Mortgage through an IFA:What tricks are there?

mrscruffy

Hello!!

I am looking into all the options and possible routes for getting a mortgage. This week's "assignment" is to look into the pros and cons of going through an IFA.

Went to one recently for an hour's "fact-finding" session which thanks to the vast amounts of regulation by the FSA cost me nothing! The financial adviser said he would have no problems getting me a mortgage that would be large enough for a house and could afford (I've already done the maths - that was last week's problem :-) ).

So what should I watch out for?

The IFA laid out how he gets his money - either through an hourly rate or a commission basis. Is one better than the other?

Also there will be the added "payment protection" products. These fill me with thoughts of buying a TV or travel insurance and being offered an overpriced policy!

Whilst I appreciate the value of the protection offered, there is usually a better and cheaper product elsewhere. Where should I be looking?

Thanks for all help received.

Sput2001

Via an IFA is usually the best route, in my opinion, and it shouldn't cost you anything. The IFA will receive commission from the mortgage lenders for sucessfully arranging your mortgage - that's where the IFA gets his/her income. They shouldn't be charging you. If they are, look for another one!

simonkirkland

Use London and Country as recommended by Martin in his article...

They will call you back and take your details and then phone you a day or two later with the best options for you...

They were great with me and still continued to help me even thought we had decided that the best mortgage for me was through the lender direct as I got and extra £250 cashback for being an existing customer (alliance and leicester)...

http://www.lcplc.co.uk/

Simon

dunstonh

With life premiums, you will get cheaper deals by not paying commission but if you pay for the advice, the amount you pay would take many years to get back based on the premium saving.

IFAs have to offer the chance to pay for advice (from 1st June 2005). If you choose the fee option, they will not collect commission meaning product terms will be improved (or net commission received will be rebated). Some hybrid options exist, where you can agree a fee but have the commission cover it with any surplus being refunded and any shortfall being made up. Its upto the IFA whether they offer that option though. Personally, not had anyone select that although it does exist on my menu.

Mortgages are done under different rules from designated investment (the name used for traditional IFA regulation). An IFA is independent in that area but can be tied for mortgages. So make sure the key facts/menu you have received has a section on mortgages as well as investments and make sure both say independent. The quirks of general insurance regulation means that the general insurance section will probably not say whole of market. Blame the FSA for making it confusing.

CRUISEMAN

One downside of going through an IFA is that you might limit the availability of products as some lenders have "direct only" products and do not either allow applications from IFA's or do not pay them commission. Unfortunately these sometimes tend to be the lowest and best rates!

dunstonh

CRUISEMAN wrote:

One downside of going through an IFA is that you might limit the availability of products as some lenders have "direct only" products and do not either allow applications from IFA's or do not pay them commission. Unfortunately these sometimes tend to be the lowest and best rates!

You also get access to the broker only deals which can also be better than the direct deals so its swings and roundabouts.

simonkirkland

Which is why I went to L+C as they check the 'whole of the available market' which includes all the major provides except, HSBC, EGG and Yorkshire BS (these only offer their mortgages direct) which I then check seperately and I also check the provider that L+C recommended direct to see if it was cheaper...

L+C had a better offer than non A+L customers could get direct but I had a better deal as I got cashback for being an existing customer...

My advice from experience is to use a free borker (L+C) and check the non-included providers...

Simon

payless

Although OP did question the pro/ cons of paying a fee rather than the broker taking a commission - something L&C don't offer

Did L&C not also provide you with details of all the "direct only lenders" products - they said they do in their blurb ?

simonkirkland

They told me the best mortage caomparing the direct and non-direct mortages was a non-direct through them and explain why. It didn't take into account the fact that I could get cashback though...Simon