Do Mortgage Intermediaries Save Money?
The Advantages and Disadvantages of Using Mortgage Brokers
Dec 18, 2008
A mortgage intermediary aims to reduce monthly repayments for borrowers by trawling the market to identify the most favourable deal. This is of particular assistance to: first time buyers, those with bad credit, busy professionals and the financially inexperienced.
Mortgage Intermediary Fees
Whilst some mortgage brokers charge an upfront fee, most will add any charges to the total amount borrowed. The fee for using mortgages intermediaries is usually in the range of 1%. Bad credit deals tend to attract the higher charges due to their relative complexity.
What Options are Available Other than a Mortgage Intermediary?
- Talk directly to lenders. Always talk to the current lender first as this establishes a point of comparison regarding monthly repayments and fees. Checking other lenders will enable a borrower to see whether savings can be realised.
- Online mortgage comparison service. There are a number of excellent mortgage comparison services which provide a breakdown of different monthly repayments, fees and charges.
Advantages of Using a Mortgage Intermediary
- Save money. They are experts in their field and will be able to find clients the best deal for their unique situation.
- Contacts. Many mortgage intermediaries have also established useful contacts for specialist situations. This can make a real difference in terms of being approved or rejected.
- Specialist advice. The process can be very taxing so having someone that can be turned to provides real peace-of-mind.
- Quicker process. A broker can help expedite the process and get approval quicker in an emergency situation.
- Paperwork. All the annoying paperwork will be completed for clients meaning that they only have to read and sign the agreements.
Disadvantages of Using a Mortgage Intermediary
- Broker fees. As already alluded to, fees are in the region of 1% of the total amount borrowed. This serves to reduce the benefits of the lower monthly repayments.
- Some aren't honest. Where ever money and profits are involved, dishonesty will arise.
The loan company was fined £31,500 by the FSA for giving inconsistent information to clients and not properly checking that monthly repayments could be afforded. Next Generation Mortgages were fined £10,500 for not explaining the risks of subprime mortgages to clients.
Although mortgage brokers charge a fee, they can help clients save money, reduce monthly repayments and secure deals that might not otherwise be possible. Utilise a broker to gain useful financial experience and to deal with complex or bad credit scenarios.
Those that found this article useful may also be interested in finding out ways to reduce credit card balances and identifying the pros and cons of mortgage insurance.
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