Mortgage brokers save home buyers time and money by helping them to find the best mortgage deal with the most favourable terms to suit their personal circumstances.
What Is a Mortgage Broker?
Mortgage brokers are a specialists with expert knowledge of the mortgage market. Also known as independent mortgage brokers, these brokers are able to offer impartial advice helping you to compare and contrast different mortgage products to suit your personal needs.
What Do Mortgage Brokers Do?
Mortgage brokers will act as a key contact between borrowers and mortgage providers, aiming to find the best match to suit the needs of each party.
Their job is to find the most competitive rates and mortgage terms for the borrower as well as ensuring that the mortgage product is well-suited to the needs of the client. Mortgage brokers can help borrowers determine the size of mortgage they are able to qualify for.
The mortgage broker does not lend the mortgage but acts as a middle-man between the client and the lender, sourcing mortgage loans from a lender and matching them to the client.
One of the key benefits of working with a mortgage broker is that they have access to a range of mortgage products across different banks and lenders. This means that the borrower is not limited to the mortgages available at one particular bank.
Does a Mortgage Broker Carry Out All Services?
Mortgage brokers can only make the match between the borrower and the lender, aiming to find the best deal on the market to suit the needs of the borrower. However, they cannot supply the funds themselves.
Additionally, it should be noted that they cannot recommend any mortgages that are exclusively available if you approach the mortgage provider directly.
Can Mortgage Brokers Negotiate Fees?
Depending on the mortgage broker that you are working with, it is possible that the mortgage fees are not set in stone and there may be the potential for negotiation.
However, there is also sometimes the option to cut out the middleman and for homebuyers to negotiate mortgage rates and fees with banks and mortgage lenders directly.
How Much Do Mortgage Brokers Charge?
Mortgage broker fees vary between different brokers but the fees will tend to vary between 0.3% to 1% of the total value of the loan. You should never be asked to pay more than this in broker fees.
How Do Mortgage Brokers Make Money?
Mortgage brokers may or may not charge you for their service depending on the situation. Most often, the product you choose (i.e. the type of mortgage) and the value of the mortgage will affect whether or not you will be charged a fee.
Mortgage brokers could receive money from the client directly for their services or may be paid commission by the lender for any new business that they bring in.
If the client is paying, the broker may charge a percentage of the total mortgage amount or could charge a flat fee or hourly rate for their services.
For brokers that are paid by the lender, there will be an agreed commission rate. In these scenarios there might be a conflict of interest as the mortgage broker could be working for the commission from the lender rather than acting in the best interest of the client and opting for the best deal available.
Fee-free mortgage brokers will not pay the customer but will receive a commission from a lender. When brokers advertise a fee-free service, this may just refer to their initial advice being free. If the broker then does go on to find you a mortgage, they may charge a fee at a later stage.
What Is the Difference Between a Bank and a Mortgage Broker?
The key difference between a bank representative and a mortgage broker is that the broker will have access to a broader range of mortgage products (not just limited to those of the bank), and is paid a referral fee by the lenders.
Pricing with mortgage brokers can be as competitive as working directly with a bank, as long as the broker fees are not too high.
Should I Work With a Mortgage Broker?
Working with a broker can help you gain access to a broader range of products and deals than working directly with one bank or building society. In addition, brokers can simplify processes and save you a lot of time shopping around and vetting loans. Brokers will help to reduce mortgage-related fees and keep costs low. One of the most valuable services a broker can offer is the likelihood of approval for various loans as this could save not only time, but potential negative impact on your credit score and future borrowing power.
However, there are some disadvantages to working with a broker. Brokers could charge a borrower fee of up to 1% of the total loan amount which is a substantial fee. Additionally, there may be a conflict of interest due to their existing relationships with specific lenders meaning that it may not be the best deal available for you. Finally, depending on where you are based, it may be difficult to find a reputable local mortgage broker.
