First-Time Buyer: Do I need a mortgage broker?

Can a broker explain the mortgage process step by step?

Yes, a mortgage broker should explain the mortgage process step by step. One of the key benefits of using a broker as a first-time buyer is having someone to demystify the entire mortgage and house-buying process.

There are lots of moving parts, and it’s quite involved. You’ve got multiple people in the chain: lender, broker, solicitor, estate agent, surveyor, insurer. There’s a lot of paperwork and a long legal process. For someone who’s never bought a home before, it can feel overwhelming.

One of the first things I do with every first-time buyer is explain the process: what happens where and when, what fees are payable at which stage, and what mistakes to avoid. We hold your hand all the way through (without sounding patronising), so you feel confident and supported at each stage.

Each broker works slightly differently and has their own process, so it’s worth understanding not just the mortgage and home-buying process generally, but also the specific steps your broker follows.

Does using a broker save time? Can a broker help speed up mortgage approval?

Yes, using a broker almost always saves time, and the time savings come from three areas: research, application quality, and problem-solving.

We have specific tools that we pay for to make our mortgage research highly accurate and real time. We see interest rates as they actually are, and sometimes lenders offer us exclusive deals the general public can’t get directly. An issue that might feel overwhelming and confusing for a first-time buyer can be something I have the answer to within five seconds.

There’s no point applying for a mortgage if the lender will reject you the moment they see your documentation. When you go direct to a lender, they only ask for documents at the point of application, whereas a broker gets all the documentation upfront. That means we select the right lender first time and provide all the documentation before the lender even asks for it. The application then zooms through, and, excluding issues with the property valuation or something that comes to light you’d not told us about, you get a mortgage offer quickly.

The longest stage when buying a home is the legal process. I can only talk about how I work, but I make sure the solicitors are instructed on day one, the legal paperwork is correct and accurate, and you get a survey at the appropriate time. Getting it right the first time speeds up the purchase.

It also takes a lot of weight and stress off first-time buyers’ shoulders, because being overwhelmed creates emotion, emotion creates stress, and stress leads to bad decisions.

How much does a mortgage broker cost? Do I pay the broker directly or are they paid by the lender?

Advice fees vary widely across the mortgage industry, but there are three ways a broker can be paid. Some are commission-only and don’t charge you a fee, some are fee-only, and some charge a fee plus commission. Typically for first-time buyers with standard credit, I charge a fee of £499, which is around the industry standard. Whether you pay the broker directly or via lender commission depends on which model a broker uses.

There’s no fixed fee in the industry because we’re allowed to set our own fees within respectable limits. A mortgage broker couldn’t charge £10,000 for a £100,000 mortgage; that would be unfair and disproportionate. Understanding how brokers are paid will help you decide whether it’s good value, and it also depends on whether you want a holistic service or just someone to arrange a mortgage but without any of the support with the rest of the home buying process and other aspects of buying and owning your first home. First-time buyers tend to want a holistic service that covers the whole process.

The three payment models in more detail:

• Commission only. The broker doesn’t charge you a fee and is paid entirely through the procuration fee when your mortgage completes. That’s sometimes called a fee-free service, and a lot of online brokers work this way.
• Fee-only. The broker charges you a fee directly. Some give you back any commission from the lender to eliminate any conflict of interest, because that way the broker’s income isn’t tied to the lender they recommend.
• Fee plus commission. The broker charges you a fee and also receives the procuration fee from the lender. That’s the most common model across the industry.
  
  

Sometimes people wonder why there’s an advice fee if we’re also getting paid by the lender. The fee is actually subsidised by what the lender pays. If the lender didn’t pay commission, my fee would be much higher, because I still have costs to pay to run a business and there are fees to the Financial Conduct Authority on top.

Some brokers charge more when dealing with quirks like adverse credit or self-employment. We can set our own fee structure, but it has to be confirmed in writing. We can’t chop and change as we go because that wouldn’t be fair. All fees are disclosed in an initial disclosure document, which every broker will provide explaining the service they offer, how they’re paid, and how they’re regulated. It’s important to understand what you’re getting into and what service you want.

Is using a broker more expensive than going direct?

Not necessarily, and often a broker saves you more in time, stress and worry than the fee costs. We have access to lenders you may not have heard of and products you couldn’t get directly, and we frequently find ways to save you money that more than offset the fee.

For example, someone might pay £10,000 too much for a house if they go it alone. If they’d paid me £500, I would have pointed out that the property is overpriced. Has that cost them £500 or saved them £9,500?

The fee influences the service you get and the value it adds. You’re buying a home worth several hundreds of thousands of pounds, with a mortgage over 20, 30, or 40 years. Would you prefer to have peace of mind that it’s been done properly and that you’ve got the right mortgage available across the whole market? You also get help with legals, surveys, and insurance. It’s an individual choice, but most people would benefit from using a mortgage broker.

Are there any hidden fees or commission biases?

No. Mortgage brokers are stringently regulated by the Financial Conduct Authority, which means we have to disclose all our fees and how we’re paid. That’s set out in the initial disclosure document, and any commission is also disclosed in the documentation when we recommend a particular lender. There’s no hidden commission.

There are no commission biases either, because we have to act in your best interests at all times. That’s why there’s a complaints procedure, and why we’re regulated. If you think you haven’t been advised correctly, there’s a process to follow to find out.

I understand why someone would worry about bias, but the vast majority of mortgage brokers are trustworthy, honest, reputable people. We have to be qualified and pass a Fit and Proper test annually to ensure we act with integrity. We also have to be DBS-checked. There are lots of hoops to jump through to get approved by the FCA, because they need to be confident that mortgage advice worth hundreds of thousands of pounds is coming from people you can trust, who have the skills, knowledge, qualifications and experience to advise you properly.

What else do we need to know about mortgage advice for first-time buyers?

Take time to choose your mortgage adviser carefully and ask some of the questions I’ve mentioned. Make sure you understand how they’re paid and what service you’re getting for that, or not getting, if there’s no fee.

Remember you’re the client. The process has to work for you. You have to feel comfortable and know, like, and trust the adviser. Taking out a mortgage is a big commitment, and you’ll have to share a lot of information, so you need to feel confident in the person you go with.

For example, I know that how I work, and the process I follow, will be the right fit for some first-time buyers, but it won’t be for everyone, and that’s fine. It’s also a two-way street. There will be some first-time buyers who want to work with me but want to follow their own process, and so I don’t work with them. There will also be some first-time buyers who I might love to work with, but they’re not keen on how I work.

Key Takeaways:

• Mortgage brokers are worth the cost because they help first-time buyers overcome knowledge blind spots regarding affordability assessments, credit profile impact, and other crucial factors beyond simple online rate tables.
• A broker provides a holistic service, guiding first-time buyers through the entire home-buying process, including choosing a solicitor, getting a survey, negotiating property price, and selecting insurance, which a bank dealing direct does not offer.
• Mortgage brokers act as an intermediary to find a mortgage that suits your specific circumstances across the market, rather than limiting you to the single range of products offered by a bank or direct lender.
• Brokers are strictly regulated by the Financial Conduct Authority (FCA), which mandates that they disclose all fees and commissions and act in your best interests, ensuring a complaints process is in place.
• Using a broker almost always saves time by performing accurate research, securing all necessary documentation upfront for a quality application, and helping to speed up the approval process.
  
  

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.