It’s a very logical question to ask – why should I pay to arrange a mortgage? – when there are so many readily available resources these days.
You have the Meerkats comparing most things, as do many websites and newspapers, you have brokers that work for free, or you can of course do the leg work yourself and go to a bank directly.
Being a fee charging brokerage, it is a bit like asking a surgeon if an operation is required. But putting that to one side, we look at the relative merits of working with a broker who charges to arrange a mortgage, and what the key differences are to those that do not charge vs arranging the loan yourself:
Why use a broker at all if there is so much information available these days?
There are two very simple reasons why you pay a fee arrange a mortgage.
Access to products
- 80%+ mortgages via brokers. Even before Covid struck, close to 80% of all mortgages came via brokers. Post Covid that is well over 90%.
- Preferential terms. For that reason, mortgage lenders offer preferential terms to brokers as they originate most of the loans for them. Strangely, it can be cheaper to go via a broker to refinance your mortgage, with your own bank, then go to them directly (not so strange when you see the point below).
- Never worse off. Worst case, a broker can access the same products you will find so you are never worse off for going to a broker.
- Better outcome. Crucially, if you are dealing with your bank, they aren’t going to say – oh by the way, ABC Bank are offering cheaper deals than we are at present. As a broker works for you, not the lender, you are far likelier to get a better outcome.
Quality of advice
- We work for your, not the lender. This is the true reason to use a broker. A broker works for you, not the bank.
- What’s best for you. So while you may even be able to source the ‘best mortgage rate’ yourself, how do you actually know what that is? Is it better to go for a 2 year deal vs a 5? What is happening in money markets? Are there hidden fees? Do you fit the lenders criteria? What if you want to move? What if you want Interest Only? How does the lender assess your income? What role does your outgoings and credit history play? On and on you can go with these points.
- What’s best in the market for you. There are hundreds of lenders and thousands of products, often with lenders being very unclear on their lending policy. Can you truly say you know what is best without consulting a professional? Would you buy a house without using a solicitor? Would you invest money without talking to an IFA? You obviously can do those things but it isn’t advisable, unless you do the work for a living yourself or have a lot of time on your hands…
OK, so if using a broker gets the best outcome, why on earth should I pay if some firms do this work for free?
The simplest answer is that you get what you pay for in life.
When you do your food shopping do you go to Lidl or Waitrose? It’s all food at the end of the day so what is the difference? The difference is clearly the quality, after all apples are apples!
The same is true in the world of financial advice. Yes, some firms work for free to arrange a mortgage but then expect to do a lot of the heavy lifting yourself. You will have to chase up the related parties (solicitors, agents etc) and accept that you are just a piece of meat going through the factory floor.
There is also a very important point around lender choice – not all banks pay brokers – so if you are working with a ‘fee free’ broker, they won’t even consider those lenders as they get nothing from it.
A good fee charging broker will look at those options, and if relevant, report back to you with their findings. This can be crucial when looking at larger loans & more complex lending (as in lending via a Limited Company/Trust or very complex income/asset set up). If you are working with a ‘fee free’ broker, you simply aren’t getting access to the whole market.
So what are the benefits of paying a broker to arrange a mortgage?
A good fee charging broker will offer one, some, or all of these things which you typically don’t get with a non-charging firm:
PA / Case Manager Support
- This is mainly where the fee goes, a good firm will then employ a PA/Case Manager to work alongside the broker so you have two points of contact through the arrangement of the loan. Which means they can then manage all parties involved for you, which will save you many, many hours of your time.
Additional Services. Many good brokers will also:
- Offer things like Free Wills (As we do) which can save you money/hassle in other areas.
- Advise on protecting the loan – its all well and good strapping you up with a lifetime of debt, but has your broker also talked about how to keep you in the property if unforeseen events occur?
- Preferred partners – good brokers have access to a network of other professionals like IFA’s, Solicitors, Accountants, surveyors etc – getting these quality referrals can save you a lot of time and headaches down the line.
- As touched on above, but it is worth repeating – as not all lenders pay brokers, if you want peace of mind you are getting the best impartial advice, then it often pays dividends to spend a very modest amount to get that certainty.
True professionals charge for their work
- Your solicitor, accountant and even dentist work off set fees. A good financial adviser should be the same with a clear, transparent fee policy so you know exactly what is payable when so there are no surprises.
A true client relationship
- You will be working with someone who understands you, wants to work with you from when you first come into contact, to when the mortgage is repaid in full, working with you, in your interests on that journey. Its not just a transaction.
The above outlines the way we work, and in all truth, any good broker should work this way. If they do, they will have your interest at heart.
With mortgages becoming ever more complex, with ever increasing options, having an expert on your side can save you thousands of pounds over the life of the loan, and many hours of your time.
If you are not already working with us, please do get in contact and we can talk over how we can help achieve your mortgage goals.