There are different types of Mortgage Broker or Mortgage Adviser, it is important to understand the differences.
Bank Mortgage Adviser
When you visit your own Bank to see the ‘in house’ Mortgage Adviser, they only advise on Mortgages that the Bank provides – this will probably be limited to 2 or 3 options. Some Banks have tighter criteria than others and it is not unusual for your own Bank to decline an application – where or not other Banks may accept you. Also, the mortgage on offer with your Bank could be higher interest than other mortgage providers, on a mortgage of £100,000 a 0.5% difference in rate will cost you an extra £41.67 per month, that’s a whopping £2500 over a 5-year fixed-rate mortgage. The ‘in house’ Adviser will not charge you a fee as they are paid by the Bank. You might prefer to stay with your own Bank, but ask yourself is it worth paying more?
Estate Agent or New Build Mortgage Adviser When you see a property through an Estate Agent or on a New Build Development they will encourage you to see their Mortgage Adviser, in some cases, they will tell you that it is necessary to see their Mortgage Adviser allow you to either view the property or put an offer in on your chosen property – they can also offer incentives for you to use their Mortgage Adviser, for example, a £1000 off the price of the house. This practice is frowned upon by the FCA. Also, why do they want you to use their Adviser so much??
2 reasons, they will make money from you by using their Adviser regardless of the incentives. Plus, and more worrying, the Adviser will know your full situation and affordability – making your negotiation a bit trickier.
In most cases Mortgage Advisers in Estate Agents are ‘Tied Advisers’ this means that they will work with a panel of lenders, maybe 10 – again if you have a more complicated situation, for example, you have been posted overseas, or you have a poor credit history they might not be able to help you.
A Mortgage Adviser should look at your whole situation, an Estate Agent Mortgage Adviser and especially a New Build Mortgage Adviser will focus just on the purchase of the property, and not on your full situation.
Estate Agent and New Build Mortgage Advisers will charge you a fee, make sure you know the amount of fee and when it is due, before committing to use their services.
A Mortgage Broker is usually ‘whole of market’ this means that they have access to every lender, they will assess your needs and then search the market finding you your best option. They have access to lenders who are not on the High Street and cannot be contacted directly by a customer. Mortgage Brokers will also have exclusive rates. Lenders offer Brokers lower rates and incentives such as cashback or free valuations. There are hundreds of lenders, but an experienced Mortgage Broker will know which lenders will suit your circumstances the best, along with seeking you the cheapest rates, saving you in some cases £1000’s of pounds.
A Mortgage Broker will also look at your current circumstances and what your future intentions are, making sure that what they advise you will not only suit you now but, in the months, and years to come.
A Mortgage Broker will also be on hand throughout your mortgage term, this means that when your current rate ends, they will be on hand to look at securing your next rate, not allowing you to fall on to the Lenders Standard Variable Rate as this can be much higher. Also, if your circumstances change, whether it is moving to a new house, a new baby or divorce, your Mortgage Broker is there to help you.
Are you a HomeOwner?
Now you have taken the plunge and bought a property, whether it is your home, or you have chosen to buy a property to rent out you will have experience with how mortgages work. Unless, you have purchased a property without a mortgage, or you have now paid off your original mortgage.
The real danger is that you fall into one of the following traps. 1, Once your original rate has expired and your mortgage is on the lenders Standard Variable Rate – the ‘SVR’ is usually much higher. Many customers fear that due to change in circumstances, for example, change to income, level of Debt or maybe you have had a default since your original application, you may no longer qualify for the mortgage and worry that if your current lender was to find out they would withdraw your mortgage – and you would lose your home. If you keep up your payments on time this won’t happen. Or, it might be that you just haven’t had time to look to remortgage, due to work and family commitments.
2, It might be that you have been contacted by your existing mortgage provider, they have offered you a new rate to stay with them – you think that you have not had a problem with them, and they were the cheapest lender at the start of your original mortgage. Usually, lenders offer enhanced rates to new customers, to attract new business. Existing customers, although negotiating a new rate is better than staying on the ‘SVR’ the rates are usually higher than if we moved you to a new Lender. When looking at Remortgage, these usually come with free legal work and a free valuation, it does mean supplying your payslips and bank statements again, and the Mortgage Broker looking at your personal circumstances. A Mortgage Broker will compare your options and whether staying with your current lender is your better option, or to move to a new lender. At this point, you may want to borrow more for home improvements or for Debt consolidation. You might want to shorten your term or look at overpayments – your Broker will help.
So, you can see that a Mortgage Broker is ‘for the life of your Mortgage’ and not just to get you your first mortgage like you would expect from your Bank Mortgage Adviser or the Mortgage Adviser in the Estate Agents.
Some of my customers have been with me for over 10 years, it is nice to see their families grow and they settled into their homes.