Working with a mortgage broker can potentially save homebuyers a great deal of time and money. Before deciding if you want to work with a broker, there are a few things to consider to ensure that this is the right choice for you.
What Does a Mortgage Broker Do?
A mortgage broker is the middleman between the homebuyer and the mortgage lender. They work on the behalf of the borrower to find the best mortgage to suit their personal circumstances.
Mortgage brokers are specialists in their sector and, subsequently, can offer expert impartial advice about the best mortgage products, regardless of whether the borrower is hoping to buy a home or refinance.
They work to find the most competitive rates and prices on the market as well as making sure that the mortgage product matches the client’s needs. Mortgage brokers can also help borrowers assess the size of mortgage they are able to apply for.
It is important to note that the mortgage broker does not supply the mortgage funds. Instead, they source the funds on behalf of the borrower and then match the borrower and the client.
Benefits of Working With a Mortgage Broker
There are many advantages to working with a mortgage broker and can be a great choice for homebuyers, especially first time buyers who lack market knowledge. The housing market can be overwhelming and with so many mortgage offers available, it can be difficult to know where to begin. Mortgage brokers help simplify the process and can take away the headache of research.
One of the key benefits of working with a mortgage broker is that they look for the most competitive mortgage rates on the market, both in regards to interest rates and fees. Brokers typically have access to a broad range of mortgage products and lenders meaning that they have a bigger pool available and can find deals that you may otherwise not have been able to find.
A key advantage of working with a broker is the huge amount of time they can save you. Researching the best mortgage on the market can be a never ending process with so many options available and every lender claiming to have the best deal. Brokers are able to cut through the many different options available to find you the most suitable product to suit your personal circumstances. In addition, they can negotiate on your behalf and keep track of the mortgage process through the different stages.
For mortgage situations which are less straightforward, for example those with poor credit history or seeking mortgages for unusual properties, brokers have access to a greater range of lenders who may be able to loan money in specialist circumstances or with more flexibility.
Disadvantages of Working With a Mortgage Broker
There can be certain drawbacks when it comes to working with a mortgage broker. For example, not all lenders work with mortgage brokers meaning that even though the broker may have access to a range of loan products, there are some programs unavailable to them which can only be accessed directly through a financial institution.
In some scenarios mortgage advisors are free, however in others, working with a mortgage broker will mean that the borrower has to pay for the service. This will vary from broker to broker and often the broker fee is covered by the lender. However, if the mortgage broker charges a fee, this is an additional payment that the homebuyer will need to take into account. This may be a flat rate, hourly rate or a percentage of the total loan amount.
The other disadvantage of working with a mortgage broker is that there is a potential for conflict of interest. If a mortgage broker is being paid a commission by the lender, it could be that the broker is favouring the lender and therefore not working in the best interest of the client. If this is the case, it is possible that the broker is not offering the client the best deal available.
Factors To Consider When Working With a Mortgage Broker
If you do decide to work with a mortgage broker there are a few important factors to take into account.
Who Is Responsible for Paying the Mortgage Broker?
Before working with a mortgage broker, you need to know how they will be paid and if the cost will be covered by the lender or paid by the homebuyer. Checking this information up front will avoid any surprises at the end of the process. If the lender is covering the fee, take into account the potential conflict of interest.
Which Lenders Does the Mortgage Broker Work With?
Different mortgage brokers have a different pool of lenders that they work with.
Before deciding which mortgage broker to work with, it’s good to consider the following factors about them:
- Level of experience
- Licence
- References or referrals
If you are looking for a particular type of mortgage product, you should make sure that the mortgage broker you choose has access to these.
Level of Experience
Before deciding to work with a mortgage broker, make sure that they have sufficient experience, particularly if you are interested in a specific loan type.
Licence
If you are working with a mortgage broker you must check that they are licensed to work. If you are looking to work with a mortgage broker in the UK, they need to be registered by the Financial Conduct Authority (FCA) or be the agent of a regulated firm.
References or Referral
Working with a mortgage broker who has been personally recommended is a great way to ensure that you are working with someone trustworthy. If you are working with someone who has not been recommended, make sure to check references, read client reviews or try to speak to someone who has had personal experience with that broker.
