What does a mortgage broker do?
A mortgage broker, or adviser, is someone who will review the mortgages available to you based on your personal financial situation and apply for one on your behalf.
They can save you time by telling you which lenders are likely to accept you and how to improve your application, and can speed up the process by dealing with some of the paperwork.
Why use a mortgage broker?
Using a broker can save you a lot of time and stress, as they will handle everything from searching for a deal to applying and communicating with the lender on your behalf.
Mortgage brokers have expert knowledge of the mortgage market and will be able to recommend deals that suit your personal situation. They should also have access to software that allows them to search mortgage deals much faster and more thoroughly than you could yourself.
A good broker will know which lenders are most likely to accept you and help you steer clear of applying for deals you're unlikely to get (which can have a negative impact on future applications).
Also, if you take out a mortgage using a broker you have the right to complain if the mortgage turns out to be unsuitable - an option that isn't available if you apply without taking advice.
How to choose a mortgage broker
1. Look for a whole-of-market broker
There are several things you should consider when choosing a mortgage adviser. One of the most important is whether they are whole-of-market.
Some mortgage advisers and brokers will only recommend mortgages that are available from a select 'panel' of lenders.
Meanwhile, if you speak to an adviser based in a bank or building society, they will only tell you about their own product range.
A whole-of-market broker will be able to assess every available mortgage so they can recommend the very cheapest or most suitable deal for you. This could potentially save you a lot of money.
2. Ask about direct-only mortgages
While many mortgages are only available via brokers, some are only available if you apply directly, without a broker. These are known as 'direct-only' mortgages.
Brokers have no obligation to inform you of these deals. However, it's worth asking your mortgage adviser if they will tell you about any direct deals that could be cheaper.
You may wish to do some of your own research if your broker is unable or unwilling to discuss direct-only deals.
3. Consider which type of broker to use
While most mortgage brokers work with customers in person or over the phone, there's now a growing number of 'robo mortgage advisers' - web-based services which allow you to carry out some or all of the mortgage application process online.
There are pros and cons to this approach. Our guide to online mortgage brokers explores how some of the best-known companies work.
Mortgage broker fees and commission
It's normal for mortgage brokers to earn commission from lenders after arranging a mortgage.
Some will also charge you a fee, which will either be a flat rate or a percentage of the amount you want to borrow.
All mortgage brokers must clearly outline these charges and any fees or commission they receive from a lender prior to entering into a contract to act on your behalf.
Key questions to ask a mortgage broker
- Are you whole-of-market?
- Will you tell me about mortgages that are only available directly from lenders?
- What are your fees and charges?
- What is included in the service you offer? For example, will you handle all the admin and chase lenders?
- When will you be available - office hours only, or during evenings and weekends?
Mortgage broker jargon-buster
A decent mortgage broker will explain anything you don't understand, but it's still helpful to have some idea of the most common terms.
- Agreement in principle (AIP): a document from a mortgage lender confirming, in principle, how much they'd be willing to lend you
- Early repayment charges (ERCs): penalty fees you'd have to pay to leave your mortgage deal before a certain point
- Standard variable rate (SVR): what your lender will charge after your mortgage's initial deal period ends
- Freehold and leasehold: the two different forms of property ownership (find out more with our guide to leasehold and freehold)
These are just a few of the terms you might hear. Visit our A-Z mortgages jargon buster for a full list of mortgage-related words and phrases.
What to look for in a mortgage deal
Once they've found a range of mortgages for you, a broker will be able to talk you through the pros and cons of each of deal.
Before deciding which one to apply for, think about:
- whether you want a fixed-rate, discount or tracker mortgage;
- the cost of mortgage fees;
- whether a mortgage offers cashback or other incentives;
- the lender's customer service and reputation.
Your rights when using a mortgage broker
You should always check that your broker is authorised to give mortgage advice by consulting the Financial Services Register.
They should do the following before you apply for a mortgage:
- thoroughly explore your circumstances;
- explain what different deals and types of mortgage there are;
- advise you on which ones they feel meet your needs;
- give you good, clear reasons why they're recommending a particular mortgage deal.
If you think you've received bad advice, you can make a formal complaint.
First, go to the firm that advised you to see if it can offer a solution to the problem.
If it doesn't resolve your complaint satisfactorily within eight weeks from the date you complain, take your complaint to the Financial Ombudsman Service (0800 023 4567).
- Know your rights: I think I've been mis-sold my mortgage, what can I do?