Purchasing a home is undoubtedly one of the most important decisions most individuals will make. Assessing whether to approach a lender directly or employ a mortgage broker is the first choice for many in the route to home ownership.
Advantages of employing a broker
According to the Mortgage Advice Bureau, the number of products in the UK mortgages market reached record levels in August 2014, with over 12,000 different options available. While this is good news for home-buyers, offering a better range of products to suit their needs, it also makes finding the right mortgage a much more complex process.
In addition, legislation introduced by the Mortgage Market Review in April means lenders are required to perform a more extensive range of affordability checks before approving a mortgage.
Again, though this move protects borrowers from inadvisable financial decisions, and many lenders already practised rigorous checks before its introduction, this however could be viewed as an extra level of complexity to the application process for those inexperienced in this procedure The length of time it may take for an initial interview can be upto four weeks with a lender where as with me its days.
Approaching a mortgage broker like myself would be a prudent decision for many homebuyers. As an independent advisor I have an expert knowledge of the market and I’m required to give an unbiased opinion on the best deal for each buyer’s unique circumstances. This can be particularly useful for non-traditional cases, including self-employed or older buyers, who some lenders may automatically discount on inflexible criteria, without reviewing their financial profile as a whole. I will also have a better understanding of why cases might not be accepted and what can be done to overcome these objections, which could save buyers from letting their dream property slip away due to delayed or rejected applications. I will also be able to recommend related insurance products to ensure buyers are still able to meet their mortgage repayments in the case of adverse circumstances, including redundancy or illness.
Despite these numerous benefits of using a Broker, there are several things to consider before approaching any mortgage broker, beginning with the costs involved. Charges can vary for intermediaries, who are likely to either take a fixed fee from the buyer, commission from the lender, a percentage of the secured mortgage or a combination of the above. More information on this topic can be found through the Money Advice Service.
Opting for professional advice could cost buyers hundreds of pounds in the short-term, but over the lifetime of a mortgage, securing even a fractionally better interest rate could lead to significant savings. Using a broker also means homeowners may be able to claim compensation in certain cases if they feel misleading advice drove them to choose an inappropriate mortgage, though buyers are under no obligation to follow recommendations.
Aside from costs, it is also worth bearing in mind that employing a broker does not guarantee the best deal on the market, and buyers should take the time to compare brokers in order to find the right service, at the right price.
Under Financial Conduct Authority guidelines, there are three distinct classes of broker, depending on the number of lenders’ products that will be considered, from tied mortgage brokers who work with a single lender, to whole of market brokers who consider the full market. Even this last category may not have access to every product though, since some mortgage lenders deal only with direct customers.
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