What Does A Mortgage Broker Do?

What Does A Mortgage Broker Do?

The primary function of a mortgage broker really is to act as an intermediary between the client and the lender. A middleman, if you like.

Lots of people think it’s really easy to search for the best rate for clients. That it’s as simple as entering data into software, pressing a button and up pops the rate. I wish it were that easy! It’s really not. I like to refer to what we do as a mortgage advisory business.

Our advisers research the market to find the most appropriate lender to fit the circumstances of the client – while seeking out the most appropriate product. It’s not always about the best rate, although we are mindful that the client wants to achieve the best rate that they can.

Is there more to it than using mortgage search tools?

A traditional mortgage searching platform lets you put data in and produces results. We do use those, of course. But primarily what you get is a whole load of rates, starting with the cheapest down to the most expensive. But the problem is, where does your client fit in? Not all lenders will consider everybody. There might be aspects of your client’s circumstances that they’re just not prepared to accommodate.

We call this criteria, and it plays a massive part for some clients. If you can’t have a product due to the lender’s affordability criteria – i.e. how they calculate your income so you can afford what you need – or there is a blemish on your credit file, the rate becomes immaterial. Whilst the rate might be fantastic, if you can’t have it, you can’t have it.

For example, you might have a scenario currently where a five year product from a lender has a better rate than a two year product. That differential has come about because of market volatility and ‘swap rates’, which is how a lender might buy money in. They see the value of that money in perhaps five years’ time and because the world might be a better place then, they feel confident to offer a better five year position than a two year.

That has a major bearing on products. On the face of it, the five year rate might seem better for the client, but it might have a high early repayment charge. If your client is planning a job move or to do some home improvements in the next couple of years, then that five year product might not be appropriate.

So, the most important part of what we do is gather information from a client. We have to understand their needs both in the short and the long term to take a considered view. Then it’s our job to explain the options, with no gobbledygook. We might take longer than some brokers, but we will endeavour to get everything right the first time and aim to build a long lasting relationship.

What’s the difference between going to a mortgage broker or a mortgage adviser versus your local high street lender?

If you go to a local high street lender, that might be Halifax, Santander or HSBC for example, they can only offer you their own products. Whereas a mortgage advisor may have the ability to research either a panelled position or the open market.

A panelled position means that they may belong to a network that has a selection of lenders available to them, while others have licence to go wherever they want to. Fort Advice Bureau is directly authorised, so we can deal with whomever we like providing we carry adequate Professional Indemnity cover that satisfies the lender being targeted.

What services does a mortgage broker offer?

In a traditional broking house, what you might find is that the mortgage broker will go ahead and find what they regard as the most suitable deal and then hand the case off to a case manager. That will be a third party who sits in the back office – they liaise with the lenders, track the offer and take some of the workload off you as a client.

We don’t have case managers. Our advisors own the client from start to finish. So, from the client’s perspective, there’s only one point of contact. They’re not scrambling around to remember what the broker’s name was, what the mortgage advisor’s name was, who the case manager was and being passed from pillar to post. They only get the one person to deal with, and that’s our mortgage adviser.

We liaise with the lender, the estate agents and the solicitors. We help with conveyancing, and search across providers for the most appropriate deal for the client. The advisor is responsible for the submission of the mortgage application, getting it through to what we call a Decision in Principle.

A Decision in Principle is a part application, where the lender assesses up front whether they want to deal with you as a client or not. It might involve credit scoring and we manage that whole process.

What different types of borrowing can you help with?

We work with First Time Buyers and Home Movers who are moving on to a new property. We deal with remortgages and product transfers, where you’ve got a product with a lender that’s coming to an end. If you want to renew that fixed rate with that same lender, we can do that product transfer for you for free.

We also help with Buy to Let investment property, including SPVs – Special Purpose Vehicles for professional landlords. We do bridging finance, commercial finance and second charge work. A second charge is a further advance, but with a different lender. So, your primary mortgage is the first charge. If you wanted to borrow more money, perhaps £20,000 to put up a conservatory, you could seek a further advance with your lender. If they won’t accept you, you could have a second charge with a completely separate lender who will sit behind the first lender on your deed.

What that means is they haven’t got first call on the money should it all go terribly wrong, but they are confident that there’s enough equity in the property to get their money back. That tends to be a more expensive route to take, or you can just remortgage the whole lot away. The services we offer are quite broad as you would expect, because we’re a mortgage advisory business.

Can you help with property surveys?

We also can arrange surveys – both home buyers reports and structural. The lender will always want a valuation in place, but sometimes it plays a part in the chain. A client may have their eye on a property and go for the mortgage. That leads to a valuation taking place – but then they find that there’s a big problem with the property.

By that time, they have spent money on this valuation survey, plus any product charges that the lender wanted upfront. So, the smarter way to play it, if you suspect there’s a problem with the property, is to get an independent home buyer’s report or structural survey done prior to applying for the mortgage. I’d rather spend £500 to £800 than be saddled with a £250,000 debt on a property with structural issues.

What about broader financial advice?

We have what we call a third-party handoff. As we gather information to find the most appropriate product and build that long term relationship, our advisers will get to know more about your financial situation. For example, whether you’ve got pension plans. We might ask if you’ve had anybody look at those recently. If not, we will suggest you review them regularly – and if you don’t have a pension advisor, we can put you in touch with someone.

Another part of the financial review process that’s often overlooked is actually a will. So many people die intestate. And what’s a will got to do with mortgage or investment or pension? Nothing. But everybody should have one. So, we have connections with will writers and we can put you in touch with them. It’s a separate service. We offer quite a lot – we’re holistic as opposed to just being a broker.