Even if you’re not a first-time buyer, the mortgage market can be complicated. There are hundreds of lenders with thousands of products offering different interest rates and different repayments options. Making the right decision is vital as a mortgage is one of the most significant financial commitments most people will make in their lifetimes. Many people choose to work with a mortgage broker to help them through the process. But what does a mortgage broker do and do you need one when arranging your next mortgage?
What are Mortgage Brokers
A mortgage broker is an expert in understanding their customer’s circumstances and then finding a mortgage product that best suits their needs. A mortgage broker should have received the relevant training that qualifies them to advise and recommend mortgage products that fit their clients’ financial situations.
In the UK, mortgage brokers are regulated by the Financial Conduct Authority (FCA). As such, if a customer feels that the advice received was not suitable, they can seek financial compensation. Customers should check the FCA website to ensure a broker is registered before instructing them to act on their behalf.
Are Mortgage Brokers and Financial Advisors the Same?
Mortgage brokers and financial advisors both offer advice on financial products. They are also both regulated by the FCA, so have to adhere to similar codes of practice. However, while financial advisers may offer advice on mortgage products, it is generally not their specialist area. A financial advisor has a broad knowledge of many different financial products, whereas a mortgage broker focuses solely on the mortgage market and related products such as mortgage protection insurance.
What Does a Mortgage Broker Do?
As we covered above, mortgage brokers are specialists in the mortgage market and related services. They have a duty of care to their clients which means that any recommendations they make must be justified and based on their customer’s specific circumstances.
When you decide to work with a mortgage broker, the first thing they will do is complete a full financial analysis assessing your incomings and expenditure. They will ask you lots of questions regards your circumstances to build up a clear picture of your financial situation.
Using the financial information you have provided your broker will research the mortgage market for products that best fit your circumstances. Once they have a range of options, they will present them to you and make their recommendations.
If you decide to proceed with the recommendation, your mortgage broker will manage the application process and liaise with the lender on your behalf. They should provide you with regular updates, so you are clear on how the application process is progressing.
Do You Have to Pay For a Mortgage Broker?
Mortgage brokers earn money in a variety of ways. Some will offer their services for free but then make money from the lender who will pay a commission for recommending one of their products. Some brokers will charge a fee for their services and also earn a commission from the lender. Your mortgage broker must be clear about any fees being charged and outline what these will be and explain when and how they should be paid.
What Are The Benefits of Working With a Broker?
You do not need a mortgage broker to research the mortgage market and apply for a product that you feel best fits your financial circumstances. However, engaging with a broker does have several advantages;
Expert Market Knowledge – Mortgage brokers deal with mortgages all day, every day and have an in-depth knowledge of the market. They know which lenders are best suited to specific types of customers and which lenders are most likely to accept mortgage applications.
Special Mortgage Deals – Mortgage lenders do not make all their deals available to the general public. In fact, some lenders will only deal with mortgage brokers. By engaging with a broker, you get access to mortgage products and lenders that would otherwise not be available to you.
Save Time On Mortgage Applications – Mortgage applications require a lot of form-filling, paperwork and documentation. Your broker will manage the application process for you and deal with any issues that might come up.
What Does a Mortgage Broker Do Summary
What Does a Mortgage Broker Do?, in reality, much of what a broker does can be achieved by anyone with a computer and plenty of time and patience. However, when you work with a mortgage broker, what you’re really getting is their expert knowledge of the market. Their advice can save you time and money as they have access to mortgage products that may not be open to the wider market.
The content of this post was accurate at the point of publication and is subject to change.