In his last article Greg Cunnington, director of lender relationships and new homes at Alexander Hall, wrote about remortgaging and why now is a good time to be looking into your options. In part eight of this new series, Greg talks to us about the importance of good advice and why this is at the heart of everything that intermediaries do.
In our first article last year we talked about the importance of a mortgage intermediary/broker, and why we add so much value for clients throughout the process.
Intermediaries offer the kind of expert advice that helps people find the best mortgage deals for their circumstances.
We aim to make that as simple and stress-free as possible, looking at each person’s situation and finding the best product to match their needs.
The sheer volume of options, and the importance of getting it right, makes this more important than ever.
The mortgage product minefield
There are over 15,500 residential and buy-to-let mortgage products currently available in the UK, according to mortgage tech firm Twenty7Tec. This number is increasing every year, highlighting the vast number of options out there.
This is a minefield to navigate for anyone looking into all of those products without help.
Combine all those options with infinitely-varied personal and income circumstances, plus the variety of property types and how they can impact a buyer’s options… the value of obtaining correct advice has never been higher.
It’s important to speak to an adviser with access to as many lenders on the market as possible. At Alexander Hall, we have access to more than 50 different lenders on residential mortgages and close to 50 on buy-to-let mortgages.
This equates to several thousand mortgage options in total. Have a look at the mortgage lenders page on our new website to see for yourself.
Mortgage market complexity
The excellent Value of a Mortgage Broker research by Legal and General highlighted the value of using a mortgage broker. Their research showed that 81% of homeowners thought the advice of an adviser was ‘quite valuable’ or ‘extremely valuable’ when securing a mortgage.
This is hardly surprising! Recent topics covered in these articles have highlighted the value of advice for self-employed clients, in the remortgage process, for Help to Buy purchases and for clients with ‘complex’ income structures. And these are just a few examples!
More than nine out of ten homeowners (92%) who had used a broker in that same Legal and General survey were ‘quite likely’ or ‘very likely’ to recommend using a broker to their friends when getting a mortgage. This highlights why it’s important to educate the public on the value of mortgage brokers.
I’d like to think a survey of our clients would come out even higher – a quick look at our Trustpilot page certainly backs that up. Potential borrowers can benefit from a broker’s access to a huge number of products, and the right advice is key, which is why we are so passionate about this.
Speaking of our Trustpilot page, we recently hit 1,000 client reviews. At the time of writing we have a rating of 9.9, which is one of the highest in the industry and something we are very proud of.
We actively encourage reviews, as engaging with our customers and getting their direct feedback is so important and backs up the value that clients see in the advice received.
Getting the right mortgage for you
It is not only your own circumstances that mean the importance of advice is key, but also the myriad of options available with the mortgage product itself:
- Should you take a fixed rate or a tracker rate?
- Should you set things up on a capital repayment basis (whereby you repay the mortgage via the monthly payments over the mortgage term), or would an element of interest-only (so that you are just paying the interest back) be more suited to your circumstances?
- Should you take a mortgage product for two, three or five years? You may have noticed that some 10 year fixed rates are now available – are these a good option?
- Should you set a monthly budget and take the lowest mortgage term that fits this basis, or would some initial flexibility on the initial monthly payments be beneficial?
- Might an offset mortgage facility work well for you, as you expect to have some surplus funds or want increased flexibility in how quickly you repay the mortgage?
- Would a product with the flexibility to sell without a penalty in the coming months be suitable?
A good intermediary will cover all of the above in detail with you. This ensures that you get not only the best rate but the best mortgage product and set up for your circumstances. A mortgage will typically be the largest financial commitment you take out in your life, so it is vital you receive the correct advice to help you make the right choice.
Case study
Let’s take a look at a recent case study. These Alexander Hall clients illustrate how receiving the correct advice can make all the difference.
The clients:
A married couple (let’s call them Toby and Emma) contacted us to discuss their remortgage. They had been looking at five-year fixed rates, as they had always taken these previously and were told by friends these were currently a good option.
The scenario:
Toby and Emma previously took a five-year fixed rate that was coming to the end of its fixed rate period. This rate was 3.09% and they were paying £850 a month.
They were looking to reduce their obligatory monthly payments down, even though it was affordable. They had also been using their 10% allowance every year to reduce the loan size down. They estimated they would clear the loan in 10 years, and presumed they would take another five-year fix.
We looked at the five-year options, but also explored 10-year options, which they were not aware were available.
The solution:
There were options here with 10-year fixed rates only slightly higher than the best five-year fixed rate available. In this instance the monthly payment was roughly £30 a month more for the 10 -option, yet was still £125 per month cheaper than their old deal.
The clients were more than happy to pay this additional amount as they were concerned rates would increase over the next five years. They loved the idea that they would be protected against rate rises until 2029.
What’s more, the advised product only has early repayment charges for five years, meaning they can overpay by 10% of the loan amount for the first five years, and by an unlimited amount thereafter (including if they want to then sell the property).
Property value: 600k
Loan amount: 110k
LTV: 18%
Rate: 2.29%
APRC: 2.7%
Term: 15 years
Lender arrangement fee: 999
Mortgage payment: £725
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT
