The Pros and Cons of Using a Mortgage Broker

Less Stress for Home Buyers, or a Waste of Money?

Dec 15, 2008

Mortgage brokers and advisors can be a great aid when navigating aggressively competitive mortgage markets, especially for first time buyers and those lacking confidence.

Buying a dream home can be really tough for those who are also managing busy work and/or family lives. After finding the perfect place to live, seeking the advice of a mortgage broker can help to lessen the stress of home buying, as well as providing assistance in finding the most appropriate deal to suit each individual or situation. Specialist brokers can also help with bad credit mortgages and other non-standard loan arrangements.

What is a Mortgage Broker?

Mortgage brokers are specialist advisors who can have focused experience of the mortgage market. It is their job to keep up to speed with the latest mortgage products and deals and to be aware of likely patterns and shifts which could affect those products.

Brokers assess the borrower’s situation, desired property, and plans for that property, and then suggest a variety of appropriate products. They can also provide affordability calculations based on the borrower’s incoming and outgoing funds, also known as mortgage illustrations. When the deal is closed, the broker takes a commission.

Brokers are intermediaries, acting as facilitators between mortgage lenders and individuals or businesses. Whilst it is common for individuals to access loans directly through their own banks and building societies, in today’s aggressively competitive mortgage market brokers are one of the most popular ways to access home financing.

Rules and Regulations

Brokers are often regulated by financial authorities. In the UK, brokers can be held liable if they are found to have given erroneous or poor financial advice. In the USA, regulations vary from state to state. Mortgage brokers normally work on a commission basis, so they take a cut for every mortgage deal finalised. Since laws governing mortgages favor consumers, this cut is unlikely to be excessive without triggering additional warnings to the borrower.

Be warned. Unethical brokers are out there and it is wise to shop around and seek recommendations and advice before signing anything. Unscrupulous mortgage brokers will try to capitalise on a borrower’s ignorance about the mortgage market given half the chance. Ensure the chosen broker is accredited with the relevant authorities before going any further. Find out about different types of mortgages and try some free repayment calculators online before committing to anything. A little homework goes a long way.

Pros of Using a Mortgage Broker

Good brokers will help buyers find good mortgage deals, taking the hassle away from individuals who would otherwise have to scour the financial pages, conduct endless searches online, or approach bank after bank in order to find the best deals. When the broker is independent, i.e. not taking a commission from specific or limited sets of lenders, they will also be able to advise objectively on which products are the most appropriate for specific individuals.

When the time comes to get the application in, they are often able to help speed up the process, through assistance with completing the application and being available to chase up progress. The benefits are less stress, and less admin.

However, many people can’t understand why they should pay a mortgage broker to do something they could essentially do themselves. If individuals can apply to lenders direct then why pay for the pleasure of having someone else do it on their behalf?

Balancing the Decision

It’s certainly something to weigh up and the decision really comes down to individual willingness to pay someone to take the hassle of mortgage finding away.

First time buyers in particular may find mortgage brokerage a welcome helping hand as they step onto the property ladder. It is a good idea to find out the costs involved beforehand, which are normally fairly small compared to the total cost of home-buying, and for potential borrowers to decide whether they are confident enough and savvy enough to find a good deal for themselves.