A mortgage broker, also called a mortgage adviser, assesses your finances and searches available mortgage deals to find one that suits your situation. They then handle the application, liaise with the lender, and guide you through to mortgage offer.
They are regulated by the FCA and have to recommend a suitable mortgage, not just any mortgage. Their advice is on record and they have professional liability if they recommend something inappropriate.
Whole-of-market vs restricted brokers
A whole-of-market broker can access deals from most lenders. A restricted broker can only recommend products from a panel of lenders, which may be smaller. Some tied advisers at banks can only recommend products from their own employer.
Whole-of-market generally gives you access to more options. Some specialist lenders only deal through brokers, not directly with the public, so a broker may access deals you cannot find yourself. Ask any broker upfront whether they are whole-of-market and how many lenders they search.
How brokers are paid
Brokers earn money in two ways: a fee paid by you, a commission paid by the lender (called a proc fee), or both. Fee-free brokers get paid entirely by the lender. Brokers who charge a fee often charge between £300 and £500, sometimes more for complex cases.
Neither model is inherently better. A fee-free broker still has an obligation to recommend a suitable product regardless of commission. A fee-charging broker is not automatically more thorough. Ask what they charge and how they are paid before you commit.
Are you whole-of-market? How are you paid? Do you charge a fee? How many lenders do you search? Have you dealt with buyers in my situation before?
Do you need a broker?
You do not have to use a broker. You can apply for a mortgage directly through a lender. Some deals are only available direct. Some are only available through brokers. Going direct saves you any broker fee and gives you a direct relationship with the lender.
A broker adds most value when your situation is not straightforward. Self-employed, recently changed jobs, variable income, adverse credit, unusual property type, complex ownership structure. In those cases a broker who knows which lenders are likely to accept your application can save you from multiple declined applications each of which leaves a mark on your credit file.
For a straightforward case with a stable employed income and a clean credit history, going direct to a lender is a reasonable option. Compare a few lenders yourself and check whether a broker would access anything better.
What to expect from the process
The first meeting is a fact-find. The broker goes through your income, outgoings, deposit, employment, and credit history. This takes around an hour. Based on this they tell you how much you can borrow and which deals are likely to be available.
They can then arrange a Decision in Principle (DIP) or Agreement in Principle (AIP), which is a soft indication from a lender that they would consider lending to you at a certain amount. Estate agents often want to see this before accepting an offer.
Once you have an offer accepted on a property, the broker submits the full mortgage application. They collect your payslips, bank statements, and ID, package them for the lender, and chase the application through to mortgage offer. That offer is then valid for a fixed period, typically six months.
Module 7 covers everyone involved in buying a home, what to ask each of them, and how to find professionals who work for you rather than the seller.
Read module 7