Mortgage Brokers: A Guide
We take a look at what mortgage brokers do, how they can help you, how they get paid and some tips on how to find a good one.
Our comprehensive guide sheds light on the invaluable role of mortgage brokers, highlighting how they can turn even difficult situations into successful outcomes. Discover how choosing the right broker can transform your mortgage journey, no matter your circumstances.
What is a mortgage broker?
A mortgage broker is someone who is qualified to provide customers with mortgage advice and then arrange that mortgage for them.
Brokers act as a middle agent between the borrowers (you) and the lenders. The lenders that they work with allow them to submit new mortgage applications and during the course of the mortgage process to make changes and amendments as well as providing any requested documents.
Are there different types?
Yes, there are three types of mortgage adviser. If you approach a lender directly, or maybe visit your local branch, the adviser can only suggest mortgages from that one lender that they work for. If there’s a much better deal from the bank next door they are not allowed to recommend it (or mention it) as a suitable option for you.
This is clearly quite limited in terms of how many mortgage products you have to choose from.
When you go to a broker there are two possible types:
WHOLE OF MARKET
A whole of market, or independent, mortgage broker will have access to over 100 lenders and many thousands of mortgage products and interest rates.
Choosing a whole of market mortgage broker gives you the widest possible choice of mortgage options.
They are also likely to have some experience in dealing with the more complex types of mortgages that could involve: SPV’s, self-employed income, investment properties, short term bridging.
RESTRICTED
A restricted mortgage broker is one which does not have access to the ‘whole market’, often these will be from estate agents.
The advisers can only select a mortgage solution from their panel of approved lenders. Now this could be 5 lenders or maybe 10 lenders for example.
But they cannot search from all of the possible mortgages to find the best one for you.
What does a mortgage broker do?
A mortgage broker’s job is to secure the best mortgage, from those available, that meets your borrowing needs and financial circumstances. Let’s break this process down.
GET TO KNOW YOU – At the outset your broker needs to ask quite a few questions so that they can become familiar with your situation and what you need. They need to fully understand your income position and what documents you have as proof.
A broker needs to check that any new mortgage is affordable for you so they will ask about monthly expenses etc. Do you need a specific mortgage type or term? Are you planning to overpay your mortgage or perhaps move in the near future?
MORTGAGE SEARCH – All of these questions will allow them to begin their search for the right mortgage that fits your needs. Brokers will all use some type of research software that helps them to narrow down what mortgages could be suitable for you.
They then use their knowledge and experience to get this down to a short list, making sure they meet your requirements. They will only recommend a mortgage that you qualify for, making the chances of a successful outcome extremely high.
SECURE THE MORTGAGE – Once you have chosen a mortgage then the adviser will help you to apply for it, alongside collating any documents that they know the lender will need.
The general idea will be that your mortgage application has all of the relevant information and documentation to make the process as smooth as possible. Should the lender request further details, or perhaps a change to the mortgage is needed, your broker and their team can handle this on your behalf.
You will find more useful information in our guide: What does a mortgage broker do?
Why would you use a mortgage broker?
We think this is a fair question to start with. You don’t have to use a mortgage broker to apply for a mortgage. But a mortgage is a big financial commitment and with thousands of products available how do you make sure you have the right one?
An Independent Mortgage Broker has access to the whole mortgage market, giving you the widest possible range of options and choices.
They can be helpful for:
Self-employed people
Property investors
Bridging and capital raising
Credit issues
Commercial loans
Buying a second property
Complex scenarios
Limited Co & SPV
Saving time
You need to consider where your broker is based.
Some have a fixed office but can offer advice right across the UK. This may be a larger business that has many advisers looking after clients in different areas and towns.
Others may only want to deal with very local clients, perhaps those that can visit them in person.
With the advantages of the many different ways we can communicate and transfer documents now, it should be possible to receive an excellent service regardless of where your adviser is located.
We have an additional page that goes into a bit more detail: Why should you use a mortgage broker?
CONTACT A MORTGAGE BROKER
If you are ready to take the next step then we can put you in touch with a fully qualified independent mortgage broker.
Who does a mortgage broker work for?
A whole of market, or independent mortgage broker works for you.
They have your best interests in mind when advising on your mortgage options. They also want to keep your future business and will contact you in advance of any deal ending so that new options can be considered.
When should you contact a mortgage broker?
Many people turn to a mortgage broker where they have experienced issues going direct to a lender or perhaps the estate agent adviser is not up to scratch.
The ideal time is as soon as possible. But, essentially this should be before you commit to purchasing a property and before any mortgage applications are made. Every time you apply for a mortgage it leaves an entry on your credit file. Lots of entries can cause a potential lender to be concerned over your creditworthiness.
An experienced broker will also be able to provide some strategy to what you are trying to achieve and will look at the bigger picture. Mostly this will be with more complex scenarios but a broker can provide a plan of action to increase the chances of a successful outcome.
Your first meeting
When you first make contact with your broker it’s important to be open and honest and let them know what you want. A broker is not there to judge you but they do need to know the full picture.
Ask them what types of mortgages they have experience with and how many mortgage lenders they have access to.
You also need to ask about any fees and when these are due.
How much does a mortgage broker cost?
How do mortgage brokers get paid? – In the UK almost all mortgage lenders will pay brokers a commission for arranging each new mortgage. This payment is only made when the mortgage completes, or starts.
In terms of fees, brokers tend to be split into two groups.
FEES FREE – These brokers rely solely on their commission and do not charge an explicit fee to clients.
FEES AND COMMISSION – Other brokers will charge you a fee as well as receiving the lenders commission payment.
There’s no right or wrong to this. It just depends on the business model the broker has adopted. It is important to realise that some mortgages can take a lot more effort to get them ‘over the line’ than others. This could include: credit issues, employment types, SPV, bridging, let to buy to name just a few.
On a separate page we also answer the question: Do mortgage brokers charge a fee?
How to choose a mortgage broker
Choose a whole of market broker who will be able to assess every available mortgage so they can recommend the best or most suitable deal for you. This will potentially save you a lot of money.
Make sure that they have helped other clients who are in the same situation as you. You may need to approach a specialist mortgage broker.
Most brokers can work with clients in person and/or over the phone and there’s a growing number of web-based businesses. Make sure that the way they work and the hours they are available suits your needs.
Key questions to ask a broker
Before choosing a mortgage broker, it is a good idea to ask:
How many lenders do you work with?
How much do you charge?
Are you regulated?
How long have you been a broker?
What is included in your service?
When are you contactable?
Your rights when using a mortgage broker
All brokers must be suitably qualified and regulated by the Financial Conduct Authority (FCA).
Before suggesting a particular mortgage they should explain how their service works and draw your attention to any fees. After researching the options they will recommend a specific mortgage and provide clear reasons for their choice.
If you feel that you have received bad advice then you should make a formal complaint to the mortgage firm that provided the advice. It’s important to wait for their response.
If this doesn’t resolve your complaint then you are able to use the Financial Ombudsman Service (FOS) to take the matter further.
Mortgage survey
In November 2021 Legal & General interviewed 1000 people who had recently taken out a mortgage. Of those that had used a mortgage adviser, the main reasons were:
40%
Brokers have access to the whole mortgage market.
38%
They can quickly tell me about the most suitable deals.
30%
I wanted to see the best deals in the market.
FAQ
Frequently Asked Questions
Do you have to pay a mortgage broker?
Some brokers do charge fees and this will be explained to you at the outset.
Can a mortgage broker get you more money?
Potentially yes. An adviser could find a mortgage that allows you to borrow more money.
Can a mortgage broker give you a mortgage in principle?
An Agreement in Principle (AIP) will come from a specific lender but a broker can arrange this for you.
Can a broker save me money?
Yes, in many cases a broker can find a more competitive deal than going direct, a good reason to choose a broker over a bank.
Are mortgage brokers financial advisers?
Not always. Many mortgage brokers just stick to advising on mortgages and loans but some will also provide other types of financial advice.
Will I need to meet face to face?
This depends on how the broker works. Generally most brokers are happy giving advice using calls, video and email.
