Is an independent mortgage broker the best person to help me get my mortgage, or am I better using the high street banks?
There are a few ‘varieties’ of an independent mortgage broker and over the last few years their advantages and uses have altered considerably.
An independent mortgage broker should look at all the mortgages available in the market, assess your needs and decide which lenders are best for your mortgage application. The idea is that they are supposed to know who will lend and for what, and that they have access to the best rates, saving you time and money.
Some independent mortgage brokers limit themselves to just a small number of lenders, but a whole of market mortgage broker has access to all the lenders in the UK. In practice, many of the whole of market independent mortgage brokers still limit themselves to a small amount of lenders, and tend to use the same firms. By using them, you could be missing out on considerable savings.
In the past, the main advantage of an independent mortgage broker was to negotiate the best terms available in the market. Today, however, everyone I speak to says their main reason for using a mortgage broker is simply to get a mortgage, such is the state of the mortgage market.
Lenders have tightened up their lending criteria and many homeowners have found it impossible to borrow. If they have managed to, they are finding the rates to be crippling.
This is probably where a good independent mortgage broker will be most successful. Every time you apply to a lender, a credit search may be registered which can go against your credit rating. A whole of market mortgage broker will know in advance which lenders are most likely to be successful and will make the application fit before applying. They will also know exactly how a lender wants the application prepared to give it the very best chance of success. That way you only have one credit search registered against you.
So what are the other advantages of using an independent mortgage broker?
Whole of market independent mortgage brokers will be able to search every lender in the UK with one click of a button. They also know all the hidden fees. There is no point in securing a low interest rate when the extra disguised fees outweigh the advantages of the lower monthly payments.
For example, you could be asked to pay an application fee, survey fees, legal fees, a fee to secure a rate, and also have redemption fees loaded onto the exit from your mortgage. Some of these redemption fees (a penalty for moving your mortgage away from the lender before a certain date) are sizeable and often run on after the date the special rate ends.
The whole of market mortgage broker will simply assess the total cost to you of the mortgage, including all fees. A good independent mortgage broker will charge a fee; after all, you are paying for advice.
They won’t be relying on commission and as such won’t have any motivation to sell anything. Instead they will be focused on giving you the very best advice.
The best independent mortgage broker will also be well advised by a team of independent financial advisers regarding the economy and will be in a position to advise whether or not inflation will drive higher interest rates etc. This is an essential piece of advice. For example, many people were advised to fix their mortgage in 2008 on the threat of higher inflation when it was obvious to me (in this column) that the reasons for higher inflation didn’t really exist. We therefore advised everyone to stay on the variable rate. The variable rate for some of these customers is 4% less than the rate they were advised to fix on at the time and as such these customers will have saved thousands of pounds.
Some independent mortgage brokers also have access to mortgage rates not available direct to the public which can save you a small fortune.
However, some lenders also only lend direct to the public and offer better deals to customers than through an independent mortgage broker. That’s where a fee based whole of market mortgage broker will be happy to realise that and direct you where it’s best for you, rather than where they are more likely to earn more.
Overall, they should provide a massive saving of both time and money. However, be sure to look for a whole of market independent mortgage broker who is fee based and who has access to a range of independent financial advisers. This will also ensure the products that are sold to you over and above the mortgage are the best there are.
What do I do now?
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