Martins View On Using Mortgage Brokers...

PennyM

Hi,

I know there is nothing worse than a newbie who comes onto the forum to ask a question already answered (!) -However, I have tried my best to find it within these 29 pages and don't think I have!!! So apologies if I'm making anyone repeat themselves.

So here's the deal, I have had a mortgage broker recommended to me who stated that he charges a fee if we go ahead. What is then stopping me from getting options from him and then going directly to the mortgage company? I assumed it was because he would get me a better deal than I could manage to get myself but I'm not convinced.

It seems that paying a fee isn't advised and I appreciate that but I am debating whether it is worth it for better quality advice (if there is such a thing?)

I'm afraid I'm not a trusting person when it comes to anything money related - I like to research everything that I don't fully understand to make sure I ask the right questions and I find it very hard to believe that someone will get you the best deal for you and not for them. I suppose what I really want to understand is what do brokers get out of it? What do financially savvy people do?

Thanks so much.

dunstonh

So here's the deal, I have had a mortgage broker recommended to me who stated that he charges a fee if we go ahead. What is then stopping me from getting options from him and then going directly to the mortgage company? I assumed it was because he would get me a better deal than I could manage to get myself but I'm not convinced.

Sometimes brokers get better deals, sometimes lenders do. It is up to you and your morals.

It seems that paying a fee isn't advised and I appreciate that but I am debating whether it is worth it for better quality advice (if there is such a thing?)

Fee can very often end up being the best and cheapest option. The article on this site is out-of-date and wrong.

and I find it very hard to believe that someone will get you the best deal for you and not for them.

For people with that mindset, you should use an independent adviser employed on independent basis. However, even a whole of market adviser has to justify their recommendation. A panel adviser or single tie has less reason (or no reason) to do so.

I suppose what I really want to understand is what do brokers get out of it?

Other than people trying to rip them off?

Most lenders are non-advised services. This reduces your consumer protection significantly. If you can do your own research and have no lending criteria issues then going direct may result in a better deal if your research is good. A broker may have deals your lender does not have and you get full consumer protection for the advice given. You also tend to get a far higher level of hand holding through the process. Brokers are typically better on getting tight lending cases through.

It really depends on what service you are after and how much time and work you are going to put into it yourself.

kingstreet

We get paid commission and if that's enough to cover costs and a small profit, that's it. The difference between rates from lenders is very slim, normally around 0.1% to 0.2%, so nothing to make you choose one lender over another.

In addition, we have to justify the lender and product we have used and why we haven't used a lender with a better deal, if there is one.

If you are in an area with low property values, or require only a small mortgage, you may be asked to pay a fee. For example, we charge £249 because in our area/sector we do a lot of mortgages under £100k and we simply can't survive on commission-only when that is only £200.

PennyM

Thank you so much both. That's really helpful.

I did have that 'buying a car from a 2nd hand dealer' feeling when booking the appointment as I don't want to be taken advantage of and whenever I buy something I don't know about it worries me!!

However, when it comes to mortgages, I do find it too complicated at times so I think it's best to go with an adviser.

I don't believe I have it in me to actually use a person like that (taking his advice and going directly) I just wanted to see what the incentive was to use one in the first place so it was a hypothetical question -honestly!

Thanks again, It's good to know there is a place to come for real advice on these matters.

kingstreet

TBH it's the contactability our clients seem to like most. Here's an example.

I was down in Bromsgrove last Sunday morning, going through the application forms for a Leeds 95% shared ownership newbuild case at the clients' home.

I had previously prepared an agreement in principle and all the documentation. I was with them around an hour, going through the papers and explaining the purchase process. I obtained all the supporting documentation and uploaded it, minimising any delay in having the surveyor out to do the valuation ASAP.

They can ring me and email me any time of the day and night (and often do!) and they will be updated regularly with the progress of the case. This is particularly important where a lender like Leeds BS is concerned as its processing is "creaking" at the moment.

The earnings on this case are commission £200 and broker fee £249. This covers the regulatory costs, my individual costs and leaves a small profit on top.

If you think you can handle the mortgage and purchase yourselves, go for it. If you need someone to look after it for you, be prepared to pay a fee if the case earnings, based on commission of around 0.3% of the mortgage won't allow a profit to be made.

PennyM

I agree with that, it would be a load off my mind to have someone handle that for me. It's stressful enough selling and buying a home when you work full time -it's constant phone calls / chasing up various people. Any of the hassle that can be taken off my plate will be appreciated!

To clarify, I just need to make sure he covers whole of market, it doesn't matter about the independent label so much?

kingstreet

Independent = all products, event ones which don't pay commission, but then you'll get advice only as the broker won't be able to do the arrangement. You'll pay a fee and if any commission is payable, it will be rebated to you to subsidise the fee.

If borrowing, for example £300k, the commission could be as much as £1,050. If you could get a broker to offer you "independent" for a fee of say, £750, you'd get the commission back at completion, leaving you £300 better off.

Whole market = products which pay commission and which the broker can "advise on and arrange." You may get this fee-free, depending on the size of the mortgage.

Avoid "panel" brokers, such as national estate agents and single-tie advisers.

dunstonh

I like kingstreet's explanation of the two options. However, I will just add that whilst the independent cant do the arrangement, they typically will sit there with you and do the online application or help you wherever it is possible (such as filling out the form if paper based) and will still hand hold through the process and give necessary risk warnings etc.

nonnatus

To secure our mortgage, we used a specialised Mortgage Broker (whose name I will gladly provide if required).
It took 5 months to get the Mortgage, two were turned down at the very last minute after a shed load of work had been done. I'm self-employed so the Paprerwork was massive anyway.

When at last we secured and signed to accept the deal, Broker was as delighted as we were, tears shed etc.

Two weeks after we moved into our fabulous new home the Broker popped round to A) have a look round and collect his fee. The fee was £250 for all that work!! We were MORE than happy to pay this! We also tipped him (unsure if it was the "done" thing but seemed right at the time and he wasn't offended in any way) and gave him a gift.

I wouldn't hesitate to reccommend him or use him again if GOD FORBID we ever have to move again...

dunstonh

Two weeks after we moved into our fabulous new home the Broker popped round to A) have a look round and collect his fee. The fee was £250 for all that work!! We were MORE than happy to pay this! We also tipped him (unsure if it was the "done" thing but seemed right at the time and he wasn't offended in any way) and gave him a gift.

It is quite common in some areas. I am in Norfolk and frequently are given pots of homemade jam, runner beans, pot plants etc. You even get clients who will bake a cake or make biscuits or make sandwiches. I can't imagine it happens a lot in the city but it is common in rural areas.