What is a mortgage broker?

A mortgage broker is an intermediary between banks (and other financial institutions that offer mortgages), and the end-users who purchase the mortgages.

Why shouldn’t I just go direct to the bank?

As the mortgage market has become more competitive, a plethora of different products are now on the market. Banks and building societies change their offerings frequently and it can be hard to keep up on which mortgage product is currently the best deal.

Will a mortgage broker offer more choice?

A mortgage broker, not being tied to one provider, will be able to offer you more choice than going directly to the banks. The mortgage broker may also have access to specific products which are hard for end purchasers to find on their own, and as such will be able to offer a wider range of mortgage products from the whole of the market.

Will using a mortgage broker cost more?

Different mortgage brokers have different payment schemes. Typically, a mortgage broker that is not tied to a number of specific mortgage providers will change a fee based on the amount of loan sought. This fee is usually between 1-3 of the loan ultimately purchased through the broker.

How are mortgage brokers regulated?

In the UK, mortgage brokers are regulated by the Financial Services Authority, and must be authorized by the FSA to be a mortgage broker. It is also possible for smaller firms to work as a mortgage broker under the umbrella of a larger corporation, which is then tasked to ensure their agents are performing their duties correctly.

What do the FSA control?

Mortgage brokers must treat customers fairly, under the rules of the FSA. The suggestions that they make must be financially sound, and must not work against your interests. Mortgage brokers also need to be very clear about the mortgage or financial service that you will receive.

What is a Keyfacts document?

A Keyfacts document is a standard format in which a mortgage broker must outline your various choices to you. Essentially it is a standard way of showing the benefits and costs of choosing a mortgage with the provider(s) that they suggest. This makes it easier for you to weigh up your various options and therefore see what will be the best mortgage option to choose. The documents will also outline the costs to you for the mortgage broker’s services.

What is mortgage advice?

Be aware that mortgage brokers and agents could be offering you advice or information. There is a distinct difference here – getting mortgage advice means that the provider will look at your particular circumstances, and tell you what they believe to be the best options for you. Information, on the other hand, does not include looking at your personal circumstances. When one is offered advice, it should come from a resource that is knowledgeable and is giving sensible information that is wise for your circumstances. When offered advice that is incorrect for your circumstances, you are in a stronger position to receive compensation in the future than if you chose a mortgage broker who could only offer information on products.