Should I use a Mortgage Broker or talk to my Bank?
When it comes to taking out a mortgage or remortgaging your property, speaking to your bank might seem like a logical, natural first step to take.
But you could be overlooking an alternative that might help you get a better deal and make a much more informed decision about one of the biggest financial commitments you are ever likely to make.
A mortgage broker, or adviser, is a qualified professional who specialises in finding the most suitable mortgage for your personal financial situation. They’re likely to charge for their services, but they can save you time by telling you which lenders are likely to accept you, save you money by finding you the best deal, and manage the process for you.
The terms ‘broker’ and ‘adviser’ are generally interchangeable, although the word ‘broker’ usually implies that a comparison of different providers takes place, so advisers who work for lenders (banks and building societies) are not usually referred to as brokers.
Broadly speaking, there are three types of mortgage adviser:
- Independent, Whole of Market Mortgage Adviser
- Multi-Tied or ‘Panel’ Mortgage Adviser
- Single-Tied or Bank/Building Society Mortgage Adviser
A whole of market adviser can source mortgages from the whole mortgage market, therefore the widest range of options and in theory the best chance of finding the most suitable mortgage deal. The ‘independent’ label means that they don’t work their clients (you) rather than for the lenders. These advisers are typically found in independent businesses, like us at Mortgage Medics.
A multi-tied mortgage adviser is restricted to working with a panel of mortgage providers, meaning a more a limited choice. As such, they may not be able to find the cheapest and most suitable mortgage product for you. This type of adviser is often found working with estate agents, especially the larger, corporate agents. They should always explain whether they are whole of market or tied, and if you’re unsure, make sure you ask.
Going directly to the bank or building society and talking to a Single-Tied adviser may appeal because there are no broker fees, but this will limit your choice of mortgage options to just that lender. There are currently more than 50 mortgage lenders so your chance of finding the cheapest and most suitable product by approaching the banks is likely to be low, and the process may be time consuming.
Another important part of the mortgage process is lending criteria. Each lender has different lending criteria which means they may not be willing to lend based on your personal circumstances. Going direct to a bank without knowing their lending and affordability criteria could potentially lead to an unsuccessful mortgage application, whereas a broker should know exactly which lenders to approach, and will invest the time in doing this for you.
Homeowners with an existing mortgage deal coming to an end should always shop around. Just taking a new deal with your existing lender could potentially cost you money. Some lenders try really hard to offer the most competitive rates possible to existing borrowers, whilst others offer less competitive products, presumably in the hope that borrowers who don’t invest the time in shopping around will just renew with them.
It may be advantageous to remortgage to a new lender who has a cheaper mortgage deal, and crucially once you have secured a new deal whether that is with your existing lender or new lender, an independent whole of market broker is in a position to monitor the mortgage market and let you know if a better deal becomes available before the product you’ve reserved comes into force.
According to the Association of Mortgage Intermediary Lenders (IMLA), the share of mortgages arranged by intermediaries (brokers) has increased significantly in recent years, and in 2022 approximatley 84% of all mortgages were arrange via a broker.
If this has got you thinking, we’d be delighted to help. Get in touch and we’ll talk you through your options, or sign up to our monthly newsletter, to keep your finger on the pulse.
Undray Griffith – 22nd December 2022