Approximately 60 per cent of borrowers go to an adviser to arrange their mortgage. This might seem surprising in a world where we are increasingly cutting out the middleman. Many of us bank online and arrange our insurance vie the telephone or internet these days, for example. But mortgages are the exception when it comes to buying financial products online. When borrowing hundreds of thousands of pounds, the majority of people want the reassurance that they are signing up to the right deal. And, in a market where there are now literally thousands of products to choose from, a professional adviser can often be the quickest route to the best deal.
A mortgage adviser (sometimes known as an intermediary, IFA or broker) is a qualified practitioner whose responsibility is to identify your needs and objectives, research the market and recommend the product that best suits your needs. There are a number of different types of mortgage broker in the UK and it is important that you understand the difference between them.
An independent adviser has access to the ‘whole of market’, i.e. all of the mortgage deals available (or at least a panel of lenders that represents the whole market. After conducting a fact find or asking you detailed questions about your circumstances and needs, they will then recommend a suitable product or products. They act on your behalf and should offer unbiased advice.
A tied agent is ‘tied’ to a particular lender. So they may be the sales staff for a bank or building society for example. They act on behalf of the product provider and can only give information and advice on that provider’s products.
Some broker firms have links with several product providers. So their advisers will offer information and advice on a range of products from those providers alone.
An adviser may charge you a fee or they may receive commission from the lender they place your mortgage with, or both. Be aware that an adviser is only allowed to call themselves independent if they offer you the option of paying a fee, not commission. They are obliged to give you and Initial Disclosure Document (IDD) upfront, which will include how the advice will be paid for and how the payment structure works.
Prior to October 2004, the UK mortgage industry was self-regulating. In effect, anyone could have set up as a mortgage broker, regardless of their experience. However, since October 2004, selling and advising on mortgages has been regulated by the Financial Services Authority (FSA). So if you discover afterwards you have been given bad advice, you can complain to the Financial Ombudsman Service and potentially receive compensation. Mortgage advisers must pass a number of exams and become authorised before they are allowed to advise the public.
1. The best advisers have access to a wide range of available mortgage deals and can quickly sift through thousands of products to find the most suitable mortgage for you.
2. They are fully qualified and experienced in their field, so they can explain all of the terms and conditions of each mortgage you are interested in and answer any questions you may have.
3. They save you time. Advisers subscribe to computer systems that allow them to rapidly pinpoint the best deals available to you.
4. They save you money. By finding you the most competitive interest rate and fee package, a broker can potentially save you thousands of pounds.
5. They can get you exclusives. Many lenders will offer exclusive deals via brokers, with better rates or lower fees than the high street can offer you directly.
Anyone looking for a mortgage can benefit from using a mortgage adviser, from the inexperienced first-time borrower to the busy, sophisticated buy-to-let investor.
If you are buying your first property and you are nervous about the process, you don’t understand how it works or you have mortgage needs that are out of the ordinary, an adviser could be the most sensible option.
It makes sense to approach an adviser for a buy-to-let mortgage as your needs tend to be more complex than regular mortgage borrowers and many buy-to-let deals are only available through intermediaries.
People who work for themselves often have less straightforward financial circumstances than their employed counterparts. An adviser will take the time to sit down and go through your finances thoroughly.
If you need to get your hands on the mortgage funds within days, a number of advisers can arrange this, although some will charge an additional fee and you may not get the most competitive interest rate,
An adviser can help council tenants looking to buy their properties, where allowed.
If you are borrowing a very large loan, an adviser may be able to negotiate the best deal for you and ensure that the whole process occurs as smoothly as possible.
If you do not have the time (or the inclination) to look for a mortgage yourself, an adviser will do the work for you.
1. First, they tell you whether they offer advice or just information and how much you will pay for that information/advice.
2. They give you an Initial Disclosure Document (IDD) outlining:
3. They then ask you detailed questions to work out what your circumstances are, the type of mortgage you will be most comfortable with and to find out what your goals are.
4. They scour the market for the most appropriate deals.
5. For each mortgage you express interest in, they must provide you with a Key Facts Illustration Document (KFI), which includes:
6. At this point you may want to go away and think about your options or carry on. If you carry on and apply for a mortgage, you may get a definite yes or no within minutes, a ‘decision in principle’ dependent on you supplying documentation, or you may have to wait for a few days for a decision. It all depends on the mortgage lender.
7. If your application is rejected, some brokers’ systems will automatically recommend the next best deal. With others you may have to go through the application process again.