What Does A Mortgage Broker Do?
What Does a Mortgage Broker Do?
What does a Mortgage Broker do when you ask them to help you get a mortgage? Below is my take on what a good Mortgage Broker should do for their client, and how they might do it.
Listen to you and learn about your situation
For a Mortgage Broker every mortgage starts in the same place; learning about you, the client. A Mortgage Broker’s job is to recommend and secure the right mortgage for you. Not just somebody like you, not for most people like you, but specifically for you. There are lots of things that need to be considered when getting your firs mortgage and it’s the advisors job to get the right mortgage for you.
This means the starting point for every mortgage is to listen to what you want to achieve and then ask you the questions to understand your current circumstances. In your initial meeting you might do more talking than the advisor.
We’re looking to learn more than just numbers. We want to know how much flexibility you need in your mortgage, how long you expect to stay in the home you are buying, and what changes might happen in your life in the short and medium term. All this will be taken into account in order to recommend the right mortgage.
The most important bits about what you tell us will need to be evidenced by documentation. You’ll need to provide pay slips (or tax calculations and overviews if you’re self-employed), bank statements, ID, proof of your deposit, maybe even your employment contract. It’s also the Mortgages Broker’s responsibility to check these for authenticity.
Tell you what you can afford to borrow
One of the first questions you might have for your Mortgage Broker is probably how much do you charge. One of the second is probably how much can you borrow.
Once you’ve provided the documents that your Mortgage Broker has requested, they can look to get you an agreement in principle. This tests how much a lender is likely to consider lending to you, so long as you can prove what you’ve told them.
This amount can vary massively from one bank to another. This is because certain banks like certain types of income more than others. Even for straight forward salaried employees the amount banks will offer them varies. Some lenders even consider lending more to people in specific jobs.
But ultimately it’s a Mortgage Brokers job to find the lenders that will lend you enough for what you want to do. The lender that will lend you the most, might not actually have the best deal for you, especially if you don’t need to borrow the maximum available.
What does a Mortgage Broker do to verify what you can afford?
Typically, they ask you to provide proof of your income. This is usually payslips if you are an employee, or a Tax Calculations and Tax Year Overviews if you are self-employed.
They will also ask you to complete a budget planner of how you spend your money each month, and review this against your bank statements.
You can even do what a Mortgage Broker does by inputting your information into an affordability calculator yourself for an indication.
Identify the right mortgage deal for you
Once a Mortgage Broker has identified the lenders that can lend you what you need, it’s time to check if a suitable deal is available. In reality this is done in conjunction with checking what you can borrow. It’s no good coming back to you with lenders that can lend you what you want, but don’t have a suitable mortgage.
This is where we consider everything that we learnt about you at our initial meeting. The mortgage deal we recommend will be as a result of considering many things:
Your monthly budget
How much you can afford to repay each month will determine the term of your mortgage. The longer your mortgage is for, the lower the monthly repayment will be, but the more you will repay in total.
It’s important to keep the payment affordable, even if interest rates increased, but to consider keeping the overall cost down.
A common strategy is to set the term longer in the early years of a mortgage. This keeps the payments low during the first few years. During this time you may have lots of big expenses like furnishing and decorating a house. Once they are out of the way you may be able to overpay, reducing the term and total cost of the mortgage.
The home and who’s living in it
A young couple may find that in just a few years their first house no longer meets their needs. If you start a family and need more space, you may need to move. That’s why it’s not a great idea to have a fixed rate for long periods if the house you are buying wouldn’t suit your needs if your circumstances change.
The longer you fix for, typically the larger the early repayment charges are. This is a fee you may have to pay if you need to clear one mortgage in order to get another mortgage on a new home. You won’t always be able to take your mortgage with you.
You might also find that your income increases quickly at the start of your career. In a few years time you may be able to afford a lot more property.
Making sure you meet the criteria
The right mortgage isn’t simply the one that costs the least. It’s the one that you qualify for, suits your needs, and costs the least.
You might be excluded from some lenders due to how your income is made up, where your deposit is coming from, your credit history, or even because a lender already has too many properties mortgaged on the same development!
It’s a Mortgage Broker’s job to filter out all the ones you don’t qualify for. They can then recommend the best of the ones that you do qualify for.
What does a Mortgage Broker do to make sure your home is protected?
When you ask a Mortgage Broker to arrange a huge debt for you, they have a responsibility to help you ensure you can repay that debt. If you can’t, you could lose your home.
The thing that enables you to get a home is a mortgage. The thing enabling you to get a mortgage is your income. You may find it difficult to survive on Statutory Sick Pay of £95.85 per week if your income stopped. It could be even worse if you rely on sharing costs with a partner, or friend, and that person dies. The debt doesn’t die with them.
Much like with the mortgage, it’s important to assess your specific needs and arrange something that suits you and is affordable.
What does a mortgage broker do after the application?
Listening to you, recommending a mortgage, and applying for you are just the beginning. A good Mortgage Broker, (ahem) will keep you up to date with the progress of your application all the way through to you getting your mortgage offer, and eventually keys. I find it quickest to update clients on WhatsApp.
There are a few key stages after the application is in. These include letting you know that the property has passed its valuation assessment, confirming that you have passed the lenders affordability checks, and then confirming when the mortgage offer has been issued.
After that, most of the work is done by the legal people. Your Mortgage Broker may be able to recommend a conveyancing solicitor that they trust to do a good job for you. Ask if a lot of their clients have used that solicitor before and how satisfied they were. But remember, the estate agent, Mortgage Broker, or developer cannot insist you use a specific solicitor (or any service). It’s up to you, but be aware of conditional selling.
Be on call to answer your questions
Between your mortgage being offered and you finally moving in, you may have hundreds of questions. A good Mortgage Broker will be happy to support you with these.
Ask your Mortgage Broker early on if they will be on call right to completion. Some companies pass you onto a case handler after the mortgage has been applied for.
What does a Mortgage Broker do after your mortgage completes?
Your mortgage will come around for review quicker than you realise. When it does it will be handy to have it reviewed by somebody who keeps up to date with the mortgage market every day.
I make it clear to my clients that I’ll be in touch before the end of their initial period. It’s important to make sure they move onto whatever the best deal is for them. I don’t want them to go onto the high standard variable rate.