A mortgage broker is a qualified professional advisor who trawls the entire market in order to identify the best mortgage deal for their client. A mortgage fee of about 1% of the loan amount is charged for their services, but this expert is better placed to help a homeowner reduce monthly repayments and save money due to their knowledge, understanding and useful industry connections.
Advantages of Mortgage Brokers
- Knowledge. A broker will be able to provide mortgage advice on the full range of products, including fixed-rate, discounted, current account, tracker and variable rate mortgages. This knowledge is particularly helpful for first-time buyers.
- Useful contacts. Intermediaries develop useful industry contacts over the years. This means that they are better placed to gain access to the best mortgage deals, reduce monthly repayments and help the client to save money.
- Difficult cases. The majority of homeowners lack the professional expertise to deal with more difficult adverse credit cases. The mortgage broker will be able to pinpoint the right loans from the outset which means that unnecessary credit searches aren't made.
- Paperwork. An intermediary will be there to answer all questions and help with any paperwork. This is particularly helpful for first-timer buyers and busy professionals.
Disadvantages of Mortgage Brokers
- Mortgage fees. Mortgage advice will generally add 1% to the cost of a loan. Mortgage fees can normally be added to the amount borrowed so there is no need to pay this in advance. However, this additional cost does need to be factored in to determine the real amount saved on monthly mortgage repayments.
- Tied agents. Not all mortgage brokers are independent. Although the client will be advised, some are tied agents which means that they are only able to advise on a limited panel of products.
- Bad advice. Whilst the majority of advice will help homeowners to save money, some will offer advice that turns out to be poor. However, it is possible to take a case to the Financial Ombudsman and they will decide whether compensation is payable.
- Scandals. Mis-selling and corruption has given mortgage brokers a bad name. There have been instances of bad credit mortgages being sold to homeowners with an impeccable history of monthly repayments. This has taken place because it is possible to make higher commission on the sale of adverse credit products.
A mortgage broker is better placed to identify the best mortgage deal, but the service isn't free. Homeowners could consider using a mortgage comparison service as this performs a similar function, although not quite as comprehensive. An intermediary is most beneficial to first-time buyers and those who have a history of adverse credit.
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.
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