It’s natural to feel nervous about taking out a mortgage. You may feel intimidated by the scrutiny you expect to come under. Perhaps you worried about rejection? In their first column, brokers Gemma Bennett and Sonya Matharu of The Mortgage Mum explain how they want to help you realise your dreams, not dash them…
Gemma says…
I’m a mortgage broker. Another word for a broker is an ‘intermediary’, when you look at this word that’s exactly what we are. The intermediate between the client and the lender.
We form a middle point. A safe place to ask questions, run scenarios, check options, understand, and overcome hurdles that may present themselves.
Then voila! – when the case feels packaged and ready, it’s neatly presented to the lender for underwriting.
The problem is, when we think of financial advice, the idea may feel intimidating. So we are kicking off our column with a look into the worlds of lenders and brokers. We’ll show you what they do and how they think and also why they are definitely not scary.
I understand how you might feel. This is how some of us may visualise the lender…
Well, that’s how I used to see it anyway, before I worked within the mortgage industry. I held images of the board of bankers from Mary Poppins in my head and, more recently, Mr Perkins from Despicable Me.
I believed they automatically wouldn’t want to lend to me. Especially as I was a self-employed applicant.
Perhaps, once upon a time, the banking institutes did feel a bit like this. But I can assure you, since working within the market, the reality is so very different!
What lenders are really like
Firstly banks (lenders) want to lend. Seems obvious really. They are essentially looking to approve the case: your mortgage loan. They want the business.
Lending money is a business after all. They work tirelessly to find innovative ways to make lending money to people safe enough for both parties.
The individuals and boards behind the banks are more diverse than ever, and open to new ideas and alterations to achieve this.
But my biggest revolutionary discovery was just how VARIED the lenders are. What doesn’t fit for one, may well fit with another.
This is how a lender sees your application
Look at it from the lender’s point of view…
They have a carefully considered set of policies, they set these policies out to ensure they lend safely and responsibly for their business needs.
However, they must also ensure they offer enough variety and attractive products to bring ‘business’ in.
This is where the broker comes in handy…
A broker, being able to assess needs across a comprehensive range of mortgage market products, really opens up a very welcoming world of lending and choice for most cases.
Each lender will have a unique selling point (USP) as most business do, and these allow for certain nuances in clients’ circumstances, to find a suitable home for their mortgage needs.
What lenders are looking for in your documents?
The word ‘underwriting’ made me feel exposed – the thought someone was scrutinising my documents to find faults was uncomfortable.
But, in fact, the lenders are going through the relevant documents so they can find all the reasons TO lend. They are searching for all the security they need to meet their appetite.
Ensuring they aren’t taking too much of a risk, which would put their business and their customers at potential risk in doing so.
It makes sense when you understand it like that. Most things do, when you take a closer look, it’s like the fear evaporates.
It’s not comfortable to receive a decline on an application and in general when you’re working with a broker this is less likely to happen as the criteria and prechecks have already been looked at. But a decline from one lender does not necessarily mean a decline from all.
The world of mortgage lending is, as I have discovered, in fact a colourful, creative one that thrives of movement and flow.
So, what about brokers? How do they fit into the picture?
Over to Sonya
There’s no denying that a mortgage will often be the biggest financial commitment most of us will ever have.
And with this commitment often comes a lot of tension as mortgages can be complicated and overwhelming—especially when they’re hard to obtain.
But a good mortgage broker can support you with this, helping to guide you through the process whilst deciphering the jargon so that you can understand each step of the journey.
However, it’s not a mortgage broker’s ability to understand the lingo that makes them such a valuable resource when obtaining a mortgage—it’s their expertise, access and customer service.
Sure, a good mortgage broker will save you time, hassle and money—but what takes a Mortgage Broker from good to great, is their ability to look at your big picture.
Delivering financial advice that’s specifically tailored to your goals and circumstances, so that you can work together to find a solution that’s right for you.
Still unsure whether a Mortgage Broker is right for you?
Here are 5 reasons why you should consider using a broker
#1: They have access to a panel of lenders
What does this mean? Simply put, they’re not limited by one lender’s products. When you seek a mortgage through a bank directly, you only have access to their products, and as such, they have a monopoly on the rates and suitability requirements.
They do, however, have access to banks and an abundance of other lenders with products that aren’t readily available to the public.
This means that whether you’re employed, self-employed, or retired, a mortgage broker can compare a variety of products, looking at the lender’s criteria together with your suitability and monthly affordability to find a product that suits you.
#2: They’re the experts
To work as a Mortgage Broker and give advice, you need to obtain professional qualifications and work under statutory regulation by the Financial Conduct Authority (FCA).
This is reassuring for a few reasons. The first is that it means that your financial information is safe and secure.
And the second is that you can rest assured knowing that your Broker has undergone specific training and knows what they’re talking about!
Because of how heavily regulated the industry is, it also means you’re protected and will always receive a fair service because they aren’t allowed to favour a particular product or lender.
#3: They take the hassle out of the process
Getting a mortgage isn’t a short process. It can be time-consuming, complicated and paperwork intensive, with many forms to fill out and different parties to chase.
But a mortgage broker helps to alleviate this stress by guiding you through the process, preventing overwhelm by telling you what needs to be ready at what stage, helping you to complete forms and keeping up to date on communication with both you and solicitors (where required) so that everything runs smoothly.
#4: They provide more than just mortgage advice
You’d think from the name that mortgage brokers only provide mortgage advice, but the reality is that they offer so much more.
Finding the right broker can be a lifelong relationship, not just because they’re loyal and have your best interests at heart, but because as time goes on and your financial circumstances shift—they can help you to ensure you always have the best product available to help you reach your financial goals.
For example, when you want to remortgage, release equity or pay off your mortgage early. They can also help you in other financial aspects, such as finding the right insurance, so you’re prepared for whatever life throws at you!
#5: They have clear pricing for their services
When it comes to how Mortgage Brokers make their money, it usually falls into two categories:
Procuration Fee: This is for a percentage of the loan amount, and is received by the Broker, from the lender, when the mortgage completes—kind of like receiving a commission.
Brokering Fee: This is when Brokers charge a fee for their service. This is either a flat fee or a percentage of the loan amount and is paid to the broker, from clients, when giving advice or arranging the mortgage.
But regardless of which pricing structure a Broker opts for—they should provide you with their terms of business upfront.
This usually takes place during your first point of contact, and will outline fees and when they are due to be paid so that you can make an informed decision.
Do you feel a bit lighter now? We hope you feel a bit less nervous about speaking to a broker or applying for a mortgage. We’ll see you next time…
Gemma Bennett is mortgage broker and Sonya Matharu is senior mortgage broker and they both work for The Mortgage Mum
You can find out more about Sonya and Gemma, their jobs and how they help people with their mortgage journey here.
