of your available options.
Understanding Direct-Only Mortgage Deals
Some mortgage lenders do not like working with brokers. So they won’t provide access to their best deals if you’re using a mortgage broker. Some big-name lenders like FirstDirect and HSBC don’t offer any mortgages through a mortgage broker. Other lenders will only work with specific brokers.
So if you do choose a broker, be aware that even if they’re whole-of-market, they may still miss out on some deals. Talk to your dealer to find out what you might be missing out on.
Check the Fees
There’s a lot of money involved with buying a new home. The last thing you need is to get hit with unexpected fees that stretch your budget. Mortgage brokers can be paid in different ways, with some earning a commission from the mortgage lenders. Others will simply charge you a set rate, although this can be a percentage of your borrowed mortgage.
When you’re looking at how your mortgage broker will be paid, it’s best to choose one that is “fee-free”. These will charge the mortgage company instead of you.
Don’t forget that your mortgage broker has to provide you with a full breakdown of their fees, charges and commission. This will be given to you in an Initial Disclosure Document.
Online vs Local Mortgage Brokers
There are now more mortgage brokers than ever, and some of them work online only. With a few search queries, you can find the right online mortgage broker with just the click of a few buttons and have a chat on a messaging app.
This can be useful if you don’t particularly want face-to-face meetings with your broker, and using online brokers often means less paperwork. Online brokers are fast, and they will usually have lower fees. Where they fall down is that they lack the human touch. Judgement is automated, so they may overlook your unique circumstances.
You’ll also get less help from an online mortgage broker. If your situation is fairly straightforward, an online mortgage broker can be very convenient and low-cost. The more complicated your circumstances, the less useful you’ll find online brokers.
Questions to Ask Your Shortlist of Mortgage Brokers
You don’t have to use a mortgage broker at all if you’d rather not. You can head to banks and credit unions yourself easily enough. In some cases, you may even get a better deal from a bank if you have been banking with them for a while. Paperwork can be minimised, too, especially if they already have access to your bank statements and payment history.
But if you do decide to use a mortgage broker, here are the questions you need to ask them:
- Are you whole of market?
- What lenders are you excluded from?
- Will you let me know if there are any cheaper direct deals?
- What are your fees?
- Who pays your fees (you or the mortgage company)?
- What services do you provide (for example, chasing down lenders or filling out paperwork on your behalf)?
- When are you available to contact? Are you available at weekends and in the evenings, or only during office hours?
When choosing the best mortgage broker, you can never ask too many questions.
Getting a Mortgage through Your Estate Agent
You may find that your estate agent will also offer you some kind of mortgage arrangement service. Don’t snap that offer up, even if you’ve got a great relationship with your estate agent. Always shop around for better mortgage deals, as estate agents may not be the most reliable source of a mortgage, because:
- They will almost certainly be earning a commission, which may end up coming out of your pocket
- They will have an extremely limited choice of mortgages.
Whatever your estate agent tells you, you are never obligated to accept any mortgage offer they make. It’s common for estate agents to recommend specific mortgages or conveyancing solicitors, and in some cases, they could end up being ideally suited to you and your situation. However, do your research before agreeing to an estate agent’s recommended mortgage.
Using a Mortgage Broker to Buy a House
How much you end up paying for your new home will depend on finding the right mortgage deal to suit your circumstances. Whether you search for that mortgage yourself or use a broker, the right mortgage can lead to some big savings over the years ahead.
One final thing to bear in mind is that it’s likely your mortgage broker will offer you special deals on building insurance and/or content insurance. Don’t dismiss this immediately; it may be a good deal. However, like the mortgage itself, you should always shop around, as you may find a better policy at a lower price.
So do your research, and ensure you have a clear understanding of the different types of mortgage brokers. Compare prices, interest rates and fees. Use a fee-free broker, and you could save thousands.
Don’t forget that if you’re planning to buy a home, it’s best to get a conveyancing solicitor involved in the process as early as possible. The quicker they can start working on your behalf; the more streamlined your property purchase will be. Contact the friendly office team at Lockings today, and find out how we can help you get the keys to your new home faster and more stress-free.