What is a mortgage broker?
A mortgage broker is a person or company that can arrange a mortgage between you (the borrower) and a mortgage lender. They’ll work directly with you to help you decide what kind of mortgage you need, and then find a deal that matches your criteria – whether you’re a first-time buyer or looking to remortgage your current home.
Why use a mortgage broker?
A mortgage broker can help navigate you through every stage of finding and applying for a mortgage – to get the best deal available based on your individual circumstances.
For example, their service may include:
- Helping you assess your financial situation
- Suggest the most suitable mortgage for your needs
- Searching the market to find deals that match your criteria
There are pros and cons to using a mortgage broker.
- Convenience – mortgage brokers can be very useful if you don’t have a good working knowledge of the finance and mortgage markets, or don’t have the time to spend searching for deals, doing the paperwork and speaking to lenders.
- Access – due to their experience and contacts, a mortgage broker will usually have access to a wide range of lenders This means they may have a better chance of finding a deal that fits your criteria.
- Expertise – the mortgage industry can be confusing, and things can change rapidly as interest rates fluctuate and mortgage deals come and go. Having an expert who can explain things clearly and understands best practice can be invaluable.
- Cost – mortgage brokers aren’t always free and can add to your costs at a time when you’re trying to save as much money as possible. Fees can vary significantly between brokers so it’s worth shopping around (and reading our breakdown of fees below).
- Limitations – not all brokers will have access to the entire mortgage market, meaning relying solely on a broker can limit your options. Some brokers may prefer certain lenders if they have a good relationship with them. You can and should always ask a broker how many lenders they work with and if they have a preference for any particular lenders.
- Quality – qualifications and experience can vary dramatically between brokers, and an incompetent one can at best slow the process and at worst cost you money if they don’t get the best deal for you. Make sure to vet them carefully and get recommendations where possible.
How much does a mortgage broker cost?
As you might expect, mortgage broker fees will vary from broker to broker and are influenced by a variety of factors, such as how much you want to borrow. The average cost for a mortgage broker is around £500*, but different brokers can charge in different ways:
- A fixed fee – the broker will set a fixed fee to find and arrange a mortgage for you (which you should always agree in writing before engaging them).
- An hourly rate – less common but some brokers do charge by the hour, in which case you should get a written estimate of how long it will take to arrange your mortgage, so you know the likely fee.
- On commission – you may see terms like ‘fee free’, but that may mean the broker is getting a commission from certain lenders. So, it’s important to ask if they work with specific lenders before you engage them.
- As a percentage – where the broker sets their fee as a percentage of your mortgage, e.g. a 1% fee on a £250,000 mortgage would be £2,500.
You should always make sure you understand what the fees will be and when the broker expects to be paid before you engage them to find you a mortgage.
How do you find a mortgage broker?
A simple online search will return you lots of mortgage brokers hungry for your business – but how do you know which is right for you? A good start is to ask for recommendations from friends who’ve moved to the same area.
Don’t feel you have to go with the first broker you talk to, and you’re in no way obliged to use the broker an estate agent recommends to you, even if you buy your property through them. Just remember before engaging any broker to ask three key questions:
- “Are you independent and can you get me a mortgage from any UK lender?” Not all brokers have access to every mortgage – some are tied to specific lenders while others are ‘whole of market’.
- “Do you charge a fee and if so, how much and when do you take it?” As mentioned earlier, different brokers charge different fees in different ways, so make sure you know before you start.
- “Are you properly qualified and on the Financial Services Register?” Checking that your broker is reputable is essential – the most recognised qualification is called CeMAP. If you get bad advice, you can go to the Financial Ombudsman – but before you can pursue the case with them, you’ll usually be asked to open a complaint with the broker and wait for their final response.
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