Suddenly every second person you meet seems to be a mortgage expert.
Even solicitors sometimes boast a financial services division. But in the financial ocean, there are plenty of sharks circling, having scented blood from many miles away.
So where do you look for impartial advice?
Estate agents realised long ago that there’s serious money to be made flogging financial and home surveying services. Which may explain the warm smile greeting you as you amble into your local branch. In-house mortgage advisers employed by estate agents are sometimes linked to a major bank (which may even own the chain of estate agents).
So in some cases your choice will be restricted to a small panel of lenders, and it’s unlikely you’ll get the best deal. You are not obliged to take out a mortgage from an estate agent, although some dodgy firms may try to persuade you otherwise.
The fact is, agents have a legal duty to act in their client’s best interests and notify them of all offers.
So if an agent refuses to let you view a property or to pass on your offer to the seller unless you buy financial services, tell them you will be reporting them to their client, the property owner, and lodging a complain with The Property Ombudsman and their head office.
What about banks and building societies, surely these are the obvious place to start looking for a mortgage? Unfortunately, this isn’t necessarily so, since they only sell their own products.
In the same way that a Renault showroom wouldn’t offer a test drive in a Mini, your choice of product from a specific High Street lender will be limited by what they have available.
Even if they offer mortgages from a panel of providers, the choice is likely to be very limited. Given the amount of money you’re spending it’s essential to shop around for the best deal.
You want an unbiased view of the mortgage market, so the thing to look for is an independent mortgage broker.
You want a broker whose expertise is specifically in mortgages, and who knows all the best deals at any given time in an ever-changing market. You want someone who is able to sift through thousands of competing mortgages.
So an Independent Financial Adviser (IFA) who covers 1,001 other financial products may not be best placed to advise.
Some supposedly ‘independent’ brokers actually place most business with a top-five list of big banks who pay them the highest fees (known as ‘procuration fees’). But although many mortgage brokers are ‘appointed representatives’ of one household name insurance firm with a limited range of insurance products, their choice of mortgages may still be reasonably broad and independent.
At the end of the day, it’s normally best to go with an independent ‘whole-of-market’ broker.
Although there may still be the occasional deal that some mortgage lenders keep in reserve, the overwhelming majority of mortgages should be accessible via this route. But to be certain you’re not missing anything, check the independent Money Advice Service comparison tables via Home-moving.co.uk.
Lenders normally pay commission of several hundred pounds to brokers for arranging a mortgage.
The advantage is that you as the customer pay nothing up front, which can really help when budgets are tight.
Some, on the other hand, charge you an arrangement fee. Others refund all commissions and instead charge you an hourly fee for their advice. But a reputable broker should be willing to recommend the right mortgage for you, even if it pays him a little less commission.
Quality of service
Believe it or not, some banks can be slow and incompetent.
Avoiding such lenders is important not just to keep your stress levels down, but because buying a house in a buoyant property market means speed is of the essence.
Because you can’t exchange contracts until you’ve got your mortgage offer, there’s a risk that someone else with a smarter, faster bank could pip you to the post.
Every day spent waiting is an extra day when something can go wrong with your purchase. A switched-on lender should be able to process your application within about two weeks.
Some banks are also rather accident-prone when it comes to after-sales service, forgetting to collect payments so that you’re hit with an enormous bill months later, or even charging the wrong amount (inevitably in their favour). A good broker should know which lenders to avoid.
Getting the best mortgage deal could mean savings of thousands of pounds over the life of a mortgage, so ask a few searching questions before appointing a broker:
- How long have you been working as a financial adviser and what are your qualifications?
- How many mortgage lenders do you have access to? (should be at least 50)
- How many different mortgage lenders did you place mortgages with last year? (ideally ten or more)
- How many mortgages (as opposed to pensions and ISAs etc) did you arrange last year?
The time to start arranging your mortgage is before you start looking for a property.
If you wait until you’ve found somewhere, then suddenly you’ll be under enormous time pressure, which isn’t the best position to be in when making a major financial decision.
So having already decided what you can afford, and smoothed the way for credit and income references, the next step is to take a long hard look at the products on offer…
We’ll look at that in our next post, bye for now!