Mortgage Broker Advice

chrishay

Hi everybody,

I've just a few questions on Mortgage brokers:-

I'm currently using a whole of market mortgage consultant, the contact card given to me states that the consultant is 'an appointed representative of Home of Choice LTD'. There are no fee's when using the consultants services which leads me to my questions (forgive me if any of these seem like ridiculous questions - i'm new to this):-

1. Could it be that the consultant is employed by 'Home of Choice', and paid a salary?

2. If not, how does a consultant earn a steady income.

3. Do consultants work on commission, if so where and how is this commission gained?

4. If a consultant offers you certain insurance deals when selling you a mortgage (i.e. home insurance from the company 'Home of Choice' etc..) do you HAVE to take these deals in order to use the consultants services?

5. Do you have to use a consultant - do they have more pulling power to gaining you a mortgage - and why?

6. If I wanted to become a mortgage consultant what typical qualifications are needed?

I was told by the consultant that this is where they make money from (the insurance deals), and it will add approx £50 on my monthly outgoings, and also I was told not to cancel the deals within 2 years even if I come across cheaper deals because the consultant will loose out on their money.

Any advice / comments appreciated.

mic200202

1. They would not be employed - they would be self employed

2. From commissions on product sales -ie mortgage or insurances
A whole of market is not offering you an independent service, which includes the option for you to pay by fee,so he would not be reliant on sales of ancillary products.

3. as above

4. No you dont have to take these but consultant would not be too happy about it.

5. An intermediary can save you a lot of time and effort to search and get you a suitable mortgage - on the face of it,you may assume its really very simple,but the devil is in the detail as with any form of finance.

6. At the very least,Ce Map or equivalent for mortgages, and you need to be supervised to start with to become competent.

7. Correct, if the policies are canx within say 2 or 4 years (depends on the insurance company) then commissions are 'clawed back' from the consultant in proportion to the length of time the policy is in force.

MaryAnn

Not a good time to become a mortgage adviser - banks aren't approving many loans.
Many house sales are falling through cos' someone in the chain is stuck.
Friends house actually sold at asking price and his own loan fell through... having to live at parents!

Conrad

Prior to setting up my own shop, I used to manage a team at a national brokerage. A relatively small percentage of those that join the business, stick at it long term.

Most new joiners have the notion they will give really great service, and go to the enth degree to shop around to get clients best deal, but this sentiment is soon knocked into shape once you start dealing with the public.
You have to understand a great many people are messers, and tyre kickers that will think not a jot of your months of work when they suddenly decide the house move / remo is off.

A great many enquiries are complex and involve an awful lot of leg work and also risk on your part as there is always the worry they wont pay thier mortgage, or might be lying.

Myself and some other brokers I know more or less ceased selling protection policies as the clawbacks really get you down. Yes Ive been on all the courses and heard all the lines designed to ensure clients really value the policies so they dont cancel them, to little avail.
IFAs I think suffer less with clawbacks as they are dedicated specialists when it comes to protection, and whereas you might spend months getting the mortgage agreed, they would simply use that time to firm up the protection sale so its more secure.

ALL newish MAs tell me they dont have clawbacks (I remember saying this myself), but in the end they get you. Taking commission on drip is strongly recommended.

An IFA has recently had to pay out £120k for forgetting to add a relative had a health condition to an application. An easy mistake to make. Thats the other reason I dislike protection sales as the stakes are so high.

dunstonh

IFAs I think suffer less with clawbacks as they are dedicated specialists when it comes to protection, and whereas you might spend months getting the mortgage agreed, they would simply use that time to firm up the protection sale so its more secure.

Very rarely get a life cancellation. Also, I never take indemnity and go with non-indemn or even level.

Its probable that servicing IFAs dont suffer as much with clawbacks/cancellations as its a long term relationship. I can imagine transactional IFAs are closer to most mortgage advisers in persistency stats.

dwsjarcmcd

chrishay wrote: »

I was told by the consultant that this is where they make money from (the insurance deals), and it will add approx £50 on my monthly outgoings, and also I was told not to cancel the deals within 2 years even if I come across cheaper deals because the consultant will loose out on their money.

I find this an astonishing statement for a Mortgage Consultant to say, and I would be really wary that you were getting the best products for your needs and an appropriate price. It is not your responsibilty to maintain expensive deals just because the Consultant will lose out on their money.

Personally I would walk away from anyone who made such a statement.

koexelek

dunstonh wrote: »

Very rarely get a life cancellation. Also, I never take indemnity and go with non-indemn or even level.

A wise move.. I know estate agent based brokers who hard sell protection often suffer terribly with clawbacks

dunstonh

koexelek wrote: »

A wise move.. I know estate agent based brokers who hard sell protection often suffer terribly with clawbacks

Yes. I remember an adviser being nearly forced into bankruptcy during the last recession due to the number of clawbacks. it will happen this time round as well.

payless

I have it on the drip... but my concern would now be the insurer going bust before they have paid up... :-)
( or if an AR - the network!! )

koexelek

dunstonh wrote: »

Yes. I remember an adviser being nearly forced into bankruptcy during the last recession due to the number of clawbacks. it will happen this time round as well.

It sure will.

I know a lot of brokers who are currently selling a lot of life and taking it all on indemnity to compensate for the reduction in proc fees.

I've always took the attitude that if you take indemnity, that money isn't fully yours until the clawback period is up.

I know of some brokers saying that are writing premiums of around £200 to £300 month, and taking it all on indemnity.
I hope for their sakes the customers don't cancel their policies in the early years :eek:

tartanterra

chrishay wrote: »

Hi everybody,

I've just a few questions on Mortgage brokers:-

I'm currently using a whole of market mortgage consultant, the contact card given to me states that the consultant is 'an appointed representative of Home of Choice LTD'. There are no fee's when using the consultants services which leads me to my questions (forgive me if any of these seem like ridiculous questions - i'm new to this):-

1. Could it be that the consultant is employed by 'Home of Choice', and paid a salary?

2. If not, how does a consultant earn a steady income.

3. Do consultants work on commission, if so where and how is this commission gained?

4. If a consultant offers you certain insurance deals when selling you a mortgage (i.e. home insurance from the company 'Home of Choice' etc..) do you HAVE to take these deals in order to use the consultants services?

5. Do you have to use a consultant - do they have more pulling power to gaining you a mortgage - and why?

6. If I wanted to become a mortgage consultant what typical qualifications are needed?

I was told by the consultant that this is where they make money from (the insurance deals), and it will add approx £50 on my monthly outgoings, and also I was told not to cancel the deals within 2 years even if I come across cheaper deals because the consultant will loose out on their money.

Any advice / comments appreciated.

How your "consultant" is paid, for giving you advice, whether it be commission, salary or fee, is irrelavent. What really matters is the quality of the advice and the suitability of the product. If you are sold suitable products, then there should be no need for you to change them in the short term.
Also, if you do change products eventually, you are more likely to return to someone for advice if they gave you good advice the first time.
Personally, I pay a fee to my FA for advice and I have used the same one for many years. (We have built a high level of trust over a long period, and I have faith that he acts in my interests, he also refunds any commission!). However, I did use several advisors when I was younger, that I wouldn't be happy with now, and it does look (in hindsight) that the products they sold me were not right for my needs.