By Matthew Horan CeMAP · Mortgages
Quick answer: You don't have to use a mortgage broker, but many people find it helps. A whole-of-market broker can compare deals across a wide range of lenders, check your eligibility before you apply and handle the paperwork. A fee-free broker doesn't charge you for their advice and is normally paid by the lender when your mortgage completes. Clarity Mortgages & Protection in Altrincham gives fee-free advice, with no obligation.
If you're buying a home or your fixed rate is ending, you have a few ways to arrange a mortgage: go to your own bank, search online, or speak to a broker. Each can work, depending on your situation.
But the terms brokers use can be confusing. "Whole of market". "Fee-free". "Independent". What do they actually mean, and do you really need one?
Here's a straightforward explanation, including when a broker may not be necessary.
What does a mortgage broker actually do?
A mortgage broker is an adviser who helps you find and arrange a mortgage. In practice, that usually means:
Looking at your situation. Your income, deposit, outgoings, credit history and what you're hoping to achieve.
Searching for suitable deals. Comparing mortgages from a range of lenders, not just one.
Checking criteria before you apply. Lenders have different rules, so we can help you avoid applications that are likely to be declined.
Handling the application. Preparing the paperwork, sending it to the lender and chasing progress.
Staying involved until completion. Dealing with valuers, solicitors and the lender so you don't have to.
Brokers can also advise on protection, such as life insurance, so your mortgage and your cover fit together.
What does "whole of market" mean?
A whole-of-market broker isn't limited to a small panel of lenders. We can search across the wide range of lenders that work with brokers, including high street banks, building societies and specialist lenders.
One honest note: a small number of lenders only deal directly with customers and aren't available through brokers. So whole of market means the full range available through the broker market, not literally every lender in the country. If one of those direct-only lenders could suit you, we'd tell you to look at it yourself.
This is different from a restricted or tied adviser, who can only offer products from one lender or a limited panel. It's worth asking any adviser which they are.
What does "fee-free" mean?
Fee-free means you don't pay the broker for their advice. Many brokers are paid by the lender, usually when your mortgage completes. That's called a procuration fee.
It's worth being clear on a few things:
Not every broker is fee-free. Some charge an adviser fee, either instead of or as well as lender commission. That's allowed, as long as it's clearly explained.
Fee-free doesn't mean the mortgage is free. Lender fees, such as product or valuation fees, may still apply. You'll always see these before you commit.
Ask upfront. Brokers must explain how they're paid and give you the details in writing before you go ahead. If it isn't clear, ask.
At Clarity, we don't charge a fee for our advice, and we explain how we're paid at the start.
Broker, bank or going online: how they compare
A mortgage broker
Searches a wide range of lenders, so you see more than one bank's products
Gives personal advice tailored to your circumstances
Checks lender criteria before you apply, which helps you avoid declines and unnecessary credit searches
Can help with less straightforward cases, such as self-employed income or adverse credit
Is fee-free at Clarity, as we're paid by the lender if your mortgage completes
Your own bank
Can only offer its own products
Gives advice on those products, using its own lending rules
May be a good option if it offers a competitive deal, particularly if you already bank with them
Usually doesn't charge an adviser fee
Going online or using a comparison site
The choice of deals depends on the site and which lenders it features
Advice is usually limited, so you're often making the decision yourself
Eligibility checks are often not included, so you may not know if you'd be accepted until you apply
Usually doesn't charge an adviser fee
As always, it depends on you and the lender. Your own bank might offer a good deal. The aim of using a broker is to see whether there's a better one.
When you might not need a broker
A broker isn't essential in every case. You might be fine without one if:
You have a straightforward situation, such as a good credit record and stable employment
Your current lender offers a competitive product transfer and you're happy with the rate
You know exactly which product you want and don't need advice
Even then, it can be worth a quick comparison. And if your case is less straightforward, a broker can make a bigger difference. For example, if you're self-employed or have adverse credit, lenders look at your situation in very different ways, and knowing which will help is half the battle.
What happens when you speak to a broker?
Here's how it typically works at Clarity:
A free initial conversation. We learn about your circumstances and what you want.
Fact-finding. We gather details of your income, outgoings, deposit and credit history.
Recommendation. We explain suitable options and our recommendation, in plain English.
Agreement in principle. Where appropriate, we help you obtain one so you know what a lender would be prepared to offer.
Application. We submit it, keep you updated and chase where needed.
Valuation and offer. The lender values the property and, if all goes well, issues a mortgage offer.
Completion. We stay involved until the mortgage completes, and we're here afterwards, for example when your fixed rate ends.
If your deal is coming to an end, our post on what to do when your fixed rate is ending explains your options. For timing, see When should you re-mortgage?
How to check a broker is trustworthy
Before you commit, it's sensible to check:
Are they authorised by the Financial Conduct Authority (FCA)? You can look up any firm on the FCA register.
Are they whole of market or restricted? Ask them to explain.
How are they paid? You should be told clearly, in writing.
Who will you deal with? Ideally one named adviser with relevant qualifications.
Do they look at protection? A good adviser will ask how your mortgage payments would be covered if your income stopped. Read Life insurance, critical illness or income protection: which one protects your mortgage? to see why.
Frequently asked questions
Do I need a mortgage broker?
No, you can apply directly to a lender. But a broker can compare a wider range of deals, check criteria before you apply and handle the paperwork. It can make the biggest difference in less straightforward cases.
What does a whole-of-market broker do?
A whole-of-market broker can search across the wide range of lenders that work with brokers, rather than a limited panel. A small number of lenders only deal directly with customers.
Are mortgage brokers free?
Not all of them. Some charge a fee, some are paid by the lender and some do both. At Clarity we don't charge a fee for our advice, and we explain how we're paid at the start.
Will a broker give me a better rate than my bank?
Not always. Sometimes your own lender offers the best deal. A broker can compare the market, including your own bank, so you can see for yourself. Nothing is guaranteed.
Does using a broker affect my credit score?
Speaking to a broker doesn't affect your credit score. We can usually discuss lender criteria before a full application, which helps you avoid unnecessary credit searches.
Can a broker help if I've been turned down before?
Often, yes. Lenders have different criteria, so a broker can look for lenders more likely to consider your situation. Lender decisions can never be guaranteed.
Does it cost anything to speak to you?
No. We don't charge a fee for our advice.
If you'd like to know whether a broker could help in your situation, get in touch. It's fee-free with no obligation, and we'll be honest about whether you need us. We help clients across Altrincham, Trafford and Cheshire.
About the author
Matthew Horan CeMAP is Principal of Clarity Mortgages and Protection, an independent, fee-free mortgage and protection broker based in Altrincham. He has over 10 years' experience helping individuals, families and business owners with mortgages and protection, and writes in plain English because most people aren't given the chance to understand what they're signing.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.
This article is general information, not advice. What's right for you depends on your own circumstances. Acceptance of an application depends on the lender's criteria and is not guaranteed.
