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Do You Need a Mortgage Broker?

Written by

7th Apr 2020 (Last updated on 18th May 2020) 7 minute read

A mortgage broker, or mortgage adviser, can be a huge benefit to potential homebuyers looking to secure a mortgage. Although it is not essential to hire a broker, their advice and knowledge could be invaluable.

Mortgage brokers may be able to access better deals and will be able to assist you in making a strong mortgage application. They will also be able to find the lender that is right for you. However, you may find this service comes with a fee and you should be aware of the role of a mortgage broker before proceeding.  

In this guide, with the help of our finance and property experts, Compare My Move will look at the role of a mortgage broker, what they can offer and how they can help you with your mortgage application.

This article will cover the following:
  1. What is a Mortgage Broker?
  2. Who Can Use a Mortgage Broker?
  3. What Are the Advantages of Using a Mortgage Broker?
  4. What Are the Disadvantages of Using a Mortgage Broker?
  5. Should I Hire a Mortgage Broker Via the Estate Agent?
  6. How Do I Prepare for a Meeting with a Mortgage Broker?
  7. What If I’ve Been Given Poor Advice?
  8. Save on Your Home Move with Compare My Move

What is a Mortgage Broker?

Mortgage brokers are licensed and regulated financial professionals who work as an intermediary between individuals and mortgage lenders. This role has become more popular as the markets for mortgages have become more competitive. A broker will arrange mortgages between borrowers and lenders, often getting a better deal for the borrower than if they had gone directly to the lender. 

Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and need to achieve specific qualifications to work. Following the Mortgage Market Review in 2014, rules on the qualifications of all mortgage brokers and the information they must provide about their services and fees are now stricter, making it far safer to use the service. 

Brokers will undertake a comprehensive financial assessment, ensuring the range of mortgages they suggest are right for your circumstances. Your mortgage broker will work on your behalf to find the right lender for you, finding deals and interest rates that best suit your needs.

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Who Can Use a Mortgage Broker?

Anyone is able to hire a mortgage broker to get a mortgage, providing they are able to pay the fees, but some may benefit from the service more than others. 

Mortgage brokers can assist you if you are applying for a mortgage if the odds are stacked against you. For example, those looking to get a mortgage whilst working a zero-hour contract or if you are trying to buy a house with bad credit

They will be able to advise you on what you can do to strengthen your application and recommend lenders who are more likely to approve you. Essentially their role is to ensure you get the best deal for your circumstances.

You may also want to look at hiring a mortgage broker if you are considering remortgaging your home. They can give you access to a wider range of alternative mortgage options and advise you on whether you should stay with your current lender or look for a better deal elsewhere.

What Are the Advantages of Using a Mortgage Broker?

The main advantages to hiring a mortgage broker are their convenience, expertise and access to market knowledge. They have better access to the market and various deals, can save you the time and legwork when it comes to researching and will be able to manage your fees. Below we’ve listed the advantages of hiring a mortgage broker:

Market Knowledge

Mortgage brokers know the market very well and will be aware of all the latest deals and products available at the time. It is also possible that they will have access to deals that would not be available to you if you went straight to a lender. 

Advice Tailored to Your Circumstances

They will be able to discuss the different types of mortgages available and review your financial situation to see how much mortgage you can afford to take out. 

They will also know which lenders will suit which customer. For example, those which will lend to individuals who are self-employed. Their advice will be tailored to your individual financial needs and with their ‘broker only’ deals, they are in a position to find the right mortgage for you. 

Saving Money and Managing Fees

By finding the best mortgage deal for your needs, a mortgage broker could potentially save you a considerable sum of money on your mortgage. 

When it comes to applying for a mortgage, there can be a number of fees attached, depending on your mortgage offer. A broker will be able manage and explain any fees associated with the mortgage and find the best solution for you. 

Save Time and Reduce Stress

With their market knowledge and experience in the field, having a mortgage broker on board can save you far more time on your research and application than if you go it alone.

Acting as your advocate with your chosen mortgage lender, hiring a mortgage broker can also make the mortgage application a lot less stressful. The time you will save and the reassurance of the broker’s expertise will make the whole process feel a lot smoother. 

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What Are the Disadvantages of Using a Mortgage Broker?

Although there are many advantages to using a mortgage broker, you must also consider the disadvantages and bear in mind that using a broker might not be the best solution for everyone. Below are some of the disadvantages of hiring a mortgage broker:

It Comes at a Cost

The main disadvantage of using a broker, is that mortgage brokering is a business - and it is likely they will charge a fee for their services. This can be either via:

  • An hourly rate - this is a variable charge meaning the more hours that they work, the more it will cost you
  • A flat fee - This is a single fixed fee for a mortgage broker's service
  • A commission-based fee paid by the lender  - this is where the mortgage broker receives a percentage of the total mortgage loan from the lender as commission
  • A combination of the three. 

You will need to factor in the cost of hiring a mortgage broker on top of all other costs associated with buying a house, such as legal fees and surveys. 

They May Not Be Unbiased

With regards to the commission earned by mortgage brokers, this may mean that they are tied to a particular mortgage lender. According to FCA research, commission remains the dominant source of revenue for mortgage broking, accounting for 79% of revenue. Note that brokers are obliged to tell you exactly what they’ll be paid before you apply.

You Could Miss Out

Another disadvantage you will need to consider is, while mortgage brokers have access to some of the best deals, you could risk missing out on deals only available if you went directly to the lender. It is worth doing some research of your own before deciding whether to enlist the help of an adviser. 

Should I Hire a Mortgage Broker Via the Estate Agent?

During your property search, estate agents may recommend brokers. These mortgage brokers often work with the estate agents, earning the agent a fee for the sale. They may even have sales targets for this, so be aware that the estate agent may not have your best interests when recommending their own advisers.

You are not tied to using the broker recommended by the estate agent, even if you are buying the home with them.

How Do I Prepare for a Meeting with a Mortgage Broker?

The more prepared you are for your meeting with your mortgage broker, the quicker the process will be. It will also enable the broker to better tailor their search for the best mortgage for you. 

You will need to bring evidence of your income and outgoings such as payslips and bank statements. It is also worth preparing a set of questions to ask, so you can get the most out of their service. Below is a list of questions to consider asking your mortgage broker before applying:

  • Are they approved by the Financial Conduct Authority? 
  • Are they qualified and what experience do they have?
  • Do they offer independent advice or are they tied to a specific lender?
  • What do they charge and how is their fee paid?

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What If I’ve Been Given Poor Advice?

With new laws and regulations on mortgage brokers, you are more protected than ever if you are given poor advice. Your mortgage broker has a duty of care to you and must recommend a mortgage which is right for you and your circumstances. 

Remember, mortgage brokers must be regulated by the Financial Conduct Authority. You will be able to check this on the FCA register. If the advice they have given to you is poor, you can complain and be compensated.

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Adele MacGregor

Having written for PerformanceIN, WalesOnline, Grazia Magazine and The Olive Press, Adele now writes advice articles for home movers, first-time buyers and house sellers alike.