What Does A Mortgage Broker Do?
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What Does A Mortgage Broker Do?
Tony Nunn introduces the company and talks us through the role of a mortgage broker.
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.
Speak To an Expert
Our job is to provide you with the expertise and knowledge to find you the most appropriate solution. Whether you’re investing in property or looking to buy your first home, our mortgage advisers can help.
Can you provide mortgage protection too?
We’re all protection accredited, to provide life insurance, for example, to physically safeguard the mortgage. We’re also licensed to deal with family protection. So, aside from the mortgage, have you got enough protection in place for your loved ones? What happens to them in the event of something happening to you?
The mortgage may be catered for, but the reality is that if you pass away, your family income is now down one member. If the person that’s deceased is the person that generally looks after the children, would the other partner have to give up work? If so, what do they do for money?
We can help with protection for all those things, and in business as well, such as shareholder protection. If you’re going to write a will for yourself, why not write a will for the business to decide what happens if one of the directors dies? A bit of advice for people listening. If you’ve not got a partnership agreement, and one of you passes away, your business would have to dissolve itself immediately. Not many people are aware of that.
When should I see a mortgage broker? At what stage in that process?
Often people finally decide to come to a mortgage broker because they’ve been to the high street and got turned down. But if you don’t know enough about what you’re doing, then it wouldn’t hurt to see a mortgage broker. We don’t charge for an initial discussion. You can talk to us for hours on end. It’s only when we agree to do something about it that there may be an additional cost.
It’s all about being educated in the ways of the mortgage maze, because it is quite a different marketplace than it used to be. There are loads of products now that perhaps weren’t available even three or four years ago.
Perhaps you’re a First Time Buyer but you haven’t got a deposit. While the high street lenders will want at least 5% in cash, it is possible to get a 0% deposit mortgage with family assisted products. There are a few lenders out there which you would never find without a mortgage advisory business.
If you have parents who have a property that’s unencumbered and are happy to use that as leverage for your mortgage, these lenders will do what they call a cross charge. They’ll take a charge on both properties and treat the First Time Buyer as having put down a 25% deposit. So, you can have a 100% mortgage, but you’ve really got to look for it and understand what you’re doing.
You can’t do that on your own. Talk to us. If you go looking for property, how much do you know you can afford? Come to us, explain your circumstances and we’ll tell you how much you could borrow. You go off looking and come back when you’re ready.
When was Fort Advice Bureau founded and how long have you been in the industry?
I’ve been in financial services since 1979. I spent ten years in Lloyds of London in the reinsurance market before moving into the mortgage world – so I’ve been around a pretty long time. I’ve got two codirectors who have been around even longer. Between us, we’ve been there, seen it, done it, bought the t-shirt, videos, everything.
Fort Advice Bureau became directly authorised only recently. It’s a name change – prior to that, we were known as Charles Derby Mortgage Bureau. The Charles Derby Group goes back to about 2006 and the Mortgage Bureau came to be in 2017. So, we’re new by name, but not new by nature.
The only thing that’s changed is we are now directly authorised, which means that we’ve got more flexibility in what we can offer, and we are now directly regulated by The Financial Conduct Authority.
Does it cost for an initial conversation with Fort Advice Bureau?
Some people just aren’t acceptable to lenders. But would you know that unless you did talk to somebody? And do you really want to pay for the privilege of that? It’s a very dim day when people have to pay to talk to somebody.
Anytime you want to talk to any of our advisers, initially it’s absolutely free. When we’ve done a bit of research and we feel confident that we can take you forward, we’ll tell you what we’ve found – and it’s only then that you would pay. We’ll even do a bit of work on your behalf to make sure that we can find what you want. To take it forward, then there’s a fee to pay.
Your home may be repossessed if you do not keep up with your mortgage repayments.