What is a mortgage broker or adviser?
If you’re getting ready to buy your own home, you can probably already imagine unpacking the boxes and picking out the paint colours. But there’s one thing you might need help with arranging first: a mortgage loan. Mortgage brokers – also known as a mortgage advisers – can help you to find the best deal for you.
They can also give you advice if you’re remortgaging, or help when you’re purchasing a buy-to-let property. They’ll step in to help if you’ve already been turned down, or if you can’t get what you need for a mortgage, or a Mortgage in Principle, and you’re not sure why.
Some brokers focus on helping buyers with specific circumstances, such as if you’re self-employed, or have adverse credit.
A mortgage broker will help you to work out how much you can borrow and what sort of mortgage to take out. They’ll talk through your specific circumstances to help determine the best lender for you. And they can deal with the paperwork.
Want to work out how much you could borrow? Use our mortgage calculator
What’s the difference between a mortgage broker and a lender?
A mortgage broker can offer you independent advice by looking at a broad range of mortgage products and steer you through the application process.
A mortgage lender is the bank or building society that will lend you the money to buy a home.
A lot of lenders also have their own in-house advisers, to provide advice on their own products. Lenders’ advisers are also regulated by the Financial Conduct Authority (FCA) and will look at all the same factors as brokers when making a recommendation.
What do mortgage brokers do?
They’ll use their expert knowledge of the mortgage market to assess which deals you’re most likely to qualify for. They can search through products faster than you’ll be able to. They’ll also help with your application.
A broker should tell you about the range of mortgages they offer. Some brokers only cover products from certain lenders. If you’re taking out an online mortgage, they must provide this in writing before you select the deal you want.
My application for a mortgage was unsuccessful – should I check if a mortgage broker could help?
Absolutely. Being turned down for a mortgage can feel really disappointing. But it doesn’t mean you won’t find one to suit you and your circumstances.
The criteria used to assess mortgage applications varies between lenders. A broker will understand a range of lenders’ criteria and can recommend one that is more likely to lend to you. For example, if you’re freelance or self-employed, or have just started a new job. They can also help you find lenders that will be able you help you if you have a poor credit rating.
What questions should I ask a mortgage broker?
Check your chosen broker is authorised and regulated by the FCA. Also, don’t be shy to ask how much they will charge and if they can help with your specific circumstances
How does a mortgage broker get paid?
It varies. The vast majority of brokers get paid commission from the lender, which is usually a small percentage of the size of your loan. You can ask the broker about this too, but it will also be provided in the mortgage illustration. This document outlines every detail of your mortgage deal.
Brokers also get commission from other products you buy from them, such as home insurance. Because of this, some may not charge you for their service, but others may charge a range of fees.
According to the Financial Conduct Authority (FCA), some charge a flat fee, some go for a percentage of the amount you’re borrowing. Others may ask for an hourly rate. If that’s the case, they are required to tell you what might affect the number of hours they spend on your application. You might be able to add the fee to your mortgage, but it will depend on the lender, so ask your broker what the options are. This would mean you’ll pay interest on the fee as well as the rest of the mortgage, until the whole mortgage is paid off.
The average cost of a mortgage broker is around £500. However, if the fee they charge you depends on the value of the mortgage, as a rule of thumb, you’ll probably have to pay between 0.3% to 1% of the loan amount, or more if your case is complex.
What will happen when I instruct a mortgage broker?
Your broker will explain the different types of mortgages and which one they feel would work best for you.
You can arrange to meet in person, set up a call, or you can use an online mortgage broker. To save time, make sure you have your financial documentation with you.
The exact documents that you need to provide will depend on the lender that your broker recommends. Most lenders and brokers accept digital or paper versions of online statements and payslips if they clearly display key information, such as company logos and website details, to demonstrate that they are legitimate.
What will a mortgage broker ask me for?
Identification documents: such as a current passport or driving licence, a recent utility bill and bank statements from the last three months.
Proof of income: you’ll be asked to provide recent payslips, or if you’re self-employed, copies of your tax calculations and tax year overviews. And make sure you can provide documentation of any other income you receive.
Financial records: including recent bank statements which show payments coming in and out, including debts, such as loan and credit card payments, and other expenses. You’ll also be asked to provide proof of where your deposit is coming from.
Finally, some mortgage products are only available via brokers, but others are only offered to direct applicants. Brokers aren’t obliged to tell you about these ‘direct only’ mortgages, but it’s worth asking if there are any that could be cheaper for you.
When you’ve found a home you want to make an offer on, your broker can make a full mortgage application for you.