Buying a home is a major life decision, so it can be worth making use of the experience of a professional mortgage adviser. However, whether using a broker is always worthwhile is something you can read about in another article: Mortgage Broker – is it worth it?
What is a Mortgage Broker?
A mortgage broker acts as an intermediary between a home buyer and a bank or building society that provides mortgage loans. By having access to mortgage products from different lenders, a broker’s role is to find an offer that best suits the customer’s financial and personal circumstances.
A mortgage broker can also guide the customer through the entire mortgage application process and provide support at each stage.
Brokers may offer mortgages from just one bank or building society, from a limited number of lenders, or from the whole mortgage market. Naturally, it is usually better to have access to a wider range of products, so it is worth looking for a broker who can search across the whole market.
Mortgage advice is regulated in the UK, which means brokers have responsibilities when giving advice. If a broker provides unsuitable advice — for example, recommending a mortgage that the customer cannot realistically afford — the customer may have the right to make a complaint and, where appropriate, seek compensation.
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How does a Mortgage Broker make money?
- A broker may charge the buyer a fee for their services. Fees can range from around £500 to £1,500, or may be calculated as a percentage of the property value, typically around 0.5%–0.8%. If the fees are significantly higher than this, it may be worth comparing other brokers.
- A broker may receive commission from the lender. This can be around 0.4% of the mortgage amount. In this case, the customer may not pay a direct fee, although the broker may only recommend lenders or products from which they receive commission.
- A broker may receive both a commission from the lender and a fee from the buyer.
- Some brokers charge an hourly rate. If this is the case, it is worth asking in advance how much time the advice and application process is expected to take.
Before visiting a broker, it is a good idea to check some of the mortgage deals currently available online. During the meeting, you can then ask the broker why they are recommending a particular mortgage rather than another one.
The adviser should also explain whether they receive commission from the lender and how much they are paid.