What are the benefits of using a mortgage broker when applying for a mortgage?
Is it better to use a specialist mortgage broker or go directly with your bank?
With thousands of mortgage products and several lenders available, how do you know which is best for you?
Or what steps do you need to take to get the best mortgage product without putting a significant dent in your credit file?
According to IMLA, mortgage lending through intermediaries has reached 80 per cent in April 2021.
1. Save you precious time
Arranging a mortgage to buy your first home or remortgaging to capital raise for home improvements are exciting life decisions. However, it can also be frustrating and time-consuming if you don’t have the right knowledge and support to help you through the process.
An experienced mortgage broker can save you time in:
- Finding out your mortgage needs and demands
- Match your circumstances with lender criteria
- Avoiding a mortgage product that looks cheap
- Completing the mortgage application
- Answering all your mortgage-related questions
There is a reason that 79-80% of all mortgage lending every year is through the intermediary channel. The share of the mortgage business that goes through intermediaries’ channels for buy-to-let mortgages is even higher.
Also, some big lenders only lend through brokers, and time-saving in processing packaged applications from brokers must be a big factor when these lenders decide to go with brokers only.
2. Give you tips on how to improve your credit score (if required)
Most mortgage brokers are in the relationship business and are generally good at understanding their customers’ needs and demands.
If you are a first-time buyer with a limited credit footprint or your credit file is not up to the mark, your mortgage broker can review your circumstances and share their experience to get you mortgage ready faster than you think or maybe get the far better mortgage product using their whole of the mortgage market knowledge.
3. Multiple credit searches affect credit rating
This is one of the biggest benefits of using a mortgage broker when applying for a mortgage.
Your mortgage broker assesses your mortgage needs and demands by completing the fact find and only apply with a lender:
- That offers the cheapest mortgage as per your needs and demands
- Who’s lending criteria meets your circumstances
- That can meet your mortgage processing timeline with their current service standards
Several credit searches in a short period can affect your mortgage application adversely.
4. You’ll get whole of the market mortgage advice
You won’t get whole-of-market mortgage advice by going directly to a bank because they can only offer their own mortgage products.
Benefits of using a mortgage broker include:
- Advice on the whole of the mortgage market, excluding deals offered by some banks directly to their own customers only
- Access to exclusive brokers-only products
- Advice on lending criteria. Lending criteria vary from lender to lender; you may not qualify your own bank’s lending criteria.
- You may need several mortgages at the same time with different needs. For example, in a let-to-buy scenario, you may need a let-to-buy and a new residential mortgage, which your own bank might not be able to cater for.
There could be numerous scenarios where a whole of the market mortgage broker can be invaluable for your mortgage needs.
5. Speed of processing mortgage applications
Lenders’ service standards and application processing time vary significantly.
I’m based in East London, and I regularly experience my clients competing with other buyers to purchase a property. This can be in a valuation race, so it can be important to find a lender who can quickly instruct the valuation, ideally on application.
There is a caveat attached to this scenario: lenders who instruct valuation on the application do that without assessing the application fully. In simple words, if you fail to provide any document that the lender could ask for or does not fit into any of the lender’s lending criteria, you could lose your valuation fee if the valuation has been carried out.
In this scenario, having a mortgage broker who knows the lender criteria inside out becomes more important. In high-pressure scenarios such as this, working with an experienced mortgage broker can be the difference to having your offer accepted.
6. Avoid applying for a product that looks cheap
You hear this from a customer all the time. They see a headline rate and ask why they can’t get that without considering the following important factors:
- Higher arrangement fees. Your broker advises you on the lowest product by taking the interest rate and arrangement fees into consideration. The lowest rates with higher arrangement fees are not necessarily the cheapest.
- Product loan to value. Headline rates usually require more deposits, such as 40%, and if you don’t have that, then the cheapest rate is not relevant to you.
- Lender’s lending criteria. To qualify for any mortgage, you need to fulfil the lending criteria for that particular lender. If you don’t tick all the lending criteria boxes, a rate may not be relevant to you anyway.
- Other product limitations. I had a customer who was pointing out slightly cheaper products on the internet to me. However, those were exclusive products for properties in Northern Ireland and LA postcodes, whereas his property is located in London.
Your mortgage broker sources the best mortgage product for you using detailed data points, which reduces the chances of not getting the mortgage.
However, when you search on the internet, you get headline rates with limited data points and applying for those mortgages without getting professional advice can result in a waste of time, money and frustration.
7. Liaise with an estate agent, solicitor and accountant for you
Your broker plays an important role in guiding you on how to coordinate with the estate agents and solicitors and liaise with them directly where needed to help you complete the mortgage.
If you are self-employed, your broker can deal directly with your accountant (of course, with your permission) to request the required income proofs to reduce your admin.
The mortgage process can be confusing. However, an experienced mortgage broker can help you simplify the house-buying process and save you money on your remortgage.
If you have found this information helpful, please consider sharing it with family and friends. Sharing can help me spread the word, and someone become a homeowner or landlord or save money on the remortgage.