How to Choose a Mortgage Broker

How to Choose a Mortgage Broker

Unless you’ve won the lottery or come into a heap of cash, the odds are that you’ll be using a mortgage to fund your property purchase. Property is usually the most expensive thing you’ll buy in your life so it’s important to get the mortgage part right and avoid common mistakes. This article will help you select the right mortgage broker for you to work with. But first, let’s assess if you need a mortgage broker at all. 

Do you have to use a mortgage broker?

No. It’s not compulsory to use a mortgage broker (or adviser, they basically mean the same thing). You could do everything yourself, go to a bank or building society directly, or you could have a professional broker with access to multiple banks do everything for you and support you along the way.

Why do people use mortgage brokers?

Home buyers use mortgage brokers because of the value and service they provide. You’ll likely look at mortgages a few times in your entire life. Mortgage brokers are keeping up to date with them every day as that’s their job, so they know their stuff.

A good mortgage broker, who specialises in your specific situation e.g. first time buyers, buy to lets, and so on, will be able to guide you through every step of the process, answer all the questions you have, and do all the applying and submitting for you. You will not have that support if you arrange everything yourself (or the protection of using a regulated broker) and independent brokers have to provide great service to stay in business.

Mortgage brokers often have access to lenders not available to the public. Examples are Platform (who were in the news recently for record low interest rates) and Accord who offer some great criteria, especially for people buying flats with small deposits. 

Should you use a mortgage broker?

Absolutely. All you need to do is provide them with your details and they’re duty bound to get you the most appropriate mortgage for you. This is usually the lowest cost on that you qualify for. 

Notice the phrase qualify for? This is because you won’t qualify with every lender. Mortgage brokers know which lenders like which borrowers and will prevent you from applying to a lender that will reject your application, even if they agreed to a mortgage in principle. A good example of this is time in employment. Some mortgage lenders don’t even need you to have started a job yet before considering you for a mortgage, some need you to have been in employment for over 12 months. 

What does a mortgage broker do?

A mortgage broker’s job is to get the right mortgage for you. This is usually going to be the lowest cost mortgage that you qualify for. Remember, you won’t qualify for every mortgage and a broker will ensure you don’t waste time with lenders who’s lending criteria you do not meet. 

It’s not just about picking the lowest interest rate either when selecting the lowest cost mortgage. There are other fees to consider such as arrangement fees and valuation fees. Arrangement fees are charges that a lender will add to a mortgage on the day it completes. You can also pay it upfront. This means that a mortgage with a higher interest rate may be cheaper if the additional interest is less than the arrangement fee of a mortgage with a slightly lower interest rate over an initial period. This is a common mistake made by first time buyers. 

How much does a mortgage broker cost?

Some mortgage brokers don’t charge fees at all. An average fee is probably around £500, though the fee doesn’t necessarily indicate better service.

If your case is complex, for example, you don’t have indefinite leave to remain or maybe you or your partner is on a spouse visa, you have irregular income, or bad credit, you will certainly need to work with a broker that specialises in your situation. This will usually warrant a fee.

If your case is straightforward, for example two first time buyers with regular salaries and good credit, then there are lots of options for top quality brokers who won’t charge you a penny.

Manchester based Jamie Thompson mortgages talk more about mortgage broker fees here. In summary, he only charges if the case is complicated. 

How can they afford to work for free?

Regardless of whether a mortgage broker charges their client, the lender that they agree to a mortgage with will pay them a fee directly. They should disclose the exact amount to you. This is usually around £400 for every one hundred thousand pounds that you borrow. 

Should I use a free one or a fee charging mortgage broker?

You should use the mortgage broker that best suits your needs. If you have a simple case, you’ll likely find one who won’t charge you. If you have something out of the ordinary, expect to pay a few hundred pounds. 

What’s most important when choosing a broker?

Here are the top things to consider when picking the mortgage broker you want to work with:

Find a mortgage broker that specialises in your situation

If you are a first time buyer, using a company that talks mostly about buy to let mortgages on their website isn’t usually the right way to go. They are used to dealing with people who have done this many times before, not somebody who it’s all brand new to.

If you have something out of the ordinary in your circumstances you should search for a broker that understands that characteristic when getting a mortgage. You’ll be surprised how specialist some brokers can be. 

Examples of this are if you are:

• Getting a mortgage with a new job (or even a job that hasn’t started yet)
• Getting a mortgage if you are on a fixed term contract
• Getting a mortgage if you have pre-settled status or need a spouse visa mortgage
• Or even getting a stipend mortgage using your PhD funding

The reason for this is that most lenders do not like these situations and will either reduce the amount you can borrow, insist you have a huge deposit, or not lend to you at all. If you work with a mortgage broker that specialises in your situation then they’ll be able to match you with a lender that does understand your situation and doesn’t punish you for it. 

Do they work how you like to work?

When choosing a mortgage broker make sure you like how they work. Examples of this are:

How do they communicate with you?

Traditional companies may only email you in office hours, whereas more modern ones will use WhatsApp and Zoom.

Do you need to travel to meet them?

Do they insist on you visiting their offices to do business or can they do everything over Zoom? What do you prefer?

Do you like dealing with big companies or local businesses?

Big companies might have fancy systems and portals to upload your information and get updates, but would you rather deal with an individual that answers the phone to you when you have a question? 

What are their office hours?

Some companies will only speak to you between 9 and 5, including if you go directly to most banks. Others are much more flexible and service focused and realise you don’t want to take time off work to talk about mortgages, so will take calls in the evenings and weekends.

Do all mortgage brokers have access to the same mortgages?

No. Some mortgage brokers are tied to just a few lenders. This is more common with estate agency brokers but not a certainty. Ask your prospective mortgage broker how many lenders they have access to. If it’s in the teens or below this is likely a red flag as they don’t have a wide selection. Conversely, the difference between a broker with 100 and 110 lenders available is going to be negligible as it’s likely those additional 10 are super specialist lenders and not relevant to you if you are a normal home buyer.

Ask them if they have access to the likes of TSB and HSBC as these lenders can be quite selective who they work with. 

Remember, no mortgage broker has access to every lender in the market so be wary of the term “whole of market.” It doesn’t mean what it sounds like. For example, First Direct and Lloyds are only available direct, no mortgage broker has access to them.

Check out their reviews

Check out your potential mortgage broker’s reviews. The best place in my opinion is to look at their Google reviews as a business owner can’t pay to have them removed. Other sites like trust pilot and vouched for may have reviews if they are a large firm. 

How are mortgage brokers regulated?

Your mortgage broker will be authorised directly by the Financial Conduct Authority or by an appointed representative. You can check their legitimacy by asking for their FCA number and searching it on the FCA register.