Five borrowers who must take mortgage advice

Brokers can help all borrowers but for some they are absolutely invaluable.

Deciding which mortgage to go for is a massive decision and making the right choice can save you thousands of pounds. Get it wrong and your mortgage can be costly, and very stressful.  

What makes finding the right deal particularly hard is that there is no ‘best buy’ mortgage to suit everybody, since there are so many variables to consider -- fixed or variable, long or short-term, high or low fee? And that’s all before rate comes into the equation.

So it’s little wonder that over 60% of all mortgages are arranged via mortgage advisers, as borrowers look for trusted support when it comes to sorting out the biggest financial commitment of their lives.

But some borrowers need the help of a broker more than others. The five types of mortgagor below could find that a broker not only gets them a better deal than they could find alone, they also make the process a whole lot easier:

1. The first-time buyer

Life is not easy for the plucky first-time buyer (FTB). Saving the required 10% deposit is a major struggle on the average £160,000 property (according to Halifax and Nationwide), and if you live in a pricey area you face an uphill battle before you even start.

Frankly FTBs need all the help they can get.

Brokers provide those new to the mortgage game with invaluable help and support, guiding you through the mortgage maze, and through the homebuying process.

Having somebody helping you to fill in forms, chasing the lender for you and ensuring the mortgage is smoothly seen through to completion, is like gold dust to an FTB.

Indeed, the value of professional advice during a stressful time from someone with bags of mortgage experience should not be underestimated.

2. The buy-to-let landlord

Most buy-to-let landlords are well aware of how essential brokers are to their market. This sector has seen the biggest contraction of all, with a drop in mortgages of around 90% during the credit crunch. Many buy-to-let lenders simply shut up shop while others severely restricted their lending criteria. And there is still a very limited choice for landlords.

Some of the biggest buy-to-let lenders, including BM Solutions and The Mortgage Works, are broker only - so if you go direct you are missing out on a huge swathe of available mortgages that could suit your needs.

Of course, there are direct-only deals too, and some are well-priced. But the best brokers will search all deals for you from all channels, and let you know if there is a better direct deal for you.

The smart landlords go through a broker.

3. The bad credit borrower

The poor bad credit borrower has been a high profile victim of the credit crunch -- plus they got blamed for starting it all (as untrue as it is unfair).

But now where can they turn? Many are stuck on uncompetitive standard variable rates and remortgaging elsewhere isn’t an option. Lenders just don’t want the risk, or the reputation, of dealing with sub-prime borrowers.

At least some don’t.

There are a handful of lenders who will take into account slight blemishes on your credit record, though there are no options for those with serious credit problems.

Platform, part of The Cooperative Financial Services, will accept applications from those with discharged bankruptcies, plus it will accept a County Court Judgment of up to £500 in the last year. Kensington Mortgages will also accept clients with minor credit blips.

These broker-only lenders do not operate on the high street, where you are likely to get short shrift from lenders if you have anything less than an immaculate credit history.

4. The self-employed borrower

Pre-credit crunch self-employed borrowers had no problems whatsoever. The huge number of self-cert mortgages available, at rates that rivalled mainstream mortgages, meant it was easy to arrange a mortgage without having to prove your income.

Of course, the sector was abused by some who inflated their income to borrow more -- a dangerous game indeed. The result of which is that getting a mortgage has become a whole lot harder for genuinely self-employed borrowers. If you have three years’ fully audited accounts you should be OK, but not everyone has that.

What if you have just started out, or don’t have fully audited accounts (they are not compulsory for sole traders), for example? Broker-only lender Kensington Mortgages will accept 12 months’ accounts verified by an ICB bookkeeper and Aldermore Mortgages (also broker-only) will accept two years’ certified accounts.

If you are newly self-employed, a broker is simply your only option.

5. The large loan borrower

The credit crunch has led some lenders to reduce their maximum loan sizes, which means that the high street is not always the best place to look if you need to borrow big.

If you break the £1m mark you will find that you fall outside standard criteria (with some lenders it’s £500,000). It might also be the case that you have unusual income streams, such as investments, or perhaps you receive an annual bonus that dwarfs your salary.

A mortgage broker can still help you source a deal either with the dedicated large loan desk of a mainstream lender, or with a private or commercial bank. They are set up for this sort of lending and often assess applications on a case-by-case basis.

Large loans can be difficult to access directly and the help of a specialist broker who understands the sector will be invaluable.

And everyone else

Of course, brokers help all sorts of borrowers across the board. After all, their experience and expertise is extremely useful to most people.

• They are fully qualified mortgage experts who have passed exams and are authorised by the regulator to give advice.
• They are open all hours, will meet where it suits you and do the form-filling and chasing lenders on your behalf.
• You will get whole-of-market advice from a wide range of lenders -- if you go direct you will only get details of that particular lender’s products.
• Brokers have unbeatable knowledge about which lenders are likely to accept your application, saving you precious time applying for deals you are unlikely to get.
• They have access to broker-only lenders, many of which specialise in providing mortgages to those with unusual circumstances.
• If two deals are similar, a broker will tell you which lender will be able to complete the mortgage quickest, helping you to bag the home of your dreams.
• If a new mortgage comes out that is better than yours, a broker will let you know you can save money by switching -- something your lender will never do!

Get independent mortgage advice now from our whole-of-market, fee-free lovemoney.com broker. Call 0800 804 4045 or email mortgages@lovemoney.com for more help.

At lovemoney.com, you can research all the best deals yourself using our online mortgage service.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article. 

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term will revert to the lender's standard variable rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

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