The role of a mortgage broker has become more popular with mortgage rates becoming increasingly competitive.
A mortgage broker’s role is to accumulate the relevant information from the individuals/entities e.g. statement of accounts/payslips or previously owned assets as potential security/collateral for the lender. Once this information has been gathered, it is the duty of the mortgage broker to find a suitable mortgage offer (if possible) advising their Client on this e.g. its flexibility and cost-effectiveness.
The benefits of using a mortgage broker
Saves time – most individuals/entities will seek the advice of a mortgage broker as it saves them time with looking for the most suitable mortgage offer. If time is of the essence in a property transaction, a mortgage broker could to be used from the onset to help to save time.
The individual/entity circumstance – a mortgage broker can be a real asset if an individual/entity has a credit background that would not usually be accepted by a high street lender, or a mortgage is being sought for a high-risk property.
The expertise – as a mortgage broker can be treated as an expert in their field, their services can be useful as with permission, they can liaise with the solicitor directly and can deal with certain matters without requiring their Client to always be involved.
Although there are many benefits to having a mortgage broker, the disadvantages need to be considered as well.
The disadvantages of using a mortgage broker
The commission structure of mortgage brokers – this means that they receive a higher commission the more expensive the mortgage offer. Thus, there is a possibility the mortgage broker’s interest may not always align with that of the individual/entity.
The mortgage broker will have a fee – the mortgage broker will charge a fee for their services. This will usually be around 0.37% of the amount of the total loan.
The decision-making of the individual/entity is limited – once a mortgage broker has been instructed and an offer has been agreed in principle (this is a promise from a lender stating that they will lend a certain amount of money before the mortgage is finalised), the individual or entity will have limited input in the decision-making. This can be an issue if the transaction becomes complicated and the mortgage broker has to involve their own solicitors (sometimes this occurs when a business asset is sold to a relative).
To conclude there are both benefits and disadvantages to using a mortgage broker. The most straightforward residential property transactions, one is not used. However, the use of a mortgage brokers is becoming more popular.
Please contact our Property Department with any questions that you may have about purchasing a residential or commercial property.