Do I Need a Mortgage Adviser?
Mortgage advisers can guide you on which sort of mortgage best suits your needs, and they may charge a fee for their advice. Learn the pros and cons and what to ask them.
Mortgage advisers play a big role in arranging mortgages for many borrowers in the UK, with around two-thirds of home loans arranged through an adviser, according to research from the Council of Mortgage Lenders.
As the name suggests, they are there to advise you on which sort of mortgage best suits your needs. They will discuss your situation, so that they have a better idea of which lenders are likely to look kindly on your application.
A mortgage adviser ‒ also called a mortgage broker ‒ will also establish how much you can borrow from different lenders, as well as work out what sort of product you’re most likely to be comfortable with. For example, if you are particularly risk averse then they can help guide you towards an appropriate fixed-rate mortgage.
How do mortgage advisers make money?
There are two main ways in which mortgage advisers make money.
Some brokers are paid a ‘procuration fee’ by mortgage lenders when they place a case with them. This is essentially commission, and is generally worth around 0.35% of the size of the mortgage you are taking out.
So if you took out a £200,000 mortgage and the lender paid a procuration fee of 0.35%, your mortgage adviser would make £700.
Other mortgage advisers charge a fee for the advice they offer. This can vary sharply depending on the adviser you choose to work with. It may be a fixed fee or a percentage of the sum you are borrowing. They will also receive commission from the lender.
The pros and cons of using a mortgage adviser
A big positive to using an independent mortgage adviser is that you may enjoy a far greater choice of lenders and mortgage products. They have access to products available across almost the whole market including from lenders that only offer their products through advisers ‒ they won’t lend to you directly.
Mortgage advisers are also useful if you have slightly complex arrangements, for example if you are self-employed or have more than one source of income, due to their understanding of the different criteria employed by lenders.
Even if you have straightforward circumstances, a mortgage adviser can help you establish precisely what sort of product meets your needs and attitude towards risk ‒ if you are particularly risk averse, you might prefer the security offered by a lengthy fixed-rate mortgage, for example.
A mortgage adviser can also take some of the stress out of the process by completing the application on your behalf and working with the lender if there are any delays. They will also be able to help you arrange protection such as life insurance, critical illness or unemployment cover, which could help you or your loved ones keep up your mortgage payments if your circumstances change.
However, using a mortgage adviser that charges a fee may mean that securing your mortgage is more expensive overall. Confident borrowers may be able to find the right mortgage themselves without an adviser.
In addition, there are some advisers who only use a limited ‘panel’ of lenders. As a result, these advisers will only recommend products offered by those lenders. You may be able to find a better deal elsewhere.
What to ask a mortgage adviser
There are a couple of important questions you need to ask any adviser before you enlist their services.
- What do you charge for your advice? You need to know precisely what their advice is going to cost you, as well as when that fee will be charged. For example, will you still have to pay if your home purchase falls through?
- How many lenders do you work with? Ideally you will want to work with a whole-of-market broker, which means one who works with all lenders rather than a limited panel.
John Fitzsimons has been writing about finance since 2007. He is the former editor of Mortgage Solutions and loveMONEY and his work has appeared in The Sunday Times, The Mirror, The Sun and Forbes. Read more