Martins View On Using Mortgage Brokers...

Forgil

Hello,

I'm new to this forum but in need of some desperate help! I'm currently using a mortgage broker to port my current mortgage (with additional borrowing and adding someone to it) across to a new property, and at the same time keeping my current property to let out however...... I have just been informed that due to my low income (being self employed) the broker is struggling to find a suitable lender for the buy to let mortgage! This is a disaster as I'm entering the final stages (as regards to solicitors etc) on the new property and the vendors are starting to wonder why things are taking so long as it is! Just to make things more complicated its recently come to light that my credit search recently failed due to a payment on a credit card was three days late last September!!!

So can anyone advise/help with a lender they know or used in the past who wouldn't necessarily find these two factors as a risk to them?

Many, many thanks

Tykva

Let_Us_See wrote: »

I am surprised at the number of occasions I read posts (some by professionals, and I am not specifically targetting dunstonh) that still fail to understand the terms "independent" and "whole of market."

The common fallacy is a mortgage adviser/broker can only be one or the other, but many are both. Also, it has no reference to whether a separate broker fee is charged, or not charged. So what do the terms mean?

Independent
This purely means that the adviser/broker offers the client the option to how their renumeration is received and has absolutely no reference whatsoever to the number of lenders that the adviser may or may not have access to, or whether he charges or not charges an additional fee.


If an independent adviser, the client has the option of selecting:

1. Paying a fee to the adviser with the applicant receiving the lender's procuration fee on completion of the mortgage or,
2. Electing not to pay a fee with the adviser receiving a procuration fee on completion from the lender for submitting the application.

In both of the above options the adviser may or may not charge an additional fee.

Very few applicants select option 1 as most advisers request non-refundable upfront payment of the fee and as there is no guarantee the mortgage will complete, the rebated lender's procuration fee may never be received. Often the initial fee will be higher than the payable procuration fee - so again, it is a no-brainer. However, with large mortgages, it is possible the lender's procuration fee will be higher than the upfront fee and the applicant may elect to pay a fee and accept rebate of the procuration fee. Once again if the mortgage fails to complete, the applicant has already paid a fee and will not receive the procuration fee. These are the reasons why few applicants select the "fee payment" option.

Whole of Market

Surely, this is easier to understand? Perhaps! Firstly, following on from above, an adviser can be independent and whole of market, they can also be non-independent and whole of market, or neither independent nor whole of market.

In basic terms, Whole of Market is taken to understand that the adviser has access to all lenders. However, this term can also apply to an adviser who has sufficient market access (but not all, more later) that he "represents" whole of market. Advisers not classified as whole of market work from a restricted "panel" of lenders, and this is true of some of the UK major estate agency chains' mortgage advisers. However, in reality unless an adviser has access to all lenders, and this includes direct only providers, then true Whole of Market doesn't exist. I have yet to met an adviser who has stated 100% access to all lenders and providers - and if I did, I would have to smile!

In summary! Being independent means the applicant if offered the choice of how an adviser is renumerated - either by an upfront fee payable by applicant, or via lender's procuration fee. If this option is not offered then the adviser cannot be classified as independent. It has no significance to access to lenders. With either option the adviser may or may not charge a separate brokers fee.


Whole of Market is purely a term that signifies level of access to lenders and should be treated with caution. The level of access should be stated on the Initial Disclosure Document, but I would always request clarification at the outset. Whole of market has nothing to do with fees whatsoever.

I hope this clarification helps.

That's a great explanation, I haven't even thought of these, thank you! So is my understanding correct that if independent whole market broker hasn't mentioned anything about renumeration (we have contacted one, whose website says "no-fee mortgage broker", "we search whole market for you", "expert advice fee free"), we'd rather look for one that would ask us? We have 180K deposit and looking to for 120K mortgage, so we hope for the cheapest mortgage possible. Thank you very much!

kingstreet

When contacting any broker, request a copy of their Initial Disclosure Document and see what sections 2 & 4 say about access and remuneration.

Tykva

Thank you, king!

What about this "We do not charge a fee for any of our services. We are paid by the lender from a central fund when your mortgage transaction is completed."? What is the central fund?


Is it ok that broker and advisor is in one? I see that most users here present themselves as advisors, none as a broker. Or are these two different departments within one company that deals with mortgages? Is it better to look for company which is separately advisor, and company which is just broker?


Thank you!

kingstreet

I am a broker.

The MSE signature makes us all "advisors," which riles me a little as it is a title coined by many bank employees there to sell only their employer's products. At the moment, many actually give no advice. They stick three quotes in front of you and say pick one...

It's not really important how we/they tag themselves, it's what service they offer and how we/they are paid.

Those are covered in the IDD sections I've listed above.

I don't know of any central fund, I assume they mean the lender will pay them a procuration fee, or commission, based on the amount you will borrow. The average is about 0.33% for high street lenders.

dunstonh

What about this "We do not charge a fee for any of our services. We are paid by the lender from a central fund when your mortgage transaction is completed."? What is the central fund?

There is no central fund. Commission is paid by the lender and factored into the cost of the products. It is not an explicit charge to you but the costs of distribution (whether broker, adviser or branch or whatever) is built into the fees/rate.

Is it ok that broker and advisor is in one? I see that most users here present themselves as advisors, none as a broker.

mortgage broker and mortgage adviser is an interchangeable term. Two words that mean the same thing. Many many many years ago, it used to be a way to differentiate between bank based mortgage advisers and whole of market advisers. However, that is no longer the case.

Tykva

Thank you, everyone!

So unless we decide on a property already there is no really way to get a prior advice/interest rate quote?

Thank you!

kingstreet

Tykva wrote: »

So unless we decide on a property already there is no really way to get a prior advice/interest rate quote?

Er... yes, there is.

I don't know how you reached that conclusion, as you haven't actually asked anything about it that I can see. Your posts here have been about brokers and remuneration.

You can use online lender calculators and see what you can borrow and you can talk to lenders and brokers and get an agreement in principle before you find a property.

I suggest you start a thread of your own and ask the questions you have, rather than posting in this discussion thread which is a bit old now.

michelleturner_2

Broker all the way

pickle274

:jMy question is completely different from first time buyers.
I would like to know about endowments coming to an end. My endowments is soon maturing and will pay off my mortgage so am confused as what and how to go about sorting thing out with my mortgage lenders.
Happy but confused