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Using a Mortgage Broker

Katie Cullen
Written by Katie Cullen
10th January 2017 (Last updated on Thursday 30th August 2018)

A mortgage broker is a financial professional that helps you find the best mortgage deals to suit your situation.

There are three main types of mortgage broker:

  1. Mortgage brokers tied to one lender.
  2. Mortgage brokers who recommend mortgages from a panel of lenders.
  3. Independent mortgage brokers who use a ‘whole market’ perspective to recommend packages.

Your mortgage broker does all the legwork for you in finding packages and can sometimes offer deals to you that are not usually available to the general public. Mortgage brokers can help you save time, effort and money, but will also come at a cost for you to use their expertise.

During the primary processes, your mortgage broker will help you understand the mortgage process, find the best type of mortgage for you and explain rates, as well as calculating how long is best to borrow for.

This article will cover the following points

Should You Hire a Mortgage Broker? Where to Find a Mortgage Broker How do You Choose the Best Mortgage Broker? What Are the Costs? When to Use a Mortgage Broker The Disadvantages of Hiring a Mortgage Broker

Should You Hire a Mortgage Broker?

Using an independent broker means they will be looking out for your best interests, not the lender’s. mortgage brokers have a duty of care to you, so they will recommend a mortgage that is suitable and justify why they made their decision.

You will also gain access to range of mortgage products; mortgages are getting more and more difficult to apply for, so working with a good mortgage broker means you have a higher chance of getting the best deals when they are available.

Taking on a mortgage or working with a new lender involves many underlying fees, from origination fees to appraisal fees. Mortgage brokers may get lenders to waive some of these fees which could end up saving you hundreds or even thousands.

Where to Find a Mortgage Broker

Estate agents can usually recommend a mortgage broker, but be wary of being forced into using their own mortgage panel. Doing this goes against the Estate Agents Act, so contact the Property Ombudsman if this is the case.

The best way would be to use a broker through recommendations from people you know. Another option is unbiased.co.uk, where you can compare brokers and contact the best trusted professional for you.

How do You Choose the Best Mortgage Broker?

When you look for a mortgage broker, you want the best deal available for you. An independent mortgage broker might be the best option as they have a bigger pool of loans to choose from.

This doesn’t mean the other two options should be disregarded. Mortgage brokers who work with sole lenders or a panel might be offered exclusive deals provided only to these specific professionals. You might find an offer that is not available to the general public and only found through these brokers.

What Are the Costs?

Mortgage brokers generally cost around £500 for their services, which can be offset based on the better priced deals they find for you. Mortgage brokers can charge you in a number of ways, including:

  • Fixed fee – the mortgage broker agrees to do the work for a predetermined fee.
  • Hourly – the mortgage broker will provide an hourly service to help you find the best deals.
  • Commission based - the mortgage broker’s services are offered for free to you, but they make a profit based on commissions provided by the lender.
  • Fixed fee and commission combination – the broker can charge you a fixed fee and also make a commission from the mortgage lender. In some instances, mortgage brokers will rebate the commission to you on completion of the application.
  • Percentage based – the broker will offer their services for a percentage of your final mortgage amount.

Fixed fees are the most common among independent brokers, but they might offer services for a percentage of your mortgage value. Unless you are applying for a small mortgage, you should avoid percentage based fees.

Commission based fees are the most common among brokers tied to one lender or a panel of lenders. This can usually lead to the fear that brokers suggest certain mortgages over another due to higher commissions; this is very rare and might be a good option for people not wanting to spend a lot on a broker.

You can also consider using an online mortgage broker, which tend to use the commission-based model, but with a large range of lenders to choose from.

When to Use a Mortgage Broker

Mortgage brokers are helpful for most situations, but especially if your situation is unusual. This may be if your situation is unappealing to lenders, such as:

  • Your age – you are under 25 or over 60-65 years old.
  • Your income – you may be on low or unpredictable income through a zero-hours contract, freelance or self employed work.
  • You are self-employed or a contract worker – you will need to provide more information about your income and any upcoming work in the books.
  • The home you wish to buy – lenders are not fond of flats above commercial premises, high rise flats, houseboats, conversions etc. - the home might also be in disrepair.

If your loan application is unsuccessful, your broker will be able to use personal contacts with lenders to find out exactly what went wrong and see if it can be resolved quickly.

The Disadvantages of Hiring a Mortgage Broker

Some brokers have their own interests in mind and may end up getting you deals which suit them. There is also no guarantee of a better deal than if you go directly to the bank. Here is a breakdown of the disadvantages:

  • Different interests – your main objective is finding a mortgage with the best rate for you. Keep in mind brokers often get paid from the lender for bringing them business. This fee can depend on the amount of the mortgage and can vary amongst lenders, so a broker might try to convince you to get a mortgage that rewards them with the highest fee.
  • You won’t always get a better deal – hiring a broker than get you a better mortgage deal, but this isn’t a guarantee. Some lenders offer homebuyer exactly the same rates that brokers do, so you are better off also doing your own research to see what option is better for you.
  • Brokers can’t guarantee estimates – mortgage brokers usually present you with offers from lenders using the term ‘’good faith estimates’’. This means your broker believes this offer to be final, but this isn’t always the case. Lenders can change the terms based on your actual application, and you may end up paying a higher rate with additional fees anyway.

Ultimately, before you pay for the service of a mortgage broker, you should do your research and find out as much as possible. Don’t be afraid to ask questions either; if they are worth hiring, they should be able to answer any query you have with confidence.