Finding the right mortgage can be a daunting prospect, and with more lenders and products popping up every day, working with an experienced, qualified broker is the best way to ensure you find the most competitive deal.
A mortgage broker is different to bank advisors as they have expert knowledge in a wider range of products, and the ability to scour a selection of deals to identify the most suitable one for your circumstances.
But before you approach any advisor, it’s important to be prepared. Remember, the more your lender knows about you, the better advice and assistance you will receive throughout the process.
We’ve compiled a list of key questions you should ask your broker to help ensure that you’re confident in your choice before you commit to any mortgage deal.
First and foremost, it’s important that you check out your mortgage advisor’s credentials before you begin any dealings with them.
In the UK, all mortgage brokers are required to be regulated by the Financial Conduct Authority (FCA) or be the agent of a regulated firm. You can check whether a broker is regulated by using the FCA register.
When you approach a broker, one of the first things you should do is ascertain whether they provide advice on mortgage products from the whole market, or a limited selection of lenders.
There are three main types of broker:
It’s important to note that, while whole-of-market brokers have access to a panel of lenders who represent each sector of the mortgage market, this does not necessarily mean they compare deals from every single UK lender.
Mortgage brokers will either charge the borrower a fee, work on a commission basis (meaning you won’t be charged, but the broker will receive a cut from your chosen lender), or a combination of the two.
Some advisors have their own special terms, such as charging a fee for your first mortgage, but agreeing to arrange any subsequent mortgages or remortgages free of charge.
Even if you are charged a fee for receiving assistance from a mortgage broker or advisor, anything you do pay is likely to be nominal considering how much money and time you’ll save in the long run.
When you take out a mortgage you must choose how you are going to repay it.
With repayment mortgages you pay both mortgage interest and some of the loan itself each month, until the term end when you will have repaid the entire debt.
With interest-only mortgages, you only pay back the interest owed so monthly payments are lower, but you will owe the whole capital at the end of term.
It’s also worth asking your advisor about the other products on offer, such as cashback, offset or flexible mortgages. They can also advise whether a fixed, standard variable or tracker rate is most suitable for your circumstances.
Many mortgage offers are made at a cheaper “incentive rate”, typically between two to five years. After which time, many lenders move you onto their standard variable rate (SVR).
If the interest rate offered is below the lender’s usual SVR, it’s important to understand the consequences of what will happen when this period is up so you know whether it’s an affordable long-term option.
Some providers will allow you to “fix” your deal for longer when the incentive period comes to an end, whilst others will stipulate that you have to revert to their SVR. You can ask a broker to check the small print before you commit.
One of the key questions to ask a broker is how much you’re eligible to borrow for a mortgage. Nowadays, lenders don’t base their decision on your income alone – you will be subject to more intensive affordability checks.
To help establish roughly how much you will be able to borrow, mortgage advisors will ask you a number of questions relating to your job and contract type, as well as your monthly income and outgoings.
Your credit score is another key factor that will impact how favourably lenders look at you. If you have clean credit you’re likely to be in a stronger position – although it is still possible to arrange a mortgage if you have a history of bad credit.
If you can’t borrow as much as you would like, you could wait and save a larger deposit, or adjust your property search criteria – a broker will be able to advise you on the best plan of action for your situation.
All lenders have different deposit requirements, but as a rough guide 85% – 90% loan to value (LTV) is the norm for a residential property – although an increasing number now accept 5% deposits, subject to your other circumstances.
That being said, the more you can put down as a deposit, the better the deals your mortgage advisor will be able to find you. This is because the greater financial commitment you demonstrate, the more trust is instilled in lenders.
All providers charge mortgage arrangement fees, the cost of which completely varies by lender but is usually between £1,000 – £2,000. You can ask your advisor what to expect from your selected lender.
There are other costs too, such as mortgage valuation fees, surveys, and sometimes account and booking fees. Many providers also have early repayment charges (ERCs) and some impose exit fees.
Be sure to ask your broker to check the contracts carefully and calculate the total of all potential costs you may incur so there aren’t any nasty surprises later down the line.
If you’re taking out a long term fixed, capped or discounted mortgage, or if the redemption penalties last for a long period of time, then it’s particularly important to find out what would happen if you want to move house.
Nowadays, many lenders make their mortgages portable, which means that you can transfer the mortgage on the same terms and conditions to a different property if you decide to move.
If you start working with a broker, you can ask any other questions that will give you added peace of mind with your home purchase. And as mortgage brokers are financial advisors, they are also qualified to advise on related financial matters.
Insurance is a key area that’s closely related to mortgages so if you need advice on health insurance, life insurance, income protection or any other products, your mortgage broker should be more than happy to oblige.
If you’d like to speak to us about our specific services, you can give us a call on 0808 189 2301 or make an enquiry.
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