A mortgage advisor, also called a mortgage broker, is a professional who guides you through the mortgage process. With many different lenders out there and complex financing packages, advisors help make this process faster and easier for home buyers and property investors.
The mortgage process can be complex, and the cost of getting a bad mortgage deal can be high – their job is to help you apply to the top lenders in their network to ensure you get the best mortgage deals, the highest savings over the term of your loan, and the most value for your investment.
The better the mortgage broker, the better the deal you’re likely to get. So, with that in mind, here’s some insight into what mortgage brokers do and how to find the best one for the job.
What does a mortgage advisor do?
Mortgage advisors provide a professional service by helping property investors find the full range of mortgage deals available to them based on their personal financial situation. Good brokers have strong relationships with key lenders, and they leverage this to get clients better deals on offers that aren’t available from standard high street lenders that you can approach yourself.
They will also evaluate the different offers to ensure you find the best mortgage deal. When you have a property that you want to buy, they will guide you through the mortgage process by making your application as strong as possible, applying to lenders on your behalf, and streamlining the process by handling as much of the paperwork as possible.
Essentially, they make what is often the most rigorous and stressful part of the property buying process a lot easier. With their professional network, ability to contact good lenders and present your case in the best possible light, they give you the best chance at getting the property you want at a rate you can afford to maximise your returns.
Independent mortgage advisor vs. bank
Many people ask why they should use an independent mortgage broker rather than banks’ brokers. The answer is that it’s all about ensuring the best service for you, the client.
The main difference here is that a bank mortgage broker can only offer you the mortgage deals and products their bank supplies, so you automatically have limited options. An independent mortgage advisor isn’t linked to any single institution or lender and instead works with an extensive network. This means that you have access to deals supplied by multiple different lenders rather than just one. And if you are worried about the quality of these mortgage deals, you can rest assured that an independent mortgage advisor will work with all the top banks, insurance companies, trusts and private funds, ensuring your loan comes from a highly reputable and reliable lender.
In the past, it was very common for homebuyers to simply choose a product from their bank. However, recent trends are towards using independent brokers because of the long-term savings that a competitive mortgage can bring. The deals may look similar at first, but it’s essential to have your advisor show you how the different interest rates and fees add up over the term of your mortgage. You’ll be surprised at how these slight differences transform into thousands and thousands of pounds over the 20 years or more that your loan is in place!
How should I choose a mortgage?
Choosing a mortgage isn’t always a simple process. Several factors should be considered, including:
- Mortgage type – Mortgages differ according to the type of property you are buying. For example, standard residential mortgages are for your primary residence, buy to let mortgages are for residential investment properties, and commercial mortgages are for business premises. Your broker can walk you through the specific risk profiles, typical rates and eligibility requirements associated with each. For example, a BTL mortgage will have higher rates and require a larger deposit than a standard residential mortgage.
- Mortgage rates – Lenders apply an interest rate to the loan to secure a return on their investment. This will differ from lender to lender and be determined by your financial circumstances as well as the bank rate. The stronger your case, the lower your rates will be, making it essential to work with an advisor to present your case in the best possible light.
- Loan to Value ratio - Your LTV is how much you will be able to borrow against the value of the property you want to buy. The lower your LTV, the lower the risk for lenders, making it more likely to be granted with favourable terms. A high LTV makes it more challenging to find a competitive loan and makes it even more important to work with a top mortgage advisor to get a good rate. A low LTV is lower than 80%, and a high LTV is around 85-90%.
- Interest-only or capital repayment mortgage – Standard residential mortgages are usually capital repayment mortgages, where your monthly payments are higher, but you have paid off your property by the end of the term. Commercial and BTL mortgages are often interest-only, so you only pay the interest on the loan. This makes the mortgage more affordable on a monthly basis, but you must settle the outstanding amount at the end of the term. A mortgage broker can help you determine the pros and cons of each option.
- Lender fees – Different lenders apply different fees to their loans, so getting a wide range of mortgage deals will help you find the lowest possible fees. Fees can include property valuation fees, arrangement fees, legal and administrative fees, account fees, higher lending charges, early repayment charges, and even exit fees, so these can add up quickly!
- Eligibility criteria - Every lender sets criteria for the types of clients they are willing to invest in. An independent mortgage advisor knows these criteria inside out and can help you find lenders who are most likely to view your proposal and give the best possible deals as a result. It’s a bit like matchmaking, and instead of going in without knowing what the lender wants from you, your broker can look for the best possible matches and ensure they get all the information they need to see your case in the most favourable light.
A mortgage calculator is also a fantastic help during this process, especially if you are looking for a BTL mortgage, or are a first-time buyer. Based on your criteria, this will give you a general idea of what lenders are looking for and what they are prepared to offer. However, it is important to contact an independent mortgage broker to get a more specific and detailed idea of your loan options, as a mortgage calculator is more of a guideline.
You can look at the following to get a general idea of mortgage repayments on different mortgage products by using our:
What other costs should I factor in when deciding on a mortgage?
Several fees and costs are associated with a mortgage, including arrangement fees, booking fees, valuation fees, CHAPS fees, account fees, exit/mortgage closure fees, and a mortgage advisor fee.
In addition, depending on the lender you choose and the mortgage total, you may have to pay higher lending charges if you have a smaller deposit. There may also be building insurance fees and early repayment fees added to this total.
Finally, don’t forget about regional taxes. This includes Stamp Duty in England and Northern Ireland, Land Transaction Tax in Wales, legal and survey fees and Land and Buildings Transaction Tax in Scotland. You can find out how much Stamp Duty you will pay using our simple Stamp Duty calculator.
What is a mortgage illustration document?
Also called a Key Facts Illustration (KFI), a mortgage illustration document outlines the mortgage your broker recommends. Your mortgage advisor will develop a custom KFI for you based on the following information:
- Your personal income (joint income if you are applying with another party)
- Your deposit
- The amount you are looking to borrow
- The value of the property you want to purchase
- The ideal term of your loan (20, 25, 30 or 35-year mortgage)
They will then match this with lender criteria and market conditions as they relate to your loan, such as the bank rate, typical interest rates, and fees.
This document is created in the early stages of your search to help guide you through the process, and addresses:
- The mortgage amount you will be applying for
- The recommended mortgage term
- Interest rates once the fixed-rate period comes to an end
- Expected monthly mortgage repayments
- Interest rates for a fixed-rate mortgage, if recommended
- Interest rates once the fixed-rate period comes to an end
- Fees associated with your mortgage
Of course, this document will go out of date as lenders change their rates and market conditions evolve, so they are most accurate on the day that they are created. Usually, your broker will generate a current KFI when you apply for a mortgage, and if anything changes between that time and the time you accept the mortgage deal, they will inform you of these changes.
Why should I use a mortgage advisor?
If you are interested in buying a home, commercial property or residential investment property, it’s a good idea to use a broker. They have the professional network and expertise to source the most affordable and competitive rates on all types of mortgages and can help you present the best possible case to lenders to help you secure the best deals.
Your mortgage advisor can assist you with assessing your eligibility, finding mortgages that are more flexible in terms of their eligibility criteria, and much more. We are there to help you on your property investment journey, ensuring you navigate your options and find the best possible deal, helping save you much more money than you’d spend on our fee.
How to choose a mortgage advisor
So, how do you find the right mortgage advisor to assist you? Here are some tips.
- Use a whole-of-market broker – These brokers have the most comprehensive network of contacts, so that you can access the most lenders and the widest range of mortgage deals. The more options you have, the better your chances of finding the best deal.
- Source direct-only mortgages – The mortgage deals you find yourself are not the only deals available. In fact, the most competitive mortgages with the most flexible and favourable rates are only available directly to mortgage advisors and their clients. The best mortgage advisors will be able to offer you these direct-only mortgage deals.
- In-person mortgage advisors – Today, many lenders and advisory providers offer robo-advisors for mortgages. This means that you chat to a programmed bot rather than a real person. An in-person mortgage advisor still has a lot more to offer than a robo-advisor, and we recommend that you choose a firm that uses real, experienced mortgage advisors who are personally invested in their client’s deals.
Important questions to ask a mortgage advisor
Before you start working with a mortgage advisor, you should always ask the following questions:
- Are you a whole-of-market broker?
- What are your fees?
- What services do you offer, and how do you assist me through the mortgage process?
- What type of loan would work best for my investment?
- What are the differences between different loan types?
- How does my loan change with different interest rate options, deposit amounts, and payment terms?
- What are the potential penalties associated with this mortgage?
- Can you inform me about mortgage deals that are directly available from lenders?
- What are your hours of availability? Do you work on weekends, or can I contact you outside of working hours
- What information do you need from me to make a case for lenders?
Buying a property is one of the largest investments you will ever make, so don’t hesitate about asking lots of questions. The right broker will be happy to walk you through all the processes and options to give you the peace of mind you need to make the right decision for your financial wellbeing.
What are the fees mortgage advisors will charge?
Typically, mortgage brokers earn a commission for arranging a mortgage. This is a fee that the lender will pay to the broker for sourcing a good investment, so you are not liable for this as a client. There is usually an additional fee for using a mortgage advisor that clients do have to pay, and your broker should state this upfront. It is usually a flat rate or a percentage of the amount you want to borrow and should be discussed with you before you sign any agreements with the firm.
What are the benefits of using a mortgage advisor?
Making a property purchase for yourself, your family, or your business is no small investment. It deserves to be treated with care, patience, and respect.
Your mortgage advisor should understand this and value what’s at stake, putting your investment returns first. With the right mortgage advisor, you’ll have access to the widest range of mortgage deals, including deals that are only available through advisors themselves. Throughout this process, you’ll have an expert at your side to help build and present your case to lenders, discuss different options, and lift the administrative burden off your shoulders.
With experienced and independent mortgage brokers by your side, you are empowered to make the best investment choices – and reap the rewards.
14th January 2022