Am I tied to the developer's broker (IFA)?

step_up

hi all,

I am going through HomeBuy Direct to puchase a new build and have just reserved a property. The only issue is that it states on the reservation form that the reservation is subject to using the developer's approved mortgage broker.

My worry is that the broker will not be able to find me the best mortgage deal. I.e. there are some cheaper lenders that do not use brokers.

The HomeBuy Direct handbook provided by the association doesnt state that I MUST go with the developer's approved broker, but it is not 100% clear.

I am worried that the developer will "force" me to use their approved broker (or give up on the property) which would result in a more costly mortgage.

Does anyone have any experience / advice on this matter?

Many thanks in advance.

Muhasib

As you are using the Homebuy Direct scheme the requirement to use their preferred IFA may not be too limiting as from memory only RBS and HBOS are offering mortgages for this scheme. This may have changed since the end of 2009 if anyone knows different?

You should also consider if the IFA has dealt with Homebuy Direct transactions before (should have if they're linked to the developer but best to ask them). I saythis because if you are definite that the scheme is suitable for you then you won't want any unnecessary snags as HBD is said to be ending in September (according to this forum) so you won't get another chance.

btw - which housing association is the HBD agent?

I ask as some staff don't like talking direct to the applicant but the IFA may have a contact they use(you could ask the IFA this as well).

Wh05apk

If it is specified on the reservation form, they are effectively making it part of the contract, so probably not much choice, bear in mind as muhasib says probably not much of an issue as very few lenders now participating.
Something else to consider is that few brokers deal/have dealt with homebuy schemes regularly, so you may actually do better with their nominated broker who hopefully will know the schemes and processes.

step_up

Thanks for the replies...

To answer your question, the housing association is Metropolitan.

I have been to a high street lender and, after explaining that I am on Homebuy, have found that I can get a tracker at 3% whereas the IFA is only able to offer a 4.2% tracker (over #100 per month difference!). If they are truely independent shouldnt they recommend the best deal for me regardless of the fees they might receive?

On that note, the high street lender has quoted #500 mortgage product fee as well as a property valuation charge (possibly a further issue if they end up valuing the property much lower than the price i've reserved at).

The broker has not yet discussed fees - but I assume as its through Homebuy Direct, they would be low or zero??

Also a further general question about HomeBuy Direct mortgages...if I go with the broker initially, can I renegotiate the mortgage after 2 years with any lender?

Thanks again for your advice.

Muhasib

you will still get a valuation fee to pay if you go thru the broker and there may be an introduction fee even though there will be a disclosure that they are receiving a fee from the lender as well.

After 2 years you will be able to move the mortgage, I expect if the broker is worth their salt then they'll be back in touch at this time - of course you still will need to choose a lender who deals with HBD so not any lender unless you've bought back 100% of the equity by this time.

yatfinser

step_up wrote: »

hi all,

I am going through HomeBuy Direct to puchase a new build and have just reserved a property. The only issue is that it states on the reservation form that the reservation is subject to using the developer's approved mortgage broker.

My worry is that the broker will not be able to find me the best mortgage deal. I.e. there are some cheaper lenders that do not use brokers.

The HomeBuy Direct handbook provided by the association doesnt state that I MUST go with the developer's approved broker, but it is not 100% clear.

I am worried that the developer will "force" me to use their approved broker (or give up on the property) which would result in a more costly mortgage.

Does anyone have any experience / advice on this matter?

Many thanks in advance.

I'm a broker. I'm currently arranging a mortgage for a purchaser who has had initial approval from his HomeBuy agents for the HomeBuy Direct scheme.

In their approval letter, they referred him to their panel of IFAs who would 'undertake a financial assessment' to ascertain his 'maximum mortgage level', giving him no apparent option to try anyone else. He approached one of the panel IFAs who was more interested in selling him a mortgage than assessing his financial situation. Not satisfied with the deal they came up with, he also approached a friend of his who works for a High Street bank and who said he could offer a cheaper mortgage.

On the recommendation of one of my existing clients, he rang me (I'm not on the panel) and I found him an even cheaper mortgage with a High Street lender who only offers this particular deal through brokers. Confusing?

I rang the HomeBuy agents myself and explained the situation while my new client was sitting next to me. They told me he's perfectly within his rights to use me but I needed to talk to the local HomeBuy Direct office for further guidance (they gave me the telephone number). So I rang them and they confirmed what I had already been told, adding that they would have to undertake the financial assessment themselves, so it would probably take longer for the final approval (from which I assume I'm considered incapable of assessing his 'maximum mortgage level'). They asked to speak to my client so they could arrange to email him the necessary forms (which I shall probably do for him anyway).

So, no you don't have to use their IFAs and if you're not sure whether to trust a mortgage broker, get him to show you how he arrives at his recommendation- it should be clear whether he includes 'direct to lender' deals in his research and if it isn't, challenge him. If you're not happy with the response, don't use him.

betmunch

I have done a few of these Homebuy mortgages.

The client HAS to be financially assessed by the panel IFA, however they can choose to do the mortgage by whichever route they choose.

In our area clients were offered 4 IFA's to choose from, 2 of which were very good if the client phoned and said I have a broker ready and I just want to have the financial qualification done by you. 1 was pushy and tried to steel the business. and the last one was an out and out nightmare who would lie to the client just to get the business.

This is slightly different to your original question though as you state the DEVELOPER is forcing you to use a specific broker. Will still have the right to choose who you wish, however the developer has included it as a condition of the reservation you use their broker. This means that they could simply refuse to sell it to you if you dont comply!!! Completely unethical, but there you go!