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Bad Mortgage Advice - how to avoid
Options
Mortgageman
Posts: 158 Forumite
In the press today are a number of stories relating to a recent Which report regarding the quality of Mortgage Advice.
http://www.thisismoney.com/20040902/nm82015.html
http://news.bbc.co.uk/1/hi/business/3618650.stm
So, how do you avoid getting "bad" Mortgage advice - well, I guess by being here at all you are some of the way there.
My initial (and sadly predictable) response would be, "just phone L&C, we're great", and whilst this is what I believe, I can see how it doesn't add much value.
The key to any kind of discussion like this, is of course knowledge. So let's try and arm you with some questions to ask / things to know before you speak to your broker.
1) The Mortgage Code.
Advisers should be members of the mortgage code. They should tell you they are. They should tell you what "level of service" they are offering you. If they don't do any of these, ask them. The levels of service are Information only on a single product - so if you go in to a building society and say "I've seen this rate in your window" you will probably get this (level c) advice.
Level B advice is information only on a number of products - so, to continue our analogy, this is where you go in to your local building society and say "I need a mortgage", and the adviser gives you some options
Level A advice is "Advice and Recommendation", and this is where an adviser will take in to account your needs / circumstances to find the best mortgage for you.
No level is intrinsically better than any other - as long as you know what you are getting - it is when the level of service is not clear that problems arise (i.e. if you know think you are getting Advice and rec, when in fact you are getting info only)
2) Panel or whole of market.
With regulation approaching you will see some changes in the nomenclature of the Mortgage industry - the phrase "independent" for example will be only available to those that charge a fee (or offer a fee charging alternative), but they can work from a representative panel (which, in theory, could be the top 5 lenders). Always ask "do you work from a panel - and who is on it"
3) Associated insurances etc.
This is where much of the profit in the industry comes from - at L&C we chose our partners carefully, and we always believe that they offer the client best value. But I'm bound to say that - as is anyone else really. The true, acid test for all Money savers, has to be to shop around for everything.
4) Don't be scared to ask "stupid" questions.
Either here, or of your adviser - it is after all there job to answer your questions (the regulars here do it, I guess, out a warped sense of enjoyment)
5) Don't be forced to do anything
If people are pressuring you to sign then it is often an indication that something is awry - to be fair, it is a very fast moving industry, where a day can mean the difference between getting a rate or not. A couple of hours to think about things is not going to make the same kind of difference - take your time.
6) Specific things your adviser should check that you understand (and things you should understand)
I'm not going to explain them here, just list them. a) MIG / Mortgage Indemnity Guarantee / Higher lending charge b) The different ways of repaying a mortgage and the risk associated with them. c) The different types of mortgage and there benefits / drawbacks d) the fees associated with setting up a mortgage e) redemption penalties
7) Shop around.
Of course, the best way to ensure you don't get bad advice is to use a number of sources.
These kind of reports always sadden me, as they cast the industry I work in in a bad light - a lot of it is institutionalised incompetence / lethargy - they just don't know any better. There is a load of good guys out there too.
Regards
MM
http://www.thisismoney.com/20040902/nm82015.html
http://news.bbc.co.uk/1/hi/business/3618650.stm
So, how do you avoid getting "bad" Mortgage advice - well, I guess by being here at all you are some of the way there.
My initial (and sadly predictable) response would be, "just phone L&C, we're great", and whilst this is what I believe, I can see how it doesn't add much value.
The key to any kind of discussion like this, is of course knowledge. So let's try and arm you with some questions to ask / things to know before you speak to your broker.
1) The Mortgage Code.
Advisers should be members of the mortgage code. They should tell you they are. They should tell you what "level of service" they are offering you. If they don't do any of these, ask them. The levels of service are Information only on a single product - so if you go in to a building society and say "I've seen this rate in your window" you will probably get this (level c) advice.
Level B advice is information only on a number of products - so, to continue our analogy, this is where you go in to your local building society and say "I need a mortgage", and the adviser gives you some options
Level A advice is "Advice and Recommendation", and this is where an adviser will take in to account your needs / circumstances to find the best mortgage for you.
No level is intrinsically better than any other - as long as you know what you are getting - it is when the level of service is not clear that problems arise (i.e. if you know think you are getting Advice and rec, when in fact you are getting info only)
2) Panel or whole of market.
With regulation approaching you will see some changes in the nomenclature of the Mortgage industry - the phrase "independent" for example will be only available to those that charge a fee (or offer a fee charging alternative), but they can work from a representative panel (which, in theory, could be the top 5 lenders). Always ask "do you work from a panel - and who is on it"
3) Associated insurances etc.
This is where much of the profit in the industry comes from - at L&C we chose our partners carefully, and we always believe that they offer the client best value. But I'm bound to say that - as is anyone else really. The true, acid test for all Money savers, has to be to shop around for everything.
4) Don't be scared to ask "stupid" questions.
Either here, or of your adviser - it is after all there job to answer your questions (the regulars here do it, I guess, out a warped sense of enjoyment)
5) Don't be forced to do anything
If people are pressuring you to sign then it is often an indication that something is awry - to be fair, it is a very fast moving industry, where a day can mean the difference between getting a rate or not. A couple of hours to think about things is not going to make the same kind of difference - take your time.
6) Specific things your adviser should check that you understand (and things you should understand)
I'm not going to explain them here, just list them. a) MIG / Mortgage Indemnity Guarantee / Higher lending charge b) The different ways of repaying a mortgage and the risk associated with them. c) The different types of mortgage and there benefits / drawbacks d) the fees associated with setting up a mortgage e) redemption penalties
7) Shop around.
Of course, the best way to ensure you don't get bad advice is to use a number of sources.
These kind of reports always sadden me, as they cast the industry I work in in a bad light - a lot of it is institutionalised incompetence / lethargy - they just don't know any better. There is a load of good guys out there too.
Regards
MM
I work for a Mortgage Adviser
You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
( I have ammeded this signature slightly, as I do not actively provide mortgage advice. However, I support and adhere to the moneysavingexpert mortgage broker code of conduct)
0
Comments
-
What is the 'L&C' please - novice here - thanks0
-
I suspect L&C might be London and County. See MortgageMan's sig. They were big players before this site existed, in my opinion. I might put them to the test one day.
J_B.0 -
I suspect L&C might be London and County
Correct, sorry if it wasn't clear.I might put them to the test one day
Please do - always interested in consturctive feedback - you know where I am.
Regards MMI work for a Mortgage AdviserYou should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.( I have ammeded this signature slightly, as I do not actively provide mortgage advice. However, I support and adhere to the moneysavingexpert mortgage broker code of conduct)0
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