Mortgage is considered one of the biggest financial commitments that one will ever make during their lives. People are more conscious about getting the right place at right price without having to deal, to a great extent, with banks and lenders. This leads some of them to employing the services of a third party known as a mortgage broker.
What does a mortgage broker do?
Mortgage brokers are the intermediaries between you and banks, or other lending facility. The broker role is to help you to find the right type of mortgage after considering your requirements and circumstances. Most of the brokers have access to a large number of loan from different banks, and they’re up-to-date and knowledgeable about interest rates. Their expertise allows them to access different mortgage on favorable terms that someone without their help wouldn’t be able to find easily.
Because of their in-depth knowledge of the mortgage market, they can identify suitable mortgages, saving a lot of time for their clients searching for the right deal and communicate with lenders on their behalf as well.
In other words, a Mortgage broker is someone who do all the heavy lifting and presents you the best mortgage deal. To get the job done, however, you still have to find a good mortgage broker.
Here is what you need to look out for when selecting a mortgage broker.
Types Of Brokers
There are three main types of mortgage brokers.
Whole-Of-Market Brokers
A Whole-of-market broker is one who is able to assess a wide range of available mortgages. This is why they can recommend the cheapest and most suitable deal resulting in a good amount of savings.
Brokers Tied To Specific Lenders
Brokers tied to specific lenders will only recommend you mortgages from their limited and selected lenders panel. The won’t be able to scour the whole market just for the right deal for you.
Brokers Having Limited Set Of Deals
If you speak to a broker that has a limited set of deals, you will ultimately have to choose from their own selected range of mortgage products regardless of your preferences and circumstances
It’s very important that you get the right broker that meets your desired standards, fully understands your requirements and is committed to your best interests. The only goal in their minds should be to find you the best and most cost-effective deal, offering the best loan interest rate and minimal application or ongoing fees.
Mortgage broker fees and costs
Mortgage brokers usually charge in two different ways. The standard practice for mortgage brokers is to earn commission directly from lenders, but they can also charge you a flat fee, which is a percentage of your mortgage. A good and reputable mortgage broker always clarifies any fees or commission that they receive from a lender, prior to entering into a contract with you.
Some key benefits of using a Mortgage broker vs bank
Customer service is essential when it comes to mortgage brokers - it can set apart a mortgage broker from many others through their commitment to you and your needs - most brokers can find a loan for you but not everyone will have your best interests at heart.
The best way to find out and evaluate one’s service is to go through references and previous customer feedback and reviews, which you can find on social media, or ask the mortgage broker directly.
Mortgage brokers usually have accounts on Facebook, LinkedIn and other social media sites or even their own websites, where customers have left their reviews and feedback. It’s always best to check those out for a second opinion. It also helps you to find out about the brokers that people are speaking highly of.
Some mortgage brokers offer only a handful of services so when you are deciding which broker is suitable to work with, clearly mention all your desired services and check whether they are willing to do that much work for you.
Things To Look For In Mortgage Deal
Deposit Size
The Loan to Value ratio (LTV - how much your mortgage loan costs compared to the value of the property) is important for accessing various types of deals. There are wide range of mortgages available which vary from 85% to 65% LTV. Your chances to get the best deals depend upon the amount you can deposit - the higher the amount that you are able to put as down payment, the better and more cost-effective the deals available to you will be.
Annual Percentage Rate Of Charge (APROC)
To determine the total cost (TC) of a mortgage, we need annual percentage rate of change (APROC) based over the full term, including all associated fees. To find out how much more or less you’re paying overall, the APROC for different mortgages is an essential metric as it enables you to find out the difference in various lenders and offers, over the period you choose to take the mortgage.
Interest Charged Over Time
Lenders usually charge interest on a monthly basis, but they have other options like daily or yearly basis. Calculations of the average monthly payments are made so that a fixed monthly payment figure becomes apparent. Many other mortgages might charge a daily interest, meaning that the monthly payments vary because some months have 30 while others have 31 days.
Standard Rate Of Deal
If you are going for a fixed mortgage rate over several years, it is a good idea to look at the standard rate of the mortgage after the fixed term comes to an end. Even though you might be able to switch for another mortgage deals at the end of your fixed-rate term, you don’t know how the mortgage market will evolve, so it is best to choose a mortgage with a competitive standard rate, if you have such a deal available.
Tolerance
If your situation changes, having tolerance around your mortgage payments can became necessary. If need be, you might want to take a little break from making payments or you may want to pay up some monthly payments like a year or six months in advanced. You may opt to do this if you have extra liquidity and want to pay your mortgage off quicker and decrease the overall interest payments.
Many lenders apply limits and penalties to control the time of payments to counter this. You must double-check the payment agreement because, sometimes, being hasty leads you into the ultimate trap of unfavorable terms.
Questions to ask a Mortgage Broker
Here are a few questions that you can ask potential brokers before taking them on board.
- Which type of mortgage broker are you? (Are you a whole-of-market mortgage broker?
- Will you tell me about the mortgages that are only available directly from lenders?
- What do you normally charge as fees and are there any other charges?
- What is included in the service you offer? Will you handle all the administrative work and pursue the right lenders?
- What times are you available? Is it office hours only, or are you available during the evenings and the weekends? Will I have to wait to get an appointment with you every time?
- Ask other questions about affordability check, arrangement fees, arrears, base rate, Building Insurance, CCJ (Country Court Judgement), conveyancing, Mortgage deed, Stamp Duty among other things.
It’s important to remember that a mortgage broker doesn’t get their paycheck until the end of the deal when you’ve signed on the mortgage document. Be diligent about choosing your broker and don’t simply rely on their first suggestions.
Conclusion
There are a number of reasons to consult a mortgage broker when you are buying a house, but the point is that a mortgage is a ‘once-in-a-lifetime’ financial commitment. It is therefore compulsory to take an expert’s advice as it may save you a lot of money in the long run.
Mortgage brokers, due to their contacts and reputation in the market, know a large number of lenders, and that will work in your favor as you can navigate the concrete jungle with an experienced guide. Brokers help you overcome the challenges you might face on the road to homeownership.
Lenders usually offer mortgage brokers commission-based payments, which helps spare the applicant of additional expenses. So, by choosing the mortgage broker, you can have access to free professional advice and you’ll be free from the hassles of a lot of paper work, research , market study and hours of conversation with different lenders.