Applying for a mortgage can be a daunting task as a first-time buyer. There are interest rates to consider, credit scores to pass and an abundance of paperwork to complete. This is why mortgage brokers have rocketed in popularity recently; with over 60% of home buyers using one in 2020.
Choosing whether to enlist a mortgage broker can feel like yet another decision to make, amongst so many. When I was first faced with the prospect of applying for a mortgage, I opted to enlist a mortgage broker. However, this decision comes down to several factors. Below I have broken down the roles of both the bank and an independent broker to help you decide which is the optimal route for you.
What is the difference between the two?
A mortgage broker will act as a middleman between multiple lenders whereas a bank will offer only the rates provided by their company.
How does an independent mortgage broker work?
A mortgage advisor is a finance professional who acts as an intermediary between you and your mortgage lender. They will work closely with a wide scope of lenders to find a mortgage that will provide you with the best terms, rates and conditions. A good mortgage broker will have an excellent knowledge of the market and may also have favourable relationships with lesser-known providers. They will access your credit rating, personal income and evaluate your deposit to broker a mortgage that is suitable for you. Working with an independent mortgage broker can have a lot of positives; however, it is worth doing your homework as some may solely work in their own interests. For example, using their preferred lenders to receive higher commission rates.
How much does a mortgage broker cost?
Using a mortgage broker may or may not incur an added fee. This may be a flat rate fee, generally ranging from £300- £600 or some will take a commission from the mortgage lender.
What are the key requirements when searching for a mortgage adviser?
- Ensure that they are regulated by the FCA (Financial Conduct Authority)
- Ask them questions such as: do you have access to the whole market? How will you keep me updated on my application?
- Ask for recommendations from friends or family who have had positive experiences.
- Look at websites such as www.unbiased.co.uk to search for online providers.
How do you apply directly through a bank?
Applying for a mortgage directly through a bank can be a straightforward process. If you have a strong deposit, a good credit rating and a reliable income then applying for a mortgage directly can be a suitable choice. To apply, you are likely to meet with a mortgage advisor, represented by the bank, who will review your finances and circumstances in order to offer you a mortgage. Ensure that you have researched and compared rates beforehand and that you are happy with their rates. However, it is important to keep in mind that your options may be limited, in comparison to a mortgage broker. This can mean you will not access the best rates on the market. Always shop around first.
As there is no legal obligation to use a mortgage broker, it is entirely your choice as to whether you use one. Choosing to enlist a mortgage advisor or going through a bank directly comes with both advantages and disadvantages. However, as long as you make your decision armed with some knowledge, then you will find the most suitable mortgage for you.
Have you used a mortgage broker recently or decided to use a bank direct? Let us know how you got on below.