The choice of mortgages available from banks and building societies can be hugely bewildering. But with a plethora of financial comparison sites offering to find the best mortgage for you, you don’t need a mortgage broker or adviser these days, right?
Although finding a mortgage is indeed a task that you could carry out yourself, a professional mortgage broker has unrivalled industry knowledge and access to products and rates that simply aren’t available on the high street or online.
So it’s well worth talking to one about finding a mortgage to get the right product you need to make your property purchasing plans manageable and affordable – or switching to take advantage of a better deal.
What they do
Mortgage brokers and advisers specialise in understanding the financial market and finding the best mortgages for their clients. Their job involves:
- Analysing your income and outgoings to find out what you can afford to borrow
- Talking you through the different types of mortgage
- Explaining about repayments and mortgage protection
- Preparing mortgage options
- Helping you complete the mortgage application
- Liaising with estate agents, valuers and mortgage lenders
If the broker is independent, they’ll be able to offer you mortgages from a range of companies. If they are employed by a bank or building society, they’ll only be able to sell their employer’s products.
You may also be an independent financial adviser (IFA) who can provide information on all types of financial products, not just mortgages.
They are also bound to follow strict industry rules and guidelines to make sure they give the right advice for each client.
What they charge
Brokers normally either charge a flat fee or a percentage of the total loan value. Which means you can expect to pay around:
- £1000 – £1500 as a flat fee
- Around 0.5%-0.8% of the total loan value. Sometimes this can be as high as 1.5%
Before proceeding with a mortgage broker or adviser, weigh up which of these charges offers the best value against the overall cost of your mortgage. A cheaper initial fee can often mean a more expensive mortgage. Other fees to build in include:
- Arrangement fee – From free to £2000+
- Booking fee – £100 – £250
- Valuation fee – £150 – £1500
- Mortgage account fee – £100 – £300
What to ask
A few pertinent questions asked before things get serious (and potentially expensive) can save you a lot of hassle in the future. Try and find out:
- Are they ‘tied’? This means they are associated with certain lenders and can only offer their products
- Are they regulated by the Financial Services Authority (FSA)?
- Can they offer ‘whole of market’? This means you’ll benefit from the maximum choice of mortgages
- How do they make their money? Do they charge a fee or receive a commission from the lender?
- What information do you need to provide (bank statements, proof of employment etc)?
- Will they be making any recommendations, or just providing information?
- Will they help and guide you through the application process and be on hand to assist you all the way until completion?
Trades to trust
The Financial Conduct Agency regulates advisers. This means they meet the right standards and you get more protection if you’re not happy with the service. For example, you can complain to the Financial Services Ombudsman and may be able to claim compensation if things go wrong. Check if a financial adviser is registered with the FCA here.
All financial advisers should be registered with the FCA. They must also have passed Level 4 or above of the national Qualifications and Credit Framework
A Statement of Professional Standing (SPS) is also something to look out for. This means they have signed up to a code of ethics and have completed at least 35 hours of professional training each year. SPS certificates must be renewed annually so check your adviser‘s is up-to-date.
It’s not the law, but mortgage brokers and advisers should also give you a document called the Key Facts Illustration, or KFI, to explain the mortgage process.