All You Need to Know About Mortgage Advisors
What is a Mortgage Advisor?
Mortgage advisors (or mortgage brokers) are financial advisors who specialise in the mortgage market. A mortgage advisor is there to search the market for the right mortgage deals for your circumstances.
The mortgage advisor will present you (the borrower) with the most suitable mortgage deals and then, once you have decided which deal is right for you, the advisor will help you apply for the mortgage with the lender you have selected.
Do I Need a Mortgage Advisor?
The mortgage market is very competitive with numerous lenders vying for your business. With all the different types of mortgages, from fixed-rate, interest-only to variable rate it can seem a daunting prospect to navigate your way to the right mortgage deal.
A reputable mortgage advisor knows and understands the market and can guide you through the sometimes-complicated process of securing a mortgage.
Mortgage advisors can also help you to calculate the size of deposit you’d need to obtain the right loan-to-value – which can affect the rate you get from a lender.
You might wonder if a mortgage advisor is better than a bank. There is no simple answer to this question as it depends what you are looking for. If you have already done a lot of research and know that your bank provides a mortgage deal that is right for you then using the bank’s mortgage advisor can be a good idea.
However if you want to explore lots of options before deciding on a mortgage then an independent whole of market mortgage advisor can search more widely across the market.
For those for whom finding a mortgage can be especially challenging, for example people who are self-employed, have a poor credit-rating or work as a contractor, a mortgage advisor can be useful in helping you to find a mortgage that works for your particular circumstances.
What Do I Need to Know Before Selecting a Mortgage Advisor?
Mortgage advisors or brokers can come in a number of different guises. Some might work in-house for a bank or building society and so can only recommend products offered by their employer. Others might have special relationships with just a few lenders, limiting the mortgage deals they can offer. This is known as a tied mortgage broker, meaning that they are tied to certain lenders.
Whole of market advisors are usually independent mortgage advisors who are not tied to any specific lenders. This means they are impartial and can search a greater variety of mortgage options for you.
Things to Ask Before Engaging a Mortgage Advisor:
Are you independent or are you tied to specific lenders?
This will help you to understand if the advisor is searching the whole of the market or if they are only looking at a limited number of lenders.
Are you qualified and on the Financial Services Register?
Properly qualified mortgage advisors should hold a qualification such as a Certificate in Mortgage Advice and Practice or ‘CeMAP’ which is one of the benchmark qualifications for the industry. Additionally all good mortgage advice firms should be on the Financial Services Register which is a public record of firms, individuals and other bodies that are, or have been, regulated by the FCA and its predecessors.
Do you charge a fee and roughly how much will it cost?
It is important to understand how your chosen mortgage advisor will get paid, how much this might cost you and if it will impact the advice they give. For example if they are getting commission on certain favoured products.
Do Mortgage Advisors Charge a Fee?
There are a number of different ways that mortgage advisors are paid for their work:
- Fee-free mortgage advisors: Fee-free mortgage advisors do not charge their client for their work. Instead, they take a commission from the mortgage lender. However, this can mean that they only work with a small group of lenders rather than the whole market, reducing the options they can offer you.
- Hourly rate: Other mortgage advisors charge an agreed hourly fee. If you are using a mortgage advisor who charges by the hour, make sure you get an estimate of how many hours they will work on your case, so you know what to expect to pay before going ahead.
- Fixed fee: Some mortgage advisors work with a fixed fee which is a set amount it will cost to search the market and arrange the mortgage for you. Make sure you understand the exact cost before committing.
- Percentage: A number of mortgage advisors work by charging a percentage of the value of the mortgage. For example a 1% on a mortgage worth £175,000 would mean you’d pay the advisor £1,750.
Make sure you ask any potential mortgage advisors how they get paid and ask for an estimate of the total cost before you commit to working with them.
Here at VA Mortgages we offer independent whole of market mortgage advice. We may charge you a fee for mortgage advice. If we charge you a fee, a typical amount would be £595. Arrange to speak to one of our advisers for a no obligation discussion of your options.
When to Seek Mortgage Advice?
A mortgage advisor can guide you through every stage of the process of searching and applying for a mortgage. You can engage a mortgage advisor at any step of the process, from finding out how much you could borrow to the actual mortgage application.
Some of the key areas a mortgage advisor can help with include:
- Suggesting the most suitable mortgage type for your specific needs.
- Helping you to assess your financial situation to ensure you can afford the monthly repayments on a mortgage.
- Searching the market for the right mortgage deals to fit your circumstances.
What are the Advantages and Disadvantages of Using a Mortgage Advisor?
Lots of questions might spring to mind when you are considering whether or not to use a mortgage advisor, such as can a mortgage advisor make getting a mortgage easier? Can using a mortgage advisor get you a bigger mortgage? Or can a mortgage advisor help you secure a better deal?
As with any service there are pros and cons, here is a round-up of some of the positives and negatives of using a mortgage advisor:
- A mortgage advisor knows the mortgage industry inside out and so can offer you in-depth advice to help you choose the right mortgage for your circumstances.
- A mortgage advisor will check your financial situation to ensure you can afford a mortgage.
- Some advisors might have access to exclusive deals with certain lenders which would not otherwise be available.
- They’ll help you to look at all the costs of the mortgage from any fees and set up costs to early repayment charges, to make sure you really understand the full cost and features of any mortgage deal.
- They can help you with the paperwork involved in applying for a mortgage, which can speed up the application process.
- All mortgage advisors must offer you advice when they recommend mortgage products to you, which means that you are protected if they give bad advice as you can complain to the Financial Ombudsman.
- Some mortgage advisors charge a fee and costs can vary greatly. It is always a good idea to ask for an estimate of any fees before you commit.
- Tied mortgage advisors might work with just a small group of lenders and so will be limited in which mortgage deals they can offer you. This can be avoided by using a whole market advisor although even whole of market advisors won’t have access to every deal. For example, some lenders will only offer certain deals if you approach them directly.
How to Choose a Mortgage Advisor?
When choosing a mortgage advisor it is worth shopping around all the options to find the right advisor to suit your needs.
Good mortgage advisors will be reputable, so ask family and friends for their recommendations and read reviews.
Look for a mortgage advisor who is qualified and registered on the Financial Services Register.
Here at VA Mortgages we are an independent whole of market mortgage advisor. Contact our advisers today for a no obligation discussion about your circumstances.