Why use a mortgage broker? Advised versus Non-Advised mortgage sales.
The Financial Services Authority has recently outlined plans to change the regulation of mortgage lending and in December 2011 proposed to make it mandatory to receive advice from a qualified mortgage broker or advisor when taking out a loan. Currently most borrowers choose to use the services of a mortgage broker to find and arrange a suitable loan but many mortgage products do allow the borrower to deal directly with the lender with no intermediary involvement.
So why employ a mortgage advisor? There are many answers to this question!
When you receive advice from a qualified mortgage broker they have a duty of care towards you. This means that the broker is required to recommend a mortgage product that is suitable for you and to clearly indicate to you the justification for their choice. They must provide you with a Key Facts Illustration document outlining this. Should you encounter any problems with your loan you should contact your broker and they will assist you. If you have any complaints then again you can contact the broker, or in the worst case scenario the financial ombudsman and, if appropriate, compensation will be available. Your rights are protected during what is likely to be the biggest financial commitment you will ever make.
In contrast, if you deal directly with your mortgage lender you may never speak to a mortgage advisor, as most call centre staff are not qualified to give advice and are there only to process the loan application. You are therefore not protected and would have few rights if for example the loan repayments later became unaffordable. Even if you do speak to a qualified advisor, they will only be looking at their own mortgage products.
A major advantage when using an independent mortgage broker is that they can access and examine the ‘Whole of Market’ database when finding you a mortgage, comparing products from over 100 lenders and giving you the best chance of finding the most suitable product. This is particularly helpful in searching through products from smaller lenders who are often more flexible within certain criteria, for example a blemished credit record, or for self-employed borrowers. This enables them to be more competitive with the bigger high street lenders.
Your mortgage advisor will be aware of which lenders offer better packages to suit your personal circumstances and this will save you the huge amount of time it would take to research products from a large number of lenders. Their knowledge will be up to date in what is a frequently changing market.
A mortgage advisor also carries more influence with lenders than an individual borrower and will be better able to negotiate on your behalf or speed things along where necessary as lenders are interested in keeping their business.
But what about fees?
A mortgage advisor will usually (though not always) charge an upfront fee to their client when the loan is finalised and receive commission from the lender. Remember what you are paying for; knowledge, speed, efficiency, convenience, long term savings by finding the right product and protection.
If dealing directly with a lender you will save on the broker fee but would still be paying the broker commission which is built into the product costs and would not be refunded. You would not be assured of finding the lowest cost product available to you. Finding the most suitable product via a broker will very quickly compensate for the broker fee charged. All details of fees and commission must be clearly disclosed in the KFI document so you won’t get any nasty surprises. Mortgage advisors are also well placed to save you money on conveyancing fees and to recommend suitable insurance products if required.
Is using a mortgage advisor recommended for everyone?
The short answer is yes! There may well be a small number of borrowers with previous experience, good knowledge of the financial markets, straightforward requirements and unblemished credit and employment records who are confident in arranging their own mortgage. However for the vast majority of borrowers, the services of an independent mortgage advisor must be strongly recommended and will save a huge amount of time, money and stress in the long term.