Not too familiar with what a mortgage broker does? Well you’re in the right place. According to Legal & General, 71% of homeowners use a mortgage broker. But what do they actually do?
A mortgage broker, otherwise known as a mortgage advisor, is a company or a person, who can quite simply get a mortgage for you – they are effectively the ‘middleman’ between you (the person who borrows the money), and the lender (the person who gives you the money).
Now you might be thinking “but I can just get a mortgage myself?!”, and you would be right! But here’s why we sometimes call mortgage brokers the heroes of mortgages…
There’s over 20,000 mortgages out there, and over 90 different lenders – imagine going through them all one-by-one to find the best deal for you! Well mortgage brokers save you the time by using their knowledge and expertise to find the best one for you.
Don’t rush out and get any old broker just yet though, only ‘whole-of-market’ brokers are able to search every deal out there, so you’ll want to make sure you use one who can. More on that below.
By the way, all the mortgage brokers we work with at Nuts About Money are whole-of-market, and provide excellent customer service. If you’re ready to find the best one for you, for free, get started here.
Better than just finding the right deal, they’ll actually apply for the mortgage for you, that’s doing all the paperwork and speaking with the lender. You can just sit back, put the kettle on and relax.
Applying for a mortgage can be a stressful and drawn-out process, so having an expert in your corner who knows what they are doing to do it all for you is quite handy. They’ll also make sure you avoid little silly mistakes that could add time to your application to fix.
A mortgage broker knows how each lender operates, what their preferred customers are and what you need to do to make sure an application is successful. It’s their job to know lenders inside out after all! Some will have great relationships with the lenders, having worked together for years.
Which means they’ll know if you are likely to get rejected before you apply, and will make sure your application is in the best shape possible.
A mortgage application that gets rejected can have a significant impact on your credit score and ability to get another mortgage after. So it’s a good idea to give yourself the best chance of success.
You can have confidence the mortgage broker has your best interests at heart as they are regulated by the Financial Conduct Authority (FCA), which sets out rules that brokers must follow to treat customers fairly and ensure they are providing the customer with the right advice.
They're the same people who regulate investment apps, trading platforms, investment platforms, pensions, financial advisors and pretty much everything money related.
It gives you a level of protection you wouldn’t have by applying directly for a mortgage and gives you the right to complain and potentially receive compensation if it turns out you were given bad advice.
As there’s quite a few mortgages out there – over 20,000 to be exact, it can be hard to find the best one for you and your personal circumstances.
An independent mortgage broker who can search through all of these mortgages to find the right one for you is known as a whole-of-market broker, and using one means you can be sure you’re getting the right deal for you – which normally means the cheapest overall.
In fact, you could be overpaying by potentially £100s per month on your mortgage repayments being on the wrong or a bad deal.
There are many mortgage brokers out there who can only search a limited number of deals – that’s because they might work for one specific lender, such as HSBC or Barclays, and can only offer their range of mortgages (never just walk into a bank and get a mortgage, chances are you won’t be getting the best deal for you. It’s best to use a broker to search all lenders out there).
Or, some mortgage brokers just might not have access to search all the different lenders, which can depend on who they work for, and where their licence is from. Sometimes they might have been removed from a group of lenders for actly badly, such as fraud or not putting the customer first.
Either way, it’s best to use a whole-of-market mortgage broker to make sure you get the best deal out there.
Let’s start with how mortgage brokers get paid first and work backwards from there.
When a mortgage broker finds the right mortgage for someone, they handle all the paperwork for the customer and submit the application to the lender, they also typically manage the whole process, which saves the lender a lot of time, and of course provides them with customers.
So in return, the lender gives the broker a commission, which is normally around 0.35% of the mortgage value. So for a £200,000 mortgage, that’s £700 in commission from the lender to the broker.
Now, some mortgage brokers are happy with that, and some also charge the customer a fee too, which is usually a fixed fee, the average is around £300, but can be between 0.3% and 1% of the mortgage value.
The smaller, more local mortgage brokers tend to charge the customer as they like to spend a bit more time with the customer and pride themselves on customer service (although not always true), and so handle less customers per month.
The larger companies who cover the whole of the UK, such as brokers who operate entirely online, are typically free, as they typically spend less time with each customer and are able to handle lots of customers per month, and therefore have found they don’t need to charge the customer too. Here's our guide to getting your mortgage online.
It’s entirely up to you if you’d to go with a broker who charges or is free, the important thing is you are confident in their ability, are happy with their customer service and as long as they are whole-of-market, they will normally save you a lot of money in the long run on your mortgage.