Mortgage Brokers – Are They All the Same?

You may be looking for a mortgage and have decided to use a mortgage broker, rather than just going to the bank. This is a sound idea.

But the next question is – how do you choose a mortgage broker? Do you just pick one at random from the Yellow Pages?

Before deciding which mortgage broker to use, you need to know what different types of mortgage broker there are.

As far as access to lenders is concerned, there are basically three types of mortgage broker:

1. Some mortgage brokers are tied to a lender or a small group of specific lenders. A “mortgage adviser” in your bank or building society is likely to be of this type. In some cases they are actually employed by the lenders whose products they sell, so they are bound to promote these products. The only advantage of using one of this group is that they might be able to get you a good deal on one of these mortgages.

2. Other mortgage brokers have access to a “panel” of lenders. These panels vary in size – some are very small, some are fairly representative of the market as a whole. Some mortgage brokers who work from the larger panels will dexcribe themselves as “whole of market” because their panel is representative of the market, but this is misleading. However, the range of products they offer could be quite a good selection, including specialist providers and smaller building societies. Also they too might be able to get you a good deal. Ask the size of the panel they work from and avoid those working from very small panels – say, less than 12.

3. A truly independent mortgage broker will not be tied to any lenders. These brokers will be able to recommend providers from virtually the whole of the market. (There is actually no such thing as a completely “whole-of-market” mortgage broker as there are some lenders who don’t offer their products through brokerages.) Of these brokers, some will charge you a fee while some work on a commission basis. Many people prefer to use a mortgage broker who charges fees, feeling that this way they can be sure of truly impartial advice. However, brokers are bound by the terms of their professional code to offer the best advice for their clients.

If you want to be sure of finding a mortgage that is exactly right for your individual circumstances, you would be best to look for an independent mortgage broker. Check that the broker works on a “whole of market” basis and whether they charge fees or not. This will help you find the mortgage broker who is right for your needs.

Sean Horton is a Director of Enhanced Wealth Limited who are a specialist mortgage broker