If you’re
looking to buy a home or property to rent, choosing the right mortgage broker
is crucial.
There are many
reasons for this.
For a start,
getting a mortgage is usually the biggest financial commitment you’ll ever get.
So, you need peace of mind that any decisions you make around your mortgage are
the right ones for you.
Finding a
qualified mortgage advisor, one you feel comfortable talking to, is vital.
You’ll be telling them all kinds of things about your personal finances so make
sure you find them approachable and trustworthy.
For that
reason alone, it’s always a good idea to shop around.
Once you
start doing that, many people start thinking about how much they’re prepared to
pay for mortgage advice.
Let’s break
it down.
How do mortgage advisors
make their money?
Broker fees
vary.
Some charge
fees – often around £500 per case or more. Which means they earn money from
fees & commission.
And others
are free. And that means they depend on commission only.
To
understand all this – it’s worth thinking about what mortgage brokers
actually do.
N.B. I’ve
used the terms mortgage broker and mortgage advisor throughout this article
because they’re interchangeable.
What mortgage brokers do.
Finding a
mortgage is a lot of running around.
Once they’ve
got an idea of what you’re looking for, your broker goes off on a mission.
They
research the market extensively on your behalf, using their in-depth knowledge.
Understanding
your circumstances is a big piece of the puzzle. That’s why you need to look
for someone who’s flexible about how you contact them.
Think of it
like this: If you were up Mount Everest, you want someone who’ll phone you with
regular updates. Even if it’s hard to get through. Even if a howling wind makes
it difficult to hear what you’re saying. Even if you’ve already contacted them
five times already that day because high altitude makes it hard to remember
stuff…
Mortgage advisors
are diligent. They have to be details oriented. That’s because they must check
an enormous amount of information and documentation for every case, taking many
hours to put everything together to make an application on your behalf.
A true
mortgage broker exudes extreme patience. Really. The kind of patience usually
only found in a carthorse (from long ago) quietly ploughing a field.
Being able
answer your questions about complex issues is also part of their job. Guiding
clients through a sometimes-challenging process can be relentless.
It’s
essential for a mortgage advisor to be regulated by the Financial Conduct
Authority (FCA). This gives you the added protection of knowing they’re sticking
to the rules concerning financial advisors of any kind in the UK. It also means
they’ve got to double-check everything before they make a move. And this can be
a time-consuming but worthwhile aspect of their work.
Over the
years a good mortgage advisor builds a huge library of personal knowledge of all
types of mortgages. This includes regular programs of professional development
and updating their understanding of the current climate.
And they do
all this to find the right deal for you.
There are two kinds of
mortgage advisors…
Those who
work for a single lender. And those who don’t.
If you use
the mortgage broker with your bank they’re known as a tied agent. This means
they can only advise you on products from that bank.
Without a
thorough search of available lenders for your needs, this means you might be
missing out on a cheaper deal somewhere else, or their lending criteria might
not match your needs.
A
comprehensive mortgage advisor, like us, is able to cast a wide net to find the
right deal for you.
So now, we
get what mortgage brokers do, and how they make their money, but to really understand
why some advisors are free, let’s first have a quick look at….
How much money mortgage
advisors make.
A mortgage
advisor is a type of financial advisor who specialises in mortgages.
Their
average earnings (according to Glassdoor) around £33,000, with a starting
salary that’s often a lot less. Higher earnings are possible over time. Those
with many years of experience average about £45-55K.
They make
money in two ways:
· Discovery (for you the client) of the
right mortgage – fee payment.
· Acquiring the mortgage for the lender
– commission payment.
Commission
rates are typically under 0.5% of the mortgage, although they’re often less
than that at around 0.35%.
Therefore,
on a £100,000 mortgage, the broker earns about £350.
Advisors who don’t
charge a fee…
People often
wonder whether a mortgage advisor from a bank is a cheaper option in the long
run.
The answer,
in a word, is often “no”.
That’s
because, with so many options out there, your bank is unlikely to be the
cheapest one. If in doubt, have a chat with an advisor. They’ll explain all this,
so you can make an informed decision.
And when it
comes to comprehensive mortgage advisors who aren’t tied agents, yet don’t
charge a fee, they’re not necessarily right for everyone. For example, they
often deal with gigantic caseloads.
Because of
that, you might find that they just don’t have time to build one-to-one
relationships with clients.
What makes a good
mortgage advisor?
They’re
happy to talk (on your behalf) to your estate agent, solicitor or conveyancer,
and mortgage lender.
And they
will fight for you
if needed.
Their aim is
to find and bring you the right deal.
As always, a
bespoke service is worth paying for. And it might save you money…
In the end, are broker
fees worth paying?
Well, here’s
the thing. A good mortgage advisor could potentially save you money. That’s
because an extensive, time-consuming search to find the right deal for you, is
a saving.
Plus, you’ll
almost certainly find the whole buying situation less stressful. You pay them
to deal on the front line with everyone else involved in the transaction.
And, as
we’ve said, they fight your corner. All of which takes time. And can be
challenging.
So,
essentially, you pay for their time, knowledge, and experience.
That’s the
bottom line. It’s your choice.
Take your
time. Find out everything you can before making a decision about what mortgage
advisor to work with. It’s worth your while to shop around, do extensive
research, and find the right mortgage broker for your needs.
Find out more: If you’d like a copy of our
document, “Why we charge a fee”, with lots of information about our approach, have a chat
with one of our advisors and we
