Buying a home is one of the biggest financial decisions most people make.
It is therefore not surprising that many buyers begin their mortgage search by speaking to a mortgage broker.
A good broker can save time, identify products you may otherwise miss and help you through the mortgage application process.
That does not mean everyone needs one.
What is a mortgage broker?
A mortgage broker, also known as a mortgage adviser, acts as an intermediary between someone looking for a mortgage and banks or other mortgage lenders.
The adviser looks at your circumstances and helps identify mortgages that may suit your:
- income,
- deposit,
- credit history,
- employment,
- financial commitments,
- wider circumstances.
They may also help with documentation, comparing mortgage products, submitting an application and communicating with lenders.
Regulated mortgage advice and mortgage broking activities in the UK require the appropriate FCA authorisation or must be carried out through an appropriately authorised firm.
Bank adviser or whole-of-market broker?
Not every mortgage adviser has access to the same products.
An adviser working directly for a bank or building society will normally discuss products from that lender.
A broker may be able to search products from many different lenders.
If you want a broad choice, ask whether the adviser offers a whole-of-market service and how much of the mortgage market they actually cover.
How does a mortgage broker get paid?
A broker may receive:
- commission from the lender,
- a fee from you,
- or a combination of both.
Some brokers describe their service as fee-free because they do not charge the customer directly, but they may still receive commission from the mortgage lender.
MoneyHelper gives an indicative mortgage advice cost of around £300 to £1,000, or approximately 0.35% to 1% of the mortgage amount.
Before agreeing to use a broker, make sure you understand:
- what you will pay,
- when the fee is due,
- whether the broker also receives commission,
- what happens to the fee if the mortgage does not go ahead.
When can a broker be particularly useful?
A broker can be especially useful when your finances are not completely straightforward.
Examples include:
- being self-employed,
- having irregular income,
- receiving overtime, commission or bonuses,
- having several sources of income,
- having a smaller deposit,
- having problems in your credit history,
- buying your first home,
- being unfamiliar with UK mortgage paperwork.
Different lenders have different criteria.
A broker who understands those criteria may know which lenders are more likely to consider your circumstances.
When might you manage without one?
If you have stable employment, regular income, a good credit history, a healthy deposit and straightforward finances, researching and applying directly to lenders can be perfectly reasonable.
There is no requirement to use a mortgage broker when buying a property.
However, remember that an adviser working for a particular bank normally discusses that bank’s own mortgage products.
The lowest interest rate is not always the cheapest mortgage
This is one of the most important things to remember.
The mortgage with the lowest advertised interest rate is not automatically the cheapest deal.
There can also be:
- booking fees,
- arrangement or product fees,
- mortgage account fees,
- valuation costs,
- early repayment charges.
Arrangement or product fees alone can sometimes reach £1,000–£2,000 or more.
Always compare the overall cost rather than focusing only on the headline rate.
Does a broker guarantee that you will get a mortgage?
No.
A broker can help identify a suitable lender and prepare the application, but the lender makes the final decision.
The lender will assess factors including:
- income,
- spending,
- existing debts,
- deposit,
- credit history,
- overall affordability.
Be cautious of anyone suggesting that mortgage approval can be guaranteed.
Check your broker
Before handing over financial documents or paying any fees, check the adviser or firm.
The FCA provides tools that allow consumers to check whether a financial firm or individual is authorised.
This is particularly important when dealing with mortgages because mortgage advice and arranging regulated mortgages are regulated financial activities.
Questions to ask a mortgage broker
Before choosing an adviser, ask:
- Are you authorised by the FCA?
- Do you offer a whole-of-market service?
- Which lenders do you work with?
- Do you charge me a fee?
- How much is it?
- When is it payable?
- Do you receive commission from the lender?
- What happens to my fee if the mortgage application fails?
- Why are you recommending this particular mortgage?
A good adviser should be able to answer these questions clearly.
So, is a mortgage broker worth it?
There is no single answer for everyone.
For someone who is self-employed, has unusual income or a complicated credit history, a good mortgage broker can be extremely useful.
For someone with straightforward finances, a good credit history and a healthy deposit, researching mortgages independently can also make sense.
Do not assume that a broker will automatically find the best deal.
But equally, do not assume that going directly to a bank will always be cheaper.
Summary
A mortgage broker can save time, help with paperwork and potentially identify mortgage products you would not have found yourself.
Sometimes you will pay several hundred pounds for that service. In other cases, the broker will mainly receive commission from the lender.
Before choosing one, check:
- their FCA status,
- how much of the market they search,
- all fees,
- how they are paid.
With a mortgage, even a relatively small difference in interest rates or fees can eventually amount to thousands of pounds.
Whether you use a broker or arrange your mortgage yourself, compare the total cost of the deal — not just the headline interest rate.