Should first-time homebuyers use a mortgage broker?
Buying your first home will probably be the biggest financial commitment you’ve ever made. So it’s important you get a good deal on your mortgage.
You could do the research on multiple lenders and apply for a mortgage yourself, or you can use the services of a mortgage broker to do the legwork and secure a good deal for you.
- Brokers can save you the time and hassle of searching for the best mortgage deals to suit your budget
- They’re experts in their field and can help improve your mortgage application, so you’re more likely to get accepted
- Brokers may be tied to certain lenders or they could be whole of market
- They often have access to mortgage deals that aren't available to the general public
- Always check the fees you’ll be charged by a broker before working with them
What is a mortgage broker?
A mortgage broker - or mortgage adviser - searches the market and gives you advice on which product might best suit your financial circumstances. The broker can then apply for the mortgage on your behalf.
Brokers normally get paid a commission from the lender they arrange your mortgage with. Alternatively, they may charge you for their services. This could either be a fixed fee, or a percentage of your loan amount.
Brokers are either ‘tied’ to a lender or group of lenders or are ‘whole of market’, meaning they have access to almost every mortgage available.
You may want to choose a whole of market broker to make sure that your options aren't limited and you're getting the best possible deal for you.
How can a mortgage broker help first-time buyers?
If you’ve never taken out a mortgage before, it can feel like a daunting task.
This is where an independent mortgage adviser can prove useful.
There are even some mortgage brokers who specialise in the first-time buyer market.
They can help you navigate what can be a complicated process, improve your chances of getting accepted for the best mortgage deal for you and oversee the whole application process from start to finish and can help.
After discussing your personal financial circumstances, a broker can begin the search for the best deals on the market to suit your budget.
They can help you decide on which type of mortgage best suits you. For example, fixed-rate, variable-rate or tracker options.
Brokers calculate the total cost of your mortgage and clearly explain its terms and conditions, charges and fees, as well as pros and cons. They can also identify any limitations you need to be aware of, such as early repayment fees, or a charge for switching.
Using a broker can be particularly helpful if you are looking for a guarantor mortgage or if you want to use your Help to Buy ISA or Lifetime ISA.
They can also advise you on how to take advantage of the government schemes designed to help first-time buyers onto the property market - such as Help to Buy mortgages and the Shared Ownership scheme.
Brokers should ne knowledgeable about which high-street lenders are offering the government-backed 95% mortgage scheme which helps you secure a mortgage with just a 5% deposit.
Mortgage brokers are regulated by the Financial Conduct Authority (FCA), so if you feel you have been mis-sold a mortgage by your broker, you can open a complaint with the broker. If it can’t be resolved, you can take your complaint to the Financial Ombudsman Service.
The key questions to ask a broker
To ensure you choose the right broker for you, it’s a good idea to check their experience and what their service includes. You could ask the following questions:
- Are they whole of market or tied to a particular lender or lenders? Can they let you know about direct-only deals too?
- What experience and qualifications do they have? The most recognised qualification is the FCA approved Certificate in Mortgage Advice and Practice (CeMAP).
- Are they authorised by the FCA (you can check this on the Financial Services Register website).
- What does their service include? Will they apply for your mortgage, help you with paperwork, liaise with and chase the mortgage provider during the application, approval and sign-off process?
- If their advice is ‘fee-free’, how do they earn their money? Be aware that brokers who work ‘fee-free’ are likely to be tied to a lender or group of lenders.
- Will they charge you a one-off fee or a percentage of the loan amount? Agree the costs in writing before you start working with your broker.
- Is payment expected only if the broker secures you a mortgage?
How to find a broker
It’s best to look for a ‘whole-of-market’ broker who can explore every mortgage product on the market.
You can search for authorised mortgage brokers on the Financial Services Register.
Finding your own mortgage
If you have knowledge of mortgages and feel confident enough, you can do your own research and apply for your own mortgage.
After you’ve worked out your budget, a good first point of call is to compare mortgage rates for first time buyers then to get full quotes from the lenders you are interested in.
You’ll need to find out the Annual Percentage Rate of Charge (APRC) - which is the total amount of interest you'll be paying over the course of the mortgage term.
Things to watch out for
Your lender, or broker might try to sell you other financial products during the mortgage process. Don’t assume you have to take out their insurance policies - you’re under no obligation to. You could find cheaper policies elsewhere.
Mortgage payment protection insurance (MPPI)
This provides cover for your mortgage payments in case you find yourself unable to work due to accident or illness.
Having buildings insurance in place will be a condition of your mortgage. You don’t have to buy it through your lender or broker though. Shop around and find the right deal for your home and finances.
It’s worth noting that you do need an adequate level of cover though, otherwise your lender could reject it and request you get a more comprehensive policy.
Mortgage life insurance
This cover pays off your mortgage if you die. It decreases over time in line with your remaining mortgage payment balance.