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A mortgage broker is an individual who has trained and become qualified to advise and deal with mortgage products. A mortgage brokers qualification must be recognised by the Financial Conduct Authority (FCA) and they should show you a copy of their certificatin when asked.
A mortgage broker is duty bound to help you find the right mortgage and complete the application process when buying a property, a mortgage brokers duties can be broken down as follows:
Short answer - NO. Whilst all mortgage brokers must be qualified, the range of products depends on how they are employed:
An advantage of mortgage brokers is they have access to many mortgage lenders. Mortgage brokers can also advise you on the most suitable type of mortgages based on your need and financial situation. Also, since mortgage brokers are involved in mortgages on a full-time basis, they understand the lending criteria of different mortgage lenders. This way, you can apply to a mortgage lender who is best suited to your specific situation and avoid any unnecessary rejections.
This is a common question we are asked. The reality is that they are both well positioned to provide you sound advice on mortgage products. Mortgage brokers tend to be more focused on mortgages so do tend to find the better deals (though not always), they are however limited to dealing with mortgages. Independent Financial Advisors (IFA) are however qualified to provide financial advice on a range of products, this may suit your needs better. An IFA is normally a better choice if your are self employed as they can offer broader financial advise about your other financial interests and will have access to mortgage lenders with a wider portfolio including those who target company directors, contractors and so forth.
Note that it is important to find a good mortgage broker. Your estate agent may recommend specific mortgage brokers, but you are not obliged to use the recommended mortgae brokers even if you buy a property through the same estate agent.
It is a good idea to look for some independent mortgage advisors as they can provide you with unbiased advice on different mortgage products. You can also check with your existing connections for any references of mortgage brokers that they know or, better, have used when buying their own homes.
Before shortlisting a broker, you need to check if the broker has access to all lenders in the UK. You may get one of the three responses listed below:
Based on the responses you can decide whether you want to deal with the broker or not.
Upon shortlisting, you need to check if there is a fee for using the broker's services. Brokers make money either through a commission from the lender or by charging a fee to the borrower.
Most lenders pay a 'procuration fee' to the broker, which is typically 0.35% of the loan amount. The higher the loan amount, the greater the commission to the broker. You should note this is a transaction between the lender and broker, and it doesn't affect your borrowing costs.
Brokers are legally obligated to inform borrowers about how much commission they are going to charge the lender. You can find this information in the Key Facts illustration.
Some brokers may charge a fee to the borrowers. This could be in addition to the commission earned from lenders. Independent brokers offer the borrowers a choice between a fee and a commission.
Most mortgage brokers will charge a fee of around 1% of the loan amount. Stay away from brokers who are charging more than 1%. Also, avoid brokers who are asking for a fee prior to the transaction because you may end up paying even if your deal doesn't materialise.
You should also check if the broker has the necessary qualifications for advising. CeMAP (Certificate in Mortgage Advice and Practice) is the most accepted qualification for brokers. A qualified broker will understand the requirements and eligibility of the borrower in detail and advice only on the most suitable products. Going to a qualified broker can reduce the borrower's risk. If a qualified broker provides you with incorrect advice, you can complain to the Financial Ombudsman, and they will perform an investigation on the broker.
Some examples of independent mortgage advisors are Mortgage Advise Bureau or John Charcoal. London & Country mortgages doesn't charge a fee to the borrowers and has access to all deals, which are available only to brokers and not to the general public. You can also check websites like Unbiased.co.uk for a list of mortgage brokers.