If you are in the market to buy a house, you have probably received more advice than you know what to do with. Perhaps someone has advised you to work with a regulated mortgage broker rather than going directly to your bank. You wonder to yourself, “what are regulated mortgage brokers and why should I care?”
A regulated mortgage broker could end up being your best friend. This post will explain why. Needless to say that a mortgage broker gives you yet another opportunity for getting the mortgage you need. Whether or not you are better off with a mortgage broker really depends on your circumstances and how much you know about mortgage lending.
About Regulated Mortgage Brokers
The place to start is with the definition of a regulated mortgage broker. A mortgage broker is a financial professional whose job is to connect lenders with borrowers. A broker pays attention to a variety of high street banks, smaller banks, and private lenders. When a new client comes his way, he sits down with that client to figure out what would work best. He then investigates all of the lenders he represents in order to match the client with the best lender and deal.
The ‘regulated’ term is used here in the UK just to let it be known that mortgage brokers are regulated by the Financial Conduct Authority (FCA). In fact, you can visit the FCA to learn more about mortgage brokers. Please note that sometimes mortgage brokers are referred to as mortgage advisers. They are one and the same according to FCA rules. Also, note that the FCA website won’t necessarily point you to the best regulated mortgage brokers in the UK.
Regulations Pertaining to Mortgage Brokers
FCA rules require mortgage brokers to do certain things. For example, a broker must disclose his/her prices and range of products during the first in-person conversation with new clients. In cases where the broker-client relationship exists only online, the broker is required to provide that information in writing prior to the client agreeing to a mortgage deal.
Mortgage brokers must inform clients about:
- any limits on the range of mortgages they recommend
- what they charge and how their fees are structured
- their need to give permission before adviser fees can be added to a mortgage.
Also, note that mortgage brokers have a fiduciary responsibility to put your interests first. Everything they do must be with the intention of getting you the best possible deal while maintaining a transparent relationship throughout.
Free Mortgage Advice
The most important benefit of utilising a mortgage broker is free advice. The advice is free in the sense that you do not pay anything extra for it. It is part of the service rendered. Having said that, a mortgage broker’s advice can prove invaluable.
A bank loan officer may give you advice as well. But the loan officer gets paid whether or not you agree to the bank’s mortgage. That is not the way it works with mortgage brokers. They only get paid when clients actually take out mortgages. So it is in the broker’s best interests to make sure you get sound advice that eventually leads to a mortgage deal.
What kind of advice can you get? A good mortgage broker will walk you through the details of each potential deal to help you understand them. He or she will advise you on the best mortgage for your circumstances. An adviser will help you understand how a particular mortgage will affect your overall financial circumstances. It is all good advice that you are probably not going to get from a bank.
The Broker’s Special Skills
Second only to free advice is the mortgage broker’s special skills. Remember that a regulated mortgage broker is also a financial adviser. Your typical broker knows how to get people approved. He or she knows how to present each client in the best possible light in order to ensure good rates and terms.
Another skill that brokers possess is one of arranging applications. In other words, a broker would help you ensure that everything with your mortgage application is in order before you submit it to the lender. This kind of assistance speeds up approval times and reduces the confusion that sometimes occurs between lenders and borrowers.
Brokers possess one more special skill that could translate into saving you thousands. That skill is the skill to search the entirety of the mortgage market to find deals no one else is paying attention to. Note that this applies only to truly independent mortgage brokers. A tied or multi-tied broker is limited in his/her range of products.
Now you know what a mortgage broker is and why you should care. If you are in the market for a house, one of the most important pieces of advice anyone could give you is to seriously consider using a mortgage broker instead of going right to a lender. Mortgage brokers are a better option for some borrowers. How about you?