With the sheer volume of options out there, it can be a little overwhelming to try and find the right mortgage. More lenders and products pop up on an almost daily basis and the input of a qualified, experienced broker can be invaluable to help you find the best possible deal. A mortgage broker is different from an adviser in a bank because their expertise covers a much wider range of products. They also have the capability to compare a range of deals to pinpoint the one that is best suited to your circumstances.
Going to an adviser is always a good move, but you should do a little preparation work before you actually approach anyone. The more a broker knows about your circumstances, the better their advice will be, and the process will progress more smoothly as well. With that in mind, here is a list of important questions you should ask your mortgage broker to help ascertain whether their advice is trustworthy for you to commit to them.
1. Are you regulated by the Financial Conduct Authority (FCA)?
This is the very first thing you should establish. The credentials a mortgage broker has are a key indicator of whether it is safe to work with them. Official mortgage brokers in the UK are required to be regulated by the FCA, or to be the agent of a regulated firm. The FCA has an official register where you can check to see if a broker is regulated, so make sure they are legitimate before you undertake any dealings with them.
2. How many lenders are you able to access?
When you approach a mortgage broker you need to know that they are able to provide whole-of-market advice. This means that they have access to the full market of mortgage lenders to ensure they can genuinely find you the best deal available. Many brokers have a limited scope in terms of the lenders they have access to, meaning any search they perform is limited as well.
The main types of broker are as follows:
- Whole-of-market brokers with access to the widest range of products
- Brokers with a limited list of preferred lenders
- Those that are tied to a specific lender
Bear in mind that even whole-of-market brokers do not always compare deals from every lender. This is why you need to ask this question.
3. How are you paid for your service?
A mortgage adviser may charge a fee to borrowers for their advice, or a fee for the administration and processing of your application. Mortgage brokers may also receive a payment from the mortgage lender, called a procuration fee. There may also be special terms involved, like charging a flat fee for your first mortgage but not for any subsequent mortgages or remortgages.
A mortgage broker offers value, even if you do pay a fee, the financial and time savings it provides in the long run means it pays for itself.
4. What mortgage types are available?
There are different ways of repaying a mortgage. With a repayment mortgage product, you pay the interest and a portion of the loan every month until you reach the end of the term and the debt is paid off. With an interest-only mortgage, you only pay back the interest in your monthly payments, and pay back the capital at the end of the term.
Ask your adviser about these mortgage types, as well as other products like cashback, part & part, discount, flexible or offset mortgages. They can also advise on which type of rate is best for your circumstances.
5. What is the interest rate and how will this change over time?
There are many mortgages that offer a lower ‘incentive rate’ for the first 2-5 years. After that initial period passes, borrowers are often moved onto the lender’s standard variable rate (SVR). When you are offered an interest rate that is lower than a lender’s SVR, you need to understand exactly what will happen when that initial period is up to establish whether it is a viable option.
Some providers will offer the option to ‘fix’ that deal for longer after the incentive period whilst others will only move you onto the SVR. Ask your broker to check for this particular detail.
6. How much will I be offered?
To get a rough estimation of the amount you can borrow, a mortgage adviser will ask a series of questions relating to your employment, your contract type, and your monthly income and expenditure. Your credit score will play a key role in how favourably you are viewed by lenders. A clean credit file puts you in a strong position, though it is still possible to obtain a mortgage with adverse credit.
If the amount you can borrow is lower than you had hoped, you could hold off until you have saved a larger deposit. Alternatively, you could adjust your property search criteria – either way, your broker can offer valuable advice on the best course of action.
7. How much deposit will I need?
The deposit requirements vary from one lender to the next. However, as a rough guide, a residential property will normally involve a loan to value (LTV) of 75% – 90%. We are seeing an increase in the number of lenders who will accept only a 5% to 10% deposit if you meet certain criteria.
Ultimately, the more you can put forward as a deposit, the more attractive the deals your mortgage adviser finds will be. More financial commitment on your part inspires trust in lenders.
8. What will I pay in fees?
Mortgage arrangement fees are a part of every mortgage product, but different lenders charge different amounts. Typically, it varies between £1,000 – £2,000 and your mortgage broker will be able to fill you in on the details. Other costs you may need to think about include:
- Mortgage valuation fees
- Account/booking fees
- Legal costs
Ask your broker to check the contracts carefully to calculate the potential costs you may incur.
9. Can the mortgage be transferred if I wish to move home?
With fixed, capped or discounted mortgages, or if redemption penalties last for a long period, you need to know what will happen if you decide to make a move. Today, lenders often make their mortgage portable, meaning the mortgage can be transferred, with the same terms and conditions, to another property.
10. Can you offer advice on other things?
There are other things that can provide peace of mind with a home purchase. As mortgage brokers are financial advisers, they may be able to advise on related financial matters. Insurance relates very closely to mortgages, so ask your broker if they can advise on things like life insurance, health insurance, income protection and other things.
Think Plutus encourages you to approach us with all these questions and anything else you can think of. We want you to feel confident in our services and we aim to find you the best possible mortgage deal to enable you to focus on your goals and hopes for the future. If you would like to enquire about our services, please don’t hesitate to get in touch. We’d love to hear from you and we will be happy to answer your questions and help you take the first steps towards securing the mortgage you need. For expert mortgage advice you can trust, Think Plutus.