A mortgage is a long-term commitment, and getting it wrong could leave you with many years’ stuck with an unsuitable deal and unnecessary expense.
So, it is likely to make a great deal of sense to seek advice from appropriately trained professionals before making any decisions about the mortgage you need to buy your home. But is it better to get a mortgage from the bank or a broker?
Where to seek advice
When thinking about looking for advice on your mortgage application, you are likely to have considered the following options:
- before deciding to seek advice, you might have considered finding a mortgage lender yourself and making an application direct – it costs you nothing to do so, of course;
- you might be attracted by the fact that some mortgage deals are only available through exclusive direct-only deals that you would not be offered either by a broker;
- going through the whole mortgage search process yourself, however, is likely to present you with a relatively limited range of choice and certainly nothing like as broad as that offered by an independent mortgage broker;
- by missing out on some of the opportunities you might otherwise have been offered, you stand to lose out by thousands of pounds over the lifetime of a mortgage – and the fees you might have paid to a mortgage broker would then pale into insignificance;
- if the relationship subsequently breaks down between you and the mortgage lender you have also missed out on the chance of complaining to the Financial Ombudsman Service with a view to compensation, warns the Money Advice Service;
The bank (or building society)
- whether or not you finally choose to consult a mortgage broker, it makes sense to start at least with your bank or building society;
- it may help that they already know you if you have been doing business there for a while, they are obliged to give you impartial advice, and the advice itself is free of charge;
- although you might have been doing your banking with them for several years, however, this does not mean you will necessarily receive preferential treatment when you apply for a mortgage;
- the mortgage department will still need to ask the same questions, checks and credit tests as any other customer – and you are unlikely to be offered any special or preferential mortgage interest rate;
- another potential downside in dealing with your bank or building society is that they can make recommendations and to offer guidance about their own mortgage products only;
- your choice of mortgage deals, therefore, may be relatively limited and restrictive by this narrow range of products;
- although some mortgage brokers give advice and guidance and offer recommendations on products from a defined panel of mortgage lenders, others work the “whole of the market”;
- the latter scour the entire market in search of a mortgage that closely matches your particular, individual needs and circumstances – and many of them offer their services free of charge (only charging a commission to those mortgage lenders for whom they have arranged business leads);
- a broker is likely to take longer than your bank or building society, therefore, in understanding your financial circumstances, the type of mortgage you need or prefer, and how your plans for the future may affect the way you manage mortgage repayment commitments – whether you expect a succession of promotions at work, for example, or are planning to start a family;
- although you might be missing out on those direct-only offers made by lenders to customers who approach them directly, this may be more than compensated by your access to mortgage deals which are offered exclusively through brokers;
- mortgage brokers are bound by the rules of their authorisation and regulation by the Financial Conduct Authority (FCA) to offer impartial advice in a way that puts your own interests first and foremost – any complaints about the service you have received may be made to the Financial Ombudsman Service, which has the power to award compensation where appropriate.
When you are looking for a mortgage – and aware of the high stakes in getting things wrong – you are almost certain to benefit from professional advice. In deciding whether that might be from your bank or by an independent mortgage broker, you might want to consider the wide range of choice offered by a broker, the access to deals which might be available only if you are applying through a broker, and the security of protection by way of authorisation and regulation by the FCA.