What is a mortgage broker?
Published 16th August 2017
Definition: See Wikipedia's definition of a mortgage broker.
A mortgage broker is also known as an ‘intermediary’, someone who helps potential borrowers find the finance they need. They can have access to a limited panel of lenders, or the whole market, and will arrange your mortgage with them on your behalf. The good ones have access to specialist lenders that can consider non-standard applications for those who may have been declined elsewhere. We act as a kind of intermediary of intermediaries, ensuring that you're always passed to a mortgage broker who is best placed to advice you based on your circumstances.
What does a mortgage broker do?
Occasionally we are asked what service a broker actually provides, because some borrowers feel that they can get a mortgage easily and do it all on their own direct with the bank. Some borrowers are happy using a comparison site to find a deal and stick to that alone. Well, that’s one way of doing it.
The issue with arranging things yourself is that you can never really be sure you’re getting the best deal. You can:
- Go direct to your bank and they’ll offer you just their products, maybe you’ll go next door or walk into a few banks on the high street but that’s not scratching the surface with all the lenders out there that don’t have a high street presence but offer best rates and flexible criteria. It’s NEVER the case that any one bank is always the best – the top spot on the tables is an ever changing environment, and so the high street doesn’t necessarily offer the best deals.
- Go with your estate agent broker and more often than not they are working from a ‘panel’ of lenders, usually high street, but limited. Many of these brokers turn a lot of otherwise creditworthy borrowers away because they don’t have access to the right lenders.
- You could use a comparison site, but be aware that they offer ‘sponsored results’ that basically push one or two lenders your way, and rarely give the full picture. They don’t let you know which of the thousands of deals out there is best for YOU. Yes HSBC may come up at the top offering the best rate at the time, but is that your LTV? Is that good rate worth the fee? Will HSBC even accept you? The fact is, using best rates tables gives you absolutely no idea which products you’re looking at are suitable for you or if you’ll actually be eligible for them. – What you need is a comparison of the whole market of products that you’d qualify for. Unfortunately these don’t exist (yet – we’re working on it!), but in the meantime get in touch and we can do all the shopping around for you.
What are the benefits of using a mortgage broker?
Using a good mortgage broker will offer you a number of benefits…
- Thorough research. Establish your situation, your plans, your income, credit history, preferences, and match them all to the lenders that will accept you, to then find you the best deal.
- Search the whole market. This doesn’t just mean broker deals, they will look at every lender in the UK, and all of their products. You see, some banks ‘dual price’ – this means they offer broker deals at one rate, and direct deals at another rate. Most lenders will only tell you about the direct deals, and most brokers will only tell you about the intermediary products they can arrange for you.
- Make sure you get the best mortgage overall, not just a good rate. What’s the point in paying high fees to get a good rate, if it’s going to cost far more than a fee free deal with higher rate would cost? See our article here for more on this.
- Offer specialist options if you’ve been declined. Borrowers who have been turned away from one or a few lenders, or even turned away by another broker, may still be able to find the finance they need – it’s just that where they’ve looked until now has been in the wrong places. Whether it’s because of bad credit, or maybe because you’re self-employed and only trading a short time, there are lenders that will consider your application. The sad truth is that some brokers only deal with clean and easy to place customers and don’t persevere with the hard ones, sometimes because they don’t have the required access to specialist lenders, but more often because they don’t have the time.
The trade-off is that there may well be a fee for the service, but this ensures the broker acts completely independently and that they don’t favour a certain lender or insurance provider that may pay higher commission. Also, it’s important to note that with us, a fee isn’t payable in every case. Often, the commission earned from the providers can cover costs enough to waive a fee, unless the application is particularly time consuming and costly.
Our fee structure is very transparent and we aim to offer the best possible service without it costing the earth. For a quote please get in touch by making an enquiry, ask us a question below, or call us on 0800 304 7880.
Should I use a mortgage broker?
Yes! We recommend you do - of course! The exception to this rule is when you have no equity in your property. IF you are looking to remortgage and are 100%+ Loan to value (LTV), then your only option is to go back to your current lender and see what product transfer deals they have available.
Questions to ask a mortgage broker
If you’re not using us, make sure you ask your broker some important questions:
- Do they have access to the whole market? Then re-ask: Is that the actual whole market or just a panel? Will they offer you the range of direct deals as well as broker deals?
- What do they charge?
- Are you obliged to take any insurance products with them?
- How busy are they currently, and will they have the time to prioritise your application?