When looking for a mortgage, home buyers often find themselves asking this common question. Should I use a mortgage broker or apply for a mortgage offer direct? There are a number of factors to take into consideration.
What are the benefits of using a mortgage broker? Mortgage brokers can often find deals with better rates and know how to find the best deals for you based on your specific circumstances. The experience and industry knowledge a mortgage broker brings to the table often pays for itself. Good mortgage brokers typically have access to industry software and can search through thousands of deals very quickly. They are also typically familiar with most of the big lenders and the nuances of applying for a mortgage with each of them.
Main benefits of using a mortgage broker
They understand the jargon and complexities
If you have tried to apply for a mortgage directly, you will know how confusing the forms can be. It’s not uncommon to be stuck googling terminology and trying to compare figures between different offers that never seem to match up! A mortgage broker will be able to explain away these issues and provide informed, simple advice.
Not only can your ignorance slow you down having to constantly research terms, but it can also carry the risk of making errors in your application, which can prove financially costly.
Industry insight and experience
Any good mortgage broker with a sufficient amount of experience in the industry will be able to advise on the current best mortgage interest rates. This is without even having to consult a document or contact a lender. By arranging and recommending these products all day every day, mortgage brokers will have a general awareness of the industry. They will also likely follow industry publications and news to keep their finder on the pulse in that respect.
Awareness of common hurdles
Some banks and lenders will be more willing to consider applications from people with a low credit rating, whereas another may want a full two years payslips before they will even consider processing your application. A mortgage broker will be well versed on these potential hurdles and help you save time by targeting your application towards lenders who are most likely to accept and process the application with the minimum chance of issues.
Special rates and deals
Some lenders have special rates and deals that are exclusively available through mortgage brokers. You won’t find these deals by contacting the lenders directly. This reason is one of the most compelling reasons to use or at least consult with a mortgage broker.
Other benefits of using mortgage broker
As well as finding the best mortgage deal for you, mortgage brokers will handle most of the communications with the lender and any third parties. This frees up your time to work on more important tasks or spend precious free time with friends and family.
As well as handling your mortgage application, you may find that your broker can advise on other related areas such as finding a good accountant or solicitor. They will often be able to refer you to a trusted professional that they personally recommend.
Disadvantages of using a mortgage broker
Despite the many advantages to using a mortgage broker, there are also some downsides that you should be aware of. As with many things in life, there is a trade-off. We’ve listed some of the main disadvantages for your consideration below.
There may be costs associated
Typically, mortgage brokers will earn a commission from the bank for each successful mortgage application they make. On top of that however, many also charge a fee to customers. This is usually not very much, in the region of a couple of hundred pounds at most, but it’s something to consider.
Brokers may satisfy their own interests
Mortgage deals typically pay a commission to the mortgage broker who recommends them. This commission can vary, so the best deal for you may prove not to be the best deal for the broker making the recommendation. How much of a factor this is depends on the specific broker and how they seek to satisfy their clients and their own self interests.
You may miss other deals
Some deals may be available directly from a lender but not through a mortgage broker. There may also be deals that don’t appear within the broker’s software or new offers that they simply aren’t aware of. If you have time to call and visit banks and building societies, you can sometimes uncover these obscure deals and promotions.
Brokers can make mistakes
Nobody is perfect, and mortgage brokers are no exception. Due to the complexity of the mortgage application process and the amount of communication between the lender, broker and yourself, it’s quite common for things to get missed and for issues to occur. You might find that you have to chase up your application time and time again. This can be quite frustrating.
Obviously there will be a lot of variance between different brokers. Some may be so well organised that you find it’s more of a case of them chasing you rather than vice-versa. My experience however is that this is rarely the case.
There are a number of key benefits to using a mortgage broker – in particular the broker’s ability to find the best deals quicker and with a higher degree of success. In my personal opinion these factors far outweigh the potential disadvantages, and it’s why I have, and will again use a mortgage broker when buying a property.
There wouldn’t be such a thriving mortgage broker industry if they weren’t offering some sort of value, so it’s clear that they must be offering something to justify their cost.
Why use a mortgage broker instead of a bank?
Since they are independent, mortgage brokers can compare deals across different banks, thus helping you find the best available deal. Banks are only able to recommend their own mortgage products however.
The advantages to using a mortgage broker, as detailed above, should serve as good criteria to deciding whether to use a broker or not.
Will a mortgage broker get me a mortgage?
Yes, as well as identifying your requirements and helping you to find the best available deal, mortgage brokers will also make the application to the mortgage lender on your behalf and typically guide the application as it progresses, communicating with the client and the lender as necessary.
Do i need a mortgage broker?
It is not a legal necessity to use a mortgage broker in the UK. You are free to apply directly for a mortgage yourself or use a broker. Applying directly for a mortgage may be trickier and more time consuming, but possible nonetheless and many people, particularly those with experience with mortgages will avoid using mortgage brokers altogether.