What Does a Mortgage Broker Do?

A mortgage broker, or a mortgage advisor, is a professional person or company who acts as an intermediary between borrowers and lenders during the mortgage application process. [1] Mortgage brokers have access to a network of lenders such as banks, credit unions and private lenders, allowing them to offer their clients different mortgage options.

There are two main types of mortgage brokers [2]:

• Tied or multi-tied brokers - work only with a single lender or a specific group of lenders
• ‘Whole of market’ brokers - have access to the entire mortgage market and offer a wider range of mortgage options

The main purpose of a broker is to help clients find the most suitable mortgage option for their specific financial situation, credit history and needs. Additionally, mortgage brokers have other duties including:

• Meet with borrowers or lenders
• Explain the terms and conditions of different mortgage options to borrowers
• Compare lender fees and interest rates to help borrowers decide
• Gather all the necessary documents
• Assist borrowers with the mortgage application process and answer any questions along the way
• Keep borrowers informed on the application until completion

Why Use a Mortgage Broker?

Whether you’re a first-time buyer or want to remortgage your home, applying for a mortgage is a complex and time-consuming task. A mortgage broker can help make the mortgage application process easier and smoother to navigate by:

• Providing a personalised service - Mortgage brokers work closely with their clients and provide a personalised service, keeping their financial preferences and needs in mind.
• Accessing more options - Mortgage brokers have wide connections and can access more mortgage options than if borrowers were to research the market themselves, giving borrowers more choices to decide from.
• Saving time and effort - They help borrowers with paperwork and ensure the right documents are in place. They can also apply for mortgages and negotiate with lenders on behalf of the borrower, saving both time and effort.
• Saving money - Mortgage brokers can find the most cost-effective mortgage option for borrowers, potentially saving money in the long run.
• Offering their expertise and knowledge - Mortgage brokers offer their expertise and knowledge during the process, guiding borrowers through any concerns or issues that may arise.

According to a 2023 survey, 34% out of 2,000 first-time home buyers said that brokers provided useful recommendations and 17% of potential buyers used a mortgage broker. [3]

Do Mortgage Brokers Get Better Rates?

As a first-time buyer or existing homeowner, you want to get the best interest rate available. Mortgage brokers may secure better rates than if clients were to approach lenders directly. This is because mortgage brokers have years of experience in the field and have established relationships with certain lenders, allowing them to negotiate better rates and exclusive deals for their clients. Without a broker, clients only have access to a limited amount of mortgage products and risk missing out on a deal with a better interest rate elsewhere.

How Long Does a Mortgage Application Take Through a Broker?

The length of time it takes to complete a mortgage application through a broker can vary depending on the complexity of the application and the lender’s processing times.

The good news is that mortgage brokers have experience with filling out various application forms and submitting them to lenders, meaning the process is typically quicker than if you were to complete it yourself. In general, it can take 30 minutes to a couple of hours to complete a mortgage application form.

Once the application form is submitted, it can take two to six weeks to get a mortgage approved through a mortgage broker. However, some applications may be processed quicker, while others could take longer, especially if any issues or delays arise.

Do Mortgage Brokers Check Your Bank Account?

A mortgage broker can not access a client’s bank accounts directly. However, brokers usually ask their clients to provide 3 months'worth of bank statements and other documents for proof of income, assets and liabilities. Bank statements from savings accounts can also act as evidence of a deposit. These documents are used by brokers to assess a client’s financial situation and determine their eligibility for a mortgage.

Can I Speak to a Mortgage Broker for Free?

Most mortgage brokers offer an initial conversation with free mortgage advice. When you decide to work with a broker, they may charge a fee, while others don’t charge any fees for their services and receive a commission from the lender. This is called a ‘fee-free’ broker. While it’s free to speak with most brokers, it’s important to ask beforehand if there is a charge. [4]

How Much Does a Mortgage Broker Cost?

The cost of a mortgage broker depends on the services offered and the terms of the agreement made with the borrower. Typically, a mortgage broker is paid either through a commission from the lender, a fee from the borrower, or both.

Mortgage brokers calculate their fees using four main models:

1. Fixed Fees Some mortgage brokers charge a fixed upfront fee for their services, regardless of the mortgage loan amount. The average cost of a mortgage broker in the UK can vary from £200 to £500.
2. Percentage Fees With a percentage fee, mortgage brokers charge a percentage of the mortgage loan amount as their fee. This can range from 0.2% to 1% of the loan amount. For example, a £200,000 mortgage loan with a 0.5% fee means the borrower pays the broker a fee of £1,000.
3. Hourly Rates Other mortgage brokers charge an hourly rate for their services, typically ranging from £100 to £200 per hour. An hourly rate fee can be expensive if any issues or delays arise.
4. Combination In some cases, mortgage brokers charge both a fixed fee and a percentage fee. For example, they may charge a fixed fee to cover the initial legwork and a percentage of the loan amount for arranging it.

To avoid an unexpected invoice, borrowers need to know if their broker charges any fees and if so, how their fees are calculated before agreeing to work with them.

When Do You Pay a Mortgage Broker?

Along with understanding how much a mortgage broker costs, borrowers must also know when to pay them for their services. Some mortgage brokers will request payment upfront, while others request it once the mortgage application has been approved and completed. It's important to review or discuss the terms of payment with your mortgage broker to avoid confusion and ensure they are paid at the right time.

How To Find a Mortgage Broker?

To achieve a successful mortgage approval, you will need to find a good and trustworthy mortgage broker.

Here are some tips on how to find the right mortgage broker:

• Ask family and friends - Using a mortgage broker is very common amongst homeowners, reaching out to family and friends to hear about their recommendations and experiences.
• Ask your estate agent - If you are working with an estate agent, it is worth asking them about their mortgage broker recommendations.
• Consider the type of broker - If you want to explore different mortgage options, consider a ‘whole of market’ broker. On the other hand, if you prefer to borrow from a specific lender such as a bank, a tiered or multi-tied broker would be more suitable.
• Do online research - It is worth doing online research about mortgage brokers in your area. This can include browsing their website and reading client reviews.
• Book a consultation - Most mortgage brokers offer a free consultation to discuss your financial situation and mortgage goals.
• Choose an FCA-accredited broker - All mortgage brokers in the UK must be regulated and authorised by the Financial Conduct Authority (FCA). This accreditation ensures that brokers meet FCA standards and regulations, protecting consumers and promoting a healthy financial system. Choosing an FCA-accredited broker will give you reassurance and peace of mind. [5]

There are thousands of mortgage brokers located across the UK. You can click here to search for FCA-accredited mortgage brokers in your area.

What To Ask a Mortgage Broker?

Whether you are attending a consultation or meeting with your chosen broker for the first time, it is essential to ask any questions you may have.

Some examples of good questions to ask a mortgage broker include:

• Are you qualified and regulated by the FCA?
• Do you work with specific lenders or can you access a wide range of options?
• Can you explain what services you offer?
• What is the best type of mortgage for me?
• Do you charge a fee and how do you calculate your fees?
• How much do I need for the deposit?
• How much can I borrow?
• What are the current interest rates, and will they change?
• What documents do I need?
• How long will it take to get my mortgage approved?
• Are there any restrictions on my mortgage?
• Can you help me with anything else, such as insurance?