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Why using a mortgage broker makes sense in today’s complex mortgage market.

Repayment, interest only, banks, building societies, on-line…. Adam Brand looks at the picture.

The mortgage market has changed substantially in recent years. In the past there were very limited options, mostly building societies offering typically 25 year repayment mortgages. They’d want to have been a saver with them for several years and have a hefty deposit.

Now banks are also major players as mortgage lenders with many combining forces with - there’s also a whole host of other lenders too.

What’s on offer has also changed dramatically, from just a few standard products to a bewildering range of options - fixed interest rates, interest only, cap and collar, trackers, with different fixed periods, and of course fees.

One of the best ways to find out what will suit you is to consult a Mortgage Broker.

What can a mortgage broker do for you?
Mortgage brokers come in all shapes and sizes, from local one-man bands to substantial national organisations. Their key job is to know what’s available on the whole market and use that knowledge to find a deal that suits your needs and personal circumstances.

For the housebuyer this task can be daunting.. You have to decide what sort of deal is best for you and you’ll also have to choose from the thousands of different deals available from the hundreds of lenders in the market. The broker`s task is to understand your and circumstances and source options that not only suit you but are also likely to be approved by the Lender..

In this cyber age many brokers operate by a combination of online, telephone and home visits.

But what sort should you deal with?
Smaller ones can offer a closer relationship often based on personal acquaintance. But they may lack awareness of what’s around as they do not have the resources to check everything out. They may also not be able to deal with all the information needed to progress your application efficiently or carry out all the liaison with old and new lenders, solicitors etc that may be required. The well structured broker will have the staff in place to do much of this for you, so reducing the hassle and time you spend in getting your mortgage completed.

The broker can also clarify important factors such as fees, charges for early redemption and other items hat you need to know about to make a proper assessment of the different deals on offer.

A good broker will be aware of which Lenders are likely to be able to help. Most banks and building societies have a fairly inflexible approach to customers, still sticking closely to the old model. And they do not have the time or interest to look carefully at any but their own products. So if you are not aware of what other lenders can offer, you may condemn yourself to repeated refusals and not finding the best deal.

Remortgaging
Remortgaging is increasingly popular. Many people have built up borrowings on credit cards, store cards, bank loans etc. Recent rises in interest rates, council taxes and utility bills have put household budgets under increasing pressure and made people much more aware of the need to get their outgoings under control. Where you are consolidating debts or have some missed payments for example, it`s even more important to talk to someone who knows about the entire market, as some lenders are much more sympathetic to these situations and may be able to help where the banks and building societies will not.

When you don’t fit the conventional profile?
If you are one of the `awkward squad`, you will definitely need to know what’s around. You might be recently self employed, buying together with a friend or partner, work on a series of contracts so you do not have a consistent employment record, have tax credits as part of your income, or maybe have some missed payments or arrears. Any of these situations could mean you will have to search the wider mortgage market. That can be difficult and time consuming - newspapers tend not to be comprehensive, the net can be disorganised and confusing, a financial adviser may not be a mortgage specialist.

So a specialist mortgage broker, whose job it is to know what is available can save you time, money and frustration.

What does the broker do for you?
A broker will be able to source options that meet your needs and circumstances. They’ll be able to guide you on key issues such as how much you can afford to repay. They’ll can explain the different types of mortgages and answer any other questions. They’ll be able to clarify important issues such as fees and penalties for changing lender. And if you choose your broker carefully you’ll find one who can do most of the work involved such as liaising with your existing and new lender, solicitors and anyone else involved, obtaining documents and generally taking most of the effort and stress off your shoulders.

What sort of broker should you look for?
There are literally thousand of brokers big and small in the UK. There are a number of things to look out for. Your broker should be authorised and regulated by the Financial Services Authority. The FSA are the regulator for the industry and no legitimate broker can operate unless they are authorised directly by the FSA or indirectly through a network.

Make sure they have access to the whole of the market. Some Financial Advisers are tied to one bank or building society and therefore can only recommend their products. Ask for testimonials from other customers. Many smaller brokers are not able to act for some lenders so may not be able to offer their products to you.

Check just what their service covers. Will they find you just one mortgage offer, give you a range of options, help you complete the paperwork, liaise with lenders and solicitors for you?

Check how you pay for their service. Do they charge a set fee, or are their charges related to your mortgage advance..

How do changing interest rates affect things?
This is a hot topic at present with rate rises in the news literally every day. The rapidly changing scenario makes it even more important for you to be aware of what mortgage offers are around, and not simply to stick with your existing lender. Your broker will be able to give you a good idea whether improved deals are available and help you to assess whether early redemption charges will affect the situation for you,

How much can you afford to borrow,?
Lenders will want to know if you can afford the repayments. So they’ll want to know what your other expenses are and how much you’ll have left to live on after your monthly repayments. In the past, lenders generally stuck to about 2 to three times your income. Nowadays multiples of 4 or 5 are not unknown. – but it’s unwise to borrow more than you can afford to repay. Your broker will be able to discuss this with you . It is important to be truthful when you are raising a mortgage - don’t fake or fudge your income details as it’s an offence to do so.

How to find a Mortgage Broker.
Your local Yellow Pages can be a good source, or through internet directories. Recommendations from friends and family or professionals such as solicitors can also be useful.

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