Mortgage Guides

Should I use a mortgage broker?

Hazel Cottrell hazel@consumerchoices.co.uk

What are the advantages and disadvantages of using a mortgage broker? What are the other options when trying to find the best deal? (Updated 1/10/09)

Since the credit crunch began, those looking for a decent mortgage have really been suffering. Not only have mortgage lenders increased interest rates and fees, but they have also tightened their lending criteria, meaning it has become harder than ever to find a good deal.

Using a mortgage broker may seem like an obvious way to get help, however things are now complicated by the fact that some lenders have recently only been offering their best mortgage deals direct and not through brokers.

So, what’s a mortgage hunter to do? Is it better to use a mortgage broker or to do the work yourself and go direct to the lender? We investigate…

• What are mortgage brokers?
• What are the advantages of using a mortgage broker?
• What are the disadvantages of using a mortgage broker?
• What are my other options?
• Recommendation

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What are mortgage brokers?

A mortgage broker is an intermediary whose job is to match your individual requirements with the most suitable mortgage product and secure it at the most competitive price.

Whether you are a first time buyer, looking to remortgage, or you need to find a bad credit mortgage, a broker will search the market for the top mortgage deals that best suit your circumstances.

Some brokers charge fees up front, but many will instead get their income by charging commission to the mortgage lender you choose.

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What are the advantages of using a mortgage broker?

There are clear advantages to using a mortgage broker, which include the following:

• Access - The main advantage of using a mortgage broker is the fact that they will have access to a “whole of market database” which uses paid-for software only available to FSA-regulated mortgage advisors, i.e. you could not access it yourself. They can search products from over 100 lenders, which would probably be impractical to do yourself. Historically, brokers have also had access to a selection of “exclusive deals” that were not available direct from mortgage lenders, although these deals are now becoming less common.
• Advice - Mortgage brokers can advise you objectively, relating products to your specific circumstances. Unlike mortgage lenders who may only be able to advise you on their own specific products, mortgage brokers have a wider selection of options to recommend and are not tied to one lender. For those who are financially savvy and know what they want, a lender’s information may be enough but others will want more rounded advice specific to their needs. In addition, if a sale is “advised” you have greater rights and an extra layer of protection if anything does go wrong with your mortgage.
• Speed – Using a broker can help your mortgage deal go through more quickly. Brokers have experience in dealing with mortgage lenders and can speak directly to those who make the lending decisions. They also have tried-and-tested processes and the experience to avoid going back and forth to the lender.
• Convenience – Brokers will often work at times that suit you. While your bank branch opening hours may be incompatible with your own work commitments, a broker can often work around you, calling or visiting you when convenient.
• Unusual circumstances – Many lenders that operate in specialist markets, such as the sub-prime sector, will not deal directly with borrowers. If you have a poor credit rating or unusual needs then a mortgage broker may be a prerequisite to securing a deal.

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What are the disadvantages of using a mortgage broker?

The main disadvantage of using a mortgage broker is that the “whole of market database” they search does not actually contain every mortgage deal that is currently on the market. Instead it contains all the mortgages that are made available to brokers.

The difference used to be minimal, but thanks to the credit crunch the mortgage market has changed dramatically over the last year. Unfortunately, some lenders are now keeping back their best deals from brokers and reserving them for customers who come to them direct, in order to avoid paying commission to a broker.

Some lenders do not operate through brokers at all, the main ones being HSBC (www.hsbc.co.uk), ING Direct and First Direct (www.firstdirect.com). Others, including Nationwide (www.nationwide.co.uk) and Halifax, don’t offer all their deals through brokers.

The deals these lenders offer direct can often be more competitive than those they offer through brokers. Obviously, this makes the process of finding a decent mortgage much more difficult than it used to be.

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What are my other options?

Your other option is to research current mortgage deals yourself. There are two ways to do this:

• Go to the lender directly – Contacting mortgage lenders directly could get you the most competitive deal. If you are re-mortgaging it is always worth talking to your current lender first, to find out what deals they would offer you to stay with them. If the deal they offer is good, taking it could avoid added arrangement fees and a great deal of paperwork.
• Search online – To get a good idea of what mortgage deals are currently available, you can search online, visiting lender’s pages directly as well as sites like the FSA’s Mortgage Choices (www.fsa.gov.uk) which lists a large number of mortgage deals.

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Recommendation

The key question is whether you have the time and resources to find the best deal on the market by yourself and whether you will be able to ensure your application is processed quickly, before the deal is withdrawn.

We would recommend using a broker, in addition to doing your own research. This is practically guaranteed to give you the best chance of finding the most competitive deal. This way you will have access to deals that are only available direct from lenders as well as deals that are exclusive to brokers.

Importantly, you will want to look at the mortgage deals offered by lenders that don’t offer deals through brokers (listed above), as these will not be on your broker’s database.

Most broker services are either free to use or will only charge a fee on completion of a mortgage. To that end, there’s no harm in seeking more that one opinion and trying a few brokers to see who can find the best deal.

To start your hunt for the best mortgage deal, why not get a free quote from our Mortgage Comparison Service and see if we can find you the best mortgage?

Take two minutes to complete our form and we will search over 5,000 mortgages to find you the most suitable deal. The service is free, there is no obligation to take any mortgage recommended and no credit checks are performed.

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