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Comparing mortgage quotesSpeaking to a mortgage broker isn’t the hassle that people build it up to be and a major benefit of having one on your side is that they look after your application themselves, chasing up and doing the admin side of things so you don’t have to. It can be a real time saver.
That being said, it isn’t the only option. If you need a mortgage, there are three ways you can do it
- Ask a mortgage broker to manage it all for you
- Compare mortgage products yourself online
- Go directly to your bank and hope they have the best deal
Why use a broker when buying a home?
Lots of things affect the cost of your mortgage and the quality of your experience as you apply for finance and complete a property purchase.
Interest rates are one of those things. A slight difference in rate between lenders can result in a more expensive agreement which could be harder to qualify for if you have affordability issues like bad credit or a low income.
Getting the lowest rate possible is important but a good mortgage broker will compare all the factors that affect the overall cost of your loan. Early repayment charges, exit fees, the length of the contract, whether the rate is fixed or variable and the type of property you’re buying all affect cost.
Mortgage brokers in the UK are also regulated by the FCA and give impartial advice, meaning you get recommended mortgage products that are right for your circumstances. If one lender’s agreement isn’t quite suitable, your broker will let you know and recommend another route if it’s right.
The best result for a mortgage broker is that they find you a mortgage agreement with criteria that you’re more likely to get accepted for and with terms that make your repayments manageable. All too often people make the mistake of maxing themselves out financially by taking out a long-term loan with T&Cs that make it too expensive to live or to remortgage in the future. Keeping costs down and finding the right mortgage agreement are just a couple of reasons why people go to a mortgage broker rather than do it themselves or go directly to their bank.
Getting a mortgage without a brokerLet’s say you’re confident to search for mortgage lenders and you’ve got the time set aside to deep dive into the criteria differences between contracts.
If you want to find a mortgage without help, here’s what you need to do
- Make sure your money is in order. Usually, though not always, the bigger your deposit, the more options you will have when looking for a good mortgage deal.
- Stay out of your overdraft and keep your credit utilisation low for 3-6 months, borrowing less than 30% of your maximum credit limit if possible.
- Carry out a credit check on yourself. You need to know what lenders will see when searching for your name. Severe or recent bad credit (like a default for loan repayment or a County Court Judgement) can impact your choice of lenders because some have criteria that don’t allow for it.
- If you do have bad credit, work to improve your credit score and consider asking a broker to show you the lenders that accept borrowers with credit issues.
- Organise the documents needed to apply for a mortgage like proof of ID, proof of your address and 3 months of bank statements for your current account and any savings accounts.
- You’ll also need proof of your deposit and if part or all of your deposit is gifted, you’ll need a declaration from the gifting party about the given deposit
- Calculate how much you can afford to borrow, looking at your income and outgoings, including utility bills, travel for work, childcare costs, insurances, food and debt repayments.
- Lots of lenders will multiply your annual income by 4.5 - 6.5 to work out the maximum loan they’ll approve for you and while this can give you a guide, your debt-to-income ratio will also affect how much you can borrow to buy a property. Remember, you don’t necessarily have to apply for the maximum amount. The more you borrow, the more you repay.
- Search for mortgage lenders using comparison tools and by drawing on your knowledge of lenders in the UK. You might start with the high street lenders and then the building societies. If you’re not able to find a mortgage, you could research bridging loans, though these are short-term loans that are in general, deemed as a more expensive and riskier route.
- Compare the pros and cons of the best mortgage deals you can find, paying attention to the maximum loan amount available, whether the mortgage is interest-only or a capital repayment mortgage, the rate of interest, whether the interest rate is fixed or variable, the cost of any exit fees or early repayment fees, the length of the mortgage term, the cost of the repayments and the cost of any late payment fees.
Applying alone might not result in the best deal
If you do take the route of scrawling through comparison sites and calling various lenders to find a mortgage yourself, be aware that some mortgage offers won’t be displayed.
That’s because some lenders chose not to be included on sites like GoCompare, MoneySuperMarket and Confused.com.
Instead, they ask that borrowers contact them directly for a ‘direct-only' mortgage quote or, they offer their deals exclusively to intermediaries, like mortgage brokers.
Therefore, viewing the full range of mortgage products out there can be difficult if you’re not a qualified mortgage broker because you’ll need access to the various online lender portals which display the current rates. Without this, your options will be limited
Choice is what matters when it comes to finding a good mortgage. Usually, the bigger the pool of lenders and banks you have to choose from, the better the deal in the end.
It’s not impossible to find a mortgage without a broker but doing so might mean that you miss out on a more competitive mortgage deal elsewhere
Going direct to a bank for a mortgage
You could also try going directly to your bank to see what they can offer you.
Lots of banks like HSBC, Natwest, Halifax and Santander have in-house mortgage advisors and while these professionals can explain the pros and cons of the mortgage products on offer with the bank they work for, they can’t show you the full scale of lenders available elsewhere
Without the knowledge of what other mortgage deals are available, you could end up paying more, under terms and conditions that make it costly to make overpayments or remortgage.
Your bank might have a great mortgage offer for you but it’s always worth comparing your options with other banks, building societies and online lenders too.
High Street banks can have tough lending criteriaFurthermore, if your finances fluctuate, you’ve recently changed jobs or you have a less than perfect credit history, you might not be eligible for your chosen bank’s mortgage criteria.
Even if you’ve taken out a mortgage with them in the past, you’ll still need to prove your affordability for the amount you need based on your current circumstances.
Some banks also have minimum income requirements for their mortgage agreements and many can't approve a mortgage for a property made from non-standard building materials.
Unfortunately, if you go directly to a bank and you’re not eligible for their product, you won’t be able to make a successful application until they either change their criteria or you change your circumstances
Going directly to a bank has its limitationsAs a result, lots of people end up thinking that they can’t get a mortgage, or worse; they apply for the mortgage and get rejected.
Never apply for a mortgage without checking your eligibility for the agreement, as a rejection for a mortgage can stay on your credit report for up to six years.
There’s also no middleman with a bank and you might need to exercise patience if you have concerns about the progress of your mortgage application. Busy periods for banks might result in delays and this can be frustrating if you need a quick transaction.
Benefits of working with a mortgage broker
They can check your credit historyAnd your eligibility before you apply for the mortgage. That can help you identify any blips or bad credit that could result in you getting rejected by your chosen lender. A broker with access to lots of lenders from all over the UK can look at your circumstances and filter out any irrelevant banks and lenders.
It could be fasterA broker in a bank will likely have other responsibilities to manage as part of their job whereas an independent broker with no allegiance to any particular lender, can present you with an unbiased list of options and focus solely on completing your mortgage application.
That could help you to buy and complete on the property you love, rather than miss out to another buyer who might have the benefit of being a cash buyer or having a mortgage in principle in place before you do.
They’ll be your middle-man (or woman)If you need to chase someone up to get your mortgage application through quicker, they can do it for you. There are lots of people involved with the mortgage process including the lender, estate agent, seller, conveyancer and your solicitor. A mortgage broker acts as the middleman between you and these people, handling the back and forth communications that bog so many borrowers down.
They may be able to source your insurance tooLots of independent brokers continue to learn as they work, specialising in niche areas like bad credit or insurance. It’s a no-brainer for lots of mortgage experts, given that insurances like home, income protection and life cover are often required by lenders. Financial cover for you, your family or home could bring real relief if you unexpectedly become ill or are unable to repay your mortgage.
What does a mortgage broker actually do?
A good mortgage broker finds you a mortgage and applies on your behalf - but there’s more to it than that
- They search the market and use their network and connections to compare mortgage products.
- Using information provided by you, they check your eligibility and show you which lenders are more likely to approve you.
- They’ll explain the pros and cons of each lender and highlight important factors like how much the repayments are, how long the agreement is and whether or not it’ll be cost-effective to remortgage in the future.
- They open up your options for lenders because their access to the lending network and their relationships with banks provides more choice.
- Before a formal application is made, they check that you have the correct documents including an in-date passport or driver’s licence, bank statements and a recent utility bill.
- Little mistakes on an application can cause delays so a broker thoroughly checks for incorrect or inconsistent information, as well as spelling mistakes.
- They’ll chase up any third parties or lenders involved with the mortgage if necessary and always let you know about the progress of your application.
- To summarise, a good broker can make the mortgage experience much easier.
Choosing a mortgage broker
Get to know your broker before you make a decision about whether to go with them for advice.
- Check reviews
- Send questions via WhatsApp (most modern brokers provide advice this way)
- Call, FaceTime, or Zoom
- Meet them for a chat over a cup of tea
A professional broker will understand that getting a mortgage, whether for a home move, buy-to-let project or a first-time purchase, is a big decision. They shouldn’t push you into an agreement or rush you and after seeking advice, you should feel more informed and reassured about your next steps.
What’s better; a broker, searching on my own, or a bank?We’ll let you be the judge of what would work best for you but if you prefer the idea of working with an intermediary who can manage your mortgage search and application for you, we’re here to help.
Can I get a mortgage without a broker if I have bad credit?It’s possible but keep in mind that bad credit increases the risk you pose to a lender for defaulting on your mortgage repayments. This increased risk is too much for some high street and online lenders but adverse credit mortgage lenders do exist.
Finding them can be a challenge, again, because of your limited access to lenders. Lots of people avoid using a broker to save money on the cost of their mortgage but that can actually be counterproductive because one of the benefits of having a broker negotiate your mortgage is that they search for an affordable deal.
Another is that after getting to know more about you, including what you want from your agreement, they can begin the search, filtering out the irrelevant lenders that can’t help. The finite list of options that are left will have criteria that you’re more likely to meet, even with your bad credit.
A good mortgage broker would have helped countless people with bad credit. Our team, for example, has helped individuals, couples and families with low credit scores, missed payments, CCJs, IVAs and bankruptcy. Finding a mortgage if you have bad credit can be quicker with the help of an expert with the right connections.