What Does a Mortgage Broker Do? 

If you’re applying for a mortgage for your new home, chances are you’ll have heard the term “mortgage broker” mentioned when doing research or when discussing getting a mortgage.

There is a lot of information to take in when applying for a mortgage, so here at WhatHouse? we thought we’d put together a guide to help you understand everything you need to know about mortgage brokers…

What is a mortgage broker?

A mortgage broker is essentially a middleperson, between yourself and whoever you are borrowing your mortgage from. They may work for an estate agent, or be independent. The worlds first online mortgage broker was also launched in the UK last year.

There are different types of mortgage broker regulated by the Financial Conduct Authority (FCA). They are:

• Tied mortgage brokers: Offer a selection of products but only from one lender
• Multi-tied brokers: Can offer you a range of mortgages from a select group of lenders
• Whole of market brokers: Have access to all the mortgage offers available

How does a mortgage broker work?

So, you’ve put an offer in on a new home, and now you need that all-important mortgage. A mortgage broker will get all the information the lender will need, such as income, outgoings, employment information, credit history etc. Once they have all this information, they can give you the options of mortgages that are available to you.

Do I need a mortgage broker?

It’s entirely up to you. The mortgage broker is there to help find you the best deal, but they will also charge you a commission. They will do all the legwork for you, so if you don’t have the time, or want the convenience, then it may well be worth looking into using a mortgage broker. There are comparison sites that can compare mortgages for you, and if you are currently with a bank who has a mortgage suitable for you then you may find that you can get the deal you want by yourself, but mortgage brokers will have access to a much wider range of mortgage options.

What are the benefits of a mortgage broker?

There are many benefits of a mortgage broker but probably the biggest benefit is the number of deals they have access to. They are able to compare mortgage rates from a large number of banks and lenders at the same time, and because they tend to work with so many different lenders, you will find that you have more options. There often tends to be a more personal touch with mortgage brokers, and they will usually be available for advice and support throughout the whole process, whereas if you are going directly to the bank you may find yourself at the end of a long line. They will also be impartial, whereas if you are going directly to a lender, the lender will ultimately be trying to convince you that you should borrow from them. Using a mortgage broker also means that you only need to provide your information once, and then they are able to use the information to search for numerous mortgages. If you are applying directly, you will typically need to repeat all this information each time you approach a lender.

Do they charge and how do they charge?

Yes, mortgage brokers will cost you, a rough figure would be around £500, but if they find you a deal which saves you thousands then it’s definitely an amount worth considering. Before agreeing to work with a broker, find out exactly what their fees are, they need to be up-front with you about this. Some mortgage brokers don’t charge a fee directly from you, but will be paid a commission from the mortgage lenders, but this will raise your interest rates. Also find out if your mortgage broker charges a flat fee or works on an hourly basis.

How to find a mortgage broker?

Shopping around and comparing is key. Estate agents will usually have an in-house broker, but you don’t have to use them – even if they try and tell you that you should, don’t do anything that you aren’t comfortable with.

What are the drawbacks or disadvantages in using a broker?

They may overcharge you, or have hidden fees, so it is so important that you find out all their fees before agreeing to work with them. They also may not have access to certain deals from some lenders. They can also make mistakes, although this is true of anyone.

What should you ask a mortgage broker?

Make sure you ask straight away what their fees are. Buying a new home is an expensive process, and you don’t want to be caught out with extra fees you weren’t expecting. Ask them if they are regulated – all mortgage brokers in the UK must be regulated under the Financial Conduct Authority, or be the agent of a regulated firm. Find out if they are a “whole of market” broker. This means they have access to the widest options of mortgages, ensuring that you are able to get the best deal for you. Any mortgage broker who advertises themselves as independent should be a “whole of market” broker.

While it is totally up to you whether or not you choose to use a mortgage broker, they are there to make the process smoother, and give you the best choice of mortgage deals for you, even if this will be at a cost. There are so many different mortgages to choose from, and so having someone who understands the industry there to help may make the process much more straightforward, leaving you free to focus on other things during the busy time.