When you’re looking to get a mortgage, you might wonder whether to use a bank or a mortgage broker.
While banks are a familiar choice, many are now turning to mortgage brokers for this important step. In this article, we’ll explore why a mortgage broker can be a better option than going direct to a bank.
Mortgage brokers offer a wide range of mortgage options, personalised advice, and can save you time and effort. They have the expertise to explore the whole mortgage market and often find deals that suit your specific needs better than a bank might.
Whether you’re buying your first home, looking to change your mortgage, or have unique financial needs, it’s valuable to understand how a mortgage broker can help. We’ll break down the advantages, making it clear and straightforward to see why choosing a mortgage broker could be the right move for your mortgage journey.
What is a Mortgage Broker?
A mortgage broker is a qualified professional who acts as an intermediary between you and potential lenders.
Their job is to find you the best mortgage deal that fits your financial situation.
Unlike a bank, which only offers its own mortgage products, brokers have access to a wide range of mortgages from over 100 different lenders.
This includes banks, building societies, and specialist mortgage lenders.
How Mortgage Brokers Operate
Mortgage brokers have detailed knowledge of the market and can recommend products that align with your financial circumstances and property goals.
They consider various factors like interest rates, repayment terms, and any applicable fees. A key part of their role is to understand your financial situation – income, credit history, and long-term financial goals – to find a mortgage that suits you.
Why Their Role Matters
The value of a mortgage broker lies in their ability to tailor their search to your specific needs.
They can work through the complexities of the mortgage market, understanding the myriad of different products and specialist lenders. This is especially helpful if you have a unique situation, like being self-employed or having a mixed income, where finding the right mortgage can be more challenging.
Regulation and Training
It’s important to note that mortgage brokers in the UK are regulated by the Financial Conduct Authority (FCA).
This means they must adhere to strict standards and guidelines, ensuring they act in your best interests. They’re also required to have professional qualifications and ongoing training, keeping their knowledge current in a rapidly changing market.
The Benefits of Using a Mortgage Broker
Here’s why an independent mortgage broker can be a key ally in your mortgage journey.
Early Advice and Assistance
Brokers are used to helping their clients at a very early stage in the process of getting a mortgage. They can answer questions and help you to gather the information and documents that a lender will need. Read our article: How to get mortgage ready.
Access to a Wider Range of Products
Unlike banks that only offer their own products, whole of market mortgage brokers have access to a huge array of mortgages from many different lenders. This means they can find a product that precisely fits your financial needs and situation.
Brokers can also access specialist mortgages that are not readily available on the high street, which can be crucial if you have unique circumstances, like irregular income or a less-than-perfect credit history.
Personalised Advice and Support
Brokers take the time to understand your financial situation, offering solutions that are tailored to your personal needs. They can offer advice on how much you can afford to borrow and which type of mortgage might be best for you.
From the initial application to the final approval, brokers provide guidance and support throughout the entire process. They can also help you understand the various fees and charges involved in taking out a mortgage.
Time and Effort Saving
Mortgage brokers handle the time-consuming tasks of searching for the best rates, dealing with paperwork, and liaising with lenders. This saves you significant time and reduces the stress involved in the mortgage process.
Their experience and knowledge can make the application process smoother and quicker, which can be especially beneficial in time-sensitive situations.
Expertise and Market Knowledge
Brokers keep up-to-date with the latest market trends, interest rate changes, and lending criteria, which means they can offer current and relevant advice.
Their expertise allows them to tackle complex situations or issues that might arise, providing solutions that might not be apparent to someone less experienced in the mortgage field.
Potential Cost Savings
Brokers often have access to exclusive deals or can negotiate better terms on your behalf, potentially saving you money over the life of your mortgage. With their knowledge, they can help you avoid pitfalls or products that might not be suitable for you, preventing expensive mistakes.
Comparing Mortgage Brokers with Banks
This section contrasts the experience of using a mortgage broker with that of going directly to a bank.
Understanding these differences is key to making an informed decision about which route to take for your mortgage.
Product Range and Flexibility
Typically, banks offer only their own mortgage products. This will limit your choices to one lender and what is available in their portfolio, which may not always match your specific needs, desires or financial situation.
Brokers have access to the widest range of products from various lenders, including deals that are not available directly to the public. This variety increases the likelihood of finding a mortgage that is competitive, and fits your unique circumstances.
Personalised Service and Advice
The service at banks can sometimes be more generic, with advice and options that are standardised and not always tailored to individual needs. This can be less effective, especially for those with non-standard financial situations.
Mortgage brokers offer a much more personalised service. They work to understand your specific financial situation, providing custom advice and recommendations. This tailored approach is particularly beneficial if you have unusual income streams or credit history.
Application and Approval Process
When applying through a bank, you often need to work largely on your own, which can be time-consuming and confusing, especially for first-time buyers or those less familiar with financial jargon.
Brokers manage the application process for you, from initial paperwork to liaising with lenders. They can also expedite the process, using their relationships with lenders to potentially speed up approvals.
Expertise and Industry Knowledge
Bank representatives have qualifications and expertise, but it’s limited to their own products and training. The bank will only train them on their own products.
Brokers have comprehensive knowledge of the entire mortgage market. They stay updated on changes in regulations, lending criteria, and market conditions, which positions them to offer current and informed advice.
Cost Considerations
Going directly to a bank does not involve a broker’s fee, which can be seen as a cost-saving. However, you might end up with a less competitive mortgage rate or unfavourable terms.
While brokers often charge a fee, they have access to more lenders, better rates and terms that can save you money in the long run.
Regulation and Protection
When considering using a mortgage broker, it’s essential to understand the regulatory framework and protections in place. These factors contribute significantly to the security and confidence you can have in a broker’s services.
Regulatory Compliance
All mortgage brokers in the UK are regulated by the Financial Conduct Authority (FCA).
This regulation ensures they adhere to strict standards of conduct and practice, prioritising the best interests of their clients. Additionally, brokers are required to have professional qualifications and undergo regular training, keeping them knowledgeable and current with the latest mortgage products, regulations, and market trends.
Consumer Protections
Brokers are obliged to provide clear and transparent advice, explaining the reasons behind their recommendations. This transparency ensures that you are fully informed about the choices available to you. In case of dissatisfaction with the service, you have the right to complain. Brokers are subject to the Financial Ombudsman Service, which offers an independent review and redress if necessary.
Duty of Care
A key aspect of a broker’s role is to act in your best interest, only offering products that are suitable for your needs and financial situation. They also assess your financial risk and advise on products that align with your risk tolerance and long-term goals. This duty of care is central to their service.
Conflicts of Interest
Brokers must disclose any commissions they receive from lenders, ensuring that their recommendations are transparent. The regulatory framework also ensures that brokers cannot favour certain lenders due to personal biases or financial incentives, mitigating potential conflicts of interest.
Continued Support and Guidance
Many brokers offer ongoing support even after the mortgage is secured. This can include advice on remortgaging, changes in financial circumstances, or planning future property purchases, establishing a lasting professional relationship.
What does “whole of market” mean?
When you use a ‘whole of market’ mortgage broker, it means you have access to an extensive range of mortgage products from across the entire market.
This includes offerings from major banks, building societies, and specialist lenders, ensuring you’re not limited to just a few options. This breadth of choice only comes from a broker.
The brokers we work with have over 100 lenders to choose from
It’s especially helpful if you have specific needs or preferences, such as being self-employed or seeking particular mortgage features.
This means that your broker can help you to secure a mortgage from a high street lender such as Natwest or Santander, or those further afield such as Cumberland BS or Principality BS. Or specialist lenders such as Aldermore, Paragon or West One Loans.
Do mortgage brokers get better rates?
A mortgage broker can certainly get you a better rate than if you approached a lender directly.
With over 100 lenders at their disposal, brokers not only find the best rates but also a mortgage that suits you.
They have the advantage of knowing the ins and outs of various lenders’ criteria and specials, which might not be widely advertised. This means they can pinpoint deals that are a good fit for your specific financial situation and goals.
Moreover, due to their volume of business and relationships with these lenders, mortgage brokers often have access to exclusive rates and terms that are not available to the general public.
This can result in more attractive mortgage options for you.
Should I use a local mortgage broker?
When considering whether to use a mortgage broker, you might wonder if it’s important to choose one based near you. While there are benefits to having a local broker, the decision ultimately depends on your preferences and needs.
The advantage of a local mortgage broker is the personal touch. Meeting face-to-face can build trust and help the broker better understand your situation. They are also likely to have specific knowledge of the local property market, which can be invaluable. This insight can be especially useful if you’re buying in a competitive or unique local market.
However, the rise of digital communication has made it less necessary to have a broker nearby. Many mortgage brokers offer comprehensive services online or over the phone, making it convenient to manage your mortgage application from anywhere.
This digital approach can save you time, as you won’t need to take time off work, or travel for meetings.
What’s most important is finding a broker who understands your needs, offers excellent service, and has access to a wide range of mortgage products. Whether they are local or not may be less significant compared to these factors.
If you prefer a more personal relationship and local market knowledge, a nearby broker could be advantageous. If convenience and a broader range of options are your priority, then the physical location of your broker might not be as crucial.
Mortgages for professionals
Securing a mortgage can be a challenging process, but if you are a professional with qualifications and a stable income, you could be eligible for mortgages designed specifically for certain occupations.
Typically, this includes solicitors, accountants, doctors, and others who are viewed as having stable, high-earning professions.
Your status as a professional may grant you access to exclusive rates or bespoke deals that general mortgage products don’t offer.
Understanding Mortgage Brokers: Dispelling Common Myths
When it comes to securing a mortgage, many turn to mortgage brokers for assistance.
However, there are several misconceptions about what brokers do and how they operate.
Let’s clear up some of these misunderstandings and shed light on the true value of mortgage brokers.
Brokers Are More Expensive
Brokers do charge you a fee but in reality, brokers often save you money.
They have access to a wide range of deals, some of which are exclusive and not available directly to the public. These options can lead to finding more competitive rates and better terms than you might find on your own.
Limited Mortgage Options
Some think that brokers have access to only a few lenders.
This is far from the truth. Mortgage brokers have a vast network of lenders, including major banks, building societies, and specialist lenders, offering a diversity of products that a single bank can’t match.
This extensive range means they can find a mortgage that’s precisely tailored to your financial situation and needs.
Brokers Work for Lenders, Not Clients
There’s a misconception that brokers are more aligned with the interests of lenders.
However, in the UK, brokers are regulated by the Financial Conduct Authority (FCA) and are legally obligated to act in the best interests of their clients. Their priority is to find the best mortgage solution for you, not to favour a particular lender.
The Process Is Slower with a Broker
Some people believe that working with a broker can slow down the mortgage process.
In fact, brokers can make the process faster. Their experience and relationships with various lenders can streamline the application and approval stages. They handle the legwork, from paperwork to negotiation, making the process more efficient for you.
Online Comparisons Are Just as Good
With the rise of online comparison tools, some assume these can replace the need for a broker.
While these tools are useful for initial research, they lack the personalised service and expertise a broker provides. Brokers offer tailored advice based on your unique financial situation, something an online tool cannot replicate. They also help interpret the complexities of mortgage products and terms.
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.
Final thoughts
Here’s two compelling reasons to use an independent mortgage broker.
Choice
If you go to your bank, let’s say the Halifax, their advisers can only tell you about Halifax mortgages. If Natwest is offering a better deal they are not allowed, or obliged, to tell you.
So you have a choice of one lender.
Whereas with an independent mortgage broker you start with a choice of over 100 potential lenders. This is known as “whole of market”.
The broker will ask questions to better understand who you are and what you need.
After they have researched your mortgage options, you’ll probably have two or three deals from different lenders to consider.
Advice from Experience
The Halifax mortgage adviser will certainly have (I hope) an excellent working knowledge of the Halifax products and what they all do etc.
But being a good mortgage adviser is not about knowing everything about one lender.
It’s about understanding what the borrowers want and need.
And then searching for this from over 100 lenders.
The solution will be a mortgage. But often there is a need for advice and strategy to get to this point.
Brokers by their very nature will see many different types of potential borrowers, all with different needs. The solution for one client is rarely the same for the next client.
Independent brokers need to be excellent problem solvers, as well as knowing lots about mortgages.
The advice they give is improved by the wide range of clients they help, from all walks of live and financial background.
