Securing the right mortgage is an important step in the property-buying process.
“A mortgage broker can be a key ally in that process and more and more buyers in the UK are turning to them,” says Rob Smith, Managing Director of Whitegates.
“The broker market is expected to increase by 12% by 2025, according to DataLoft, and with securing the right mortgage now more important than ever thanks to rising rates, getting good independent mortgage advice is highly recommended.”
This guide explains everything you need to know about brokers, how they work and what you’ll have to pay.
What is a mortgage broker?
Mortgage brokers are specialist financial advisors who arrange mortgages and remortgages between buyers and lenders.
All mortgage brokers should have a level three mortgage advise qualification:
- The Certificate in Mortgage Advice and Practice (CeMAP) through the London Institute of Banking and Finance
- Certificate in Mortgage Advice from the Chartered Institute of Insurance
- More experienced brokers may also have the CeMAP Diploma, which is a higher-level broker qualification.
What does a mortgage broker do?
The role of a mortgage broker is to help buyers find the most suitable mortgage for their needs.
To do that, they’ll normally:
- Assess your financial situation with you
- Suggest the best type of mortgage for your circumstances
- Search the market or their panel of lenders to find you the right deal
- Liaise with your chosen lender and you to ensure a smooth process
Brokers are often called mortgage advisors, too, and they’ll explain in detail about the deal they’re suggesting, including:
- The interest rate and how it will work
- The term of the loan and how long you should borrow for
Not all mortgage brokers work in the same way and you’ll usually find two different types:
Tied mortgage brokers
Tied or multi-tied brokers only work with a specific lender or group of lenders.
While this means they may offer fewer mortgage products, working exclusively for certain lenders often means they’re able to offer exclusive rates or incentives for you.
Whole market mortgage brokers
Whole market or independent brokers aren’t tied to any specific lenders so they’ll usually be able to offer a wider range of deals.
Because they’re completely independent, you may also feel their advice is more impartial as they aren’t linked to certain lenders.
What’s the difference between a mortgage broker and a mortgage lender?
A mortgage broker is someone who helps you to find a suitable mortgage lender, whereas a lender is the institution that actually loans you money through a mortgage.
Why use a mortgage broker?
Using a mortgage broker rather than going directly to a lender brings with it a range of benefits:
Benefits of using a mortgage broker
- Brokers are qualified, trained experts in the mortgage market and have a duty of care towards their clients
- They’re legally obliged to justify the deals they offer you and if you’re not happy, you can complain to an ombudsman
- Your broker will assess your financial situation BEFORE you apply for a mortgage
- Using a broker can save you time searching the mortgage market for a deal
- Brokers can help you navigate your mortgage application with expert guidance
- Using a broker may save you money if they have access to exclusive deals
Can brokers get you a bigger mortgage?
The amount you can borrow from a mortgage lender will be determined by the lender’s own criteria, as well as your financial situation and credit history.
However, because brokers often have access to more of the mortgage market, it may be possible for you to secure a larger mortgage with a lender previously unavailable to you.
Do mortgage brokers charge a fee?
A typical mortgage broker fee might be anywhere between £200 to £800 – and sometimes more depending on how that broker charges.
Many brokers offer a ‘fee-free’ service because they are paid in commission by a lender when they arrange your mortgage.
In some cases, a broker may charge you a fee on top of their lender commission.
The different ways a mortgage broker makes money include:
Fixed fees
A broker may offer to arrange your mortgage in return for a fixed fee. If so, you should agree this fee in writing before any work is carried out.
Hourly rate
Brokers who charge by the hour are less common these days, but you should ask for a written breakdown and estimate of their costs before you start working with them.
Commission
A large number of brokers receive commission from lenders when they arrange your mortgage.
This often means you won’t pay them a fee yourself, but you should establish this before you engage them.
Percentage fee
The most common way for brokers to charge for their work is through a percentage fee relative to the value of the mortgage they’re arranging.
The percentage fee may vary anywhere between 0.35% to 1% of your mortgage, with the average being at the lower end of that scale.
So, if your mortgage was for £150,000, a broker charging at 0.35% would command a fee of £525.
How long does a mortgage application take through a broker?
Most mortgage applications take between two and six weeks to finalise, although this can vary.
By using a broker, you may be able to speed this process up, as your broker will liaise with the lender on your behalf, keeping the process moving and requesting any extra documents from you in good time.
Questions to ask a mortgage broker
1. Are you FCA regulated?
All mortgage brokers should be registered with the Financial Conduct Authority (FCA) and on the Financial Services Register.
2. How many lenders to you work with?
If your broker only works with certain lenders, this may limit the number of mortgage products they’re able to offer you compared with a whole market broker.
3. Will you charge me a fee and how much will it be?
All brokers will be paid for their advice and the work they do for you.
However, if your broker takes a commission from your chosen lender, you may not have to pay a fee yourself.
Always establish your broker’s fee and who pays it before engaging them officially.
4. When do I need to pay your fee?
Most mortgage broker fees paid for by buyers are due once the mortgage application is approved and a mortgage offer issued.
However, some brokers may charge fees up front.
5. Do you offer any other financial services?
Many brokers offer additional services on top of mortgage advice.
Ask your broker how they can help you with:
- Home insurance
- Life insurance
- Critical illness cover
Remember, you’re not obligated to use insurance services offered by a broker.
But finding out more can help you to decide what’s best for you.
How to find a mortgage broker
One of the best places to start searching for a suitable mortgage broker is your local estate agent.
Your local agent should have some great connections to high-recommended brokers – or they may even offer mortgage advice services themselves.
You can also look online for reviews of brokers near you or speak to friends and family for recommendations.
What your broker will need from you
To assess your financial situation, your broker should start by asking you plenty of questions about your circumstances, including:
- Information about your current or past mortgages
- Your budget for your new purchase
- Details on your income and current job
- Information on your outgoings and debts
- Your deposit and where it’s coming from
- The location you want to buy in and the type of property you’re looking at
- Your credit history and any known issues
Knowing what your broker is likely to ask you before you meet them can help you prepare and get the most from them.
It’s likely your broker may also need:
- Proof of your identity (driving licence or passport)
- Proof of address (recent utility bill)
- Three months’ bank statements
- Any credit card, store card or loan statements
- Your most recent annual mortgage statement
- Proof income (accounts, payslips, SA302 calculation)
- Proof of your deposit
