Mortgage brokers: why you need one
And why it’s worth paying for their service
By Victoria Whitlock
A good broker, and I stress the word good, will definitely save you time, they’ll certainly take away a lot of the hassle of house buying and they might be able to save you money.
When you’re considering buy-to-let mortgages you have to look not only at the interest rate, the fees and the charges, but also the long list of terms and conditions and the lending criteria.
A lot of the criteria will not be immediately apparent. For instance, some lenders will not give loans on certain properties or to certain landlords; some only accept landlords with a few properties while others favour landlords with large portfolios.
It could take you a lifetime to work out which buy-to-let mortgage is best for you, and then you could find that you don’t fulfil that lender’s criteria . Tell a broker what you want and let them find you the best deal, I say.
A good broker should be able to quickly advise you which mortgage is most suited to your circumstances, and they might have access to better interest rates than those available to landlords buying direct.
Just as importantly, they’ll also know which mortgages aren’t suitable, perhaps because of your circumstances or because of the type of property you’re buying, so they could save you wasting a lot of time applying for the wrong mortgage and risking your purchase falling through.
For instance, as a first-time landlord applying for a BLT mortgage for a flat on the 13th floor of a tower block you might struggle to find a lender who will give you the money, but a broker should be able to instantly point you in the right direction.
However, not all mortgage brokers were born equal.
Let me explain. There are 2 types of mortgage broker: those who charge you a fee and those who don’t.
There are many small mortgage brokers who don’t charge a fee and you’ll usually find that the one recommended to you by your letting agent will offer his or her services for free because they’ll earn a nice meaty commission from the lender instead.
However, many brokers do charge the borrower (you) a fee on top of the commission they earn from the lender. It’s usually about 1% of the cost of the mortgage, but this is, in my experience, negotiable – they’ll usually come down to 0.5%
But why pay a broker anything at all when there are others who will do the same job for free, especially as most of them will tell you they have access to “the whole of the market”?
Good question. I’ve used both and even though I hate paying anyone for anything I can get for nothing, I must admit that I’ve had a much, much better experience when using a broker who charges a fee.
In my experience, they offer a more personal service and, when time is of the essence, this is important.
When applying for my first BTL mortgage, I used a ‘free’ mortgage broker, someone recommended by a friend, but he wasted weeks applying for a mortgage for which I wasn’t eligible because the lender only accepted experienced landlords. Pretty basic stuff that he should have known, but didn’t.
I switched to a broker from Savills, who charged me 0.5% of the mortgage, and it was money well spent. He immediately found me a suitable mortgage at a good interest rate and whizzed through the application.
I didn’t learn my lesson though and two years later I was again seduced into using a free broker, who took so long to process my application that I nearly lost the flat I was buying. The vendor, another landlord, had given me 8 weeks to complete the deal and yet the broker hadn’t even managed to get me a mortgage offer by the deadline. In the end, I called the lender direct and finalised the mortgage myself.
I’ve since used another broker, Martin Stewart from the independent financial advisors London Money, and I’d say he’s well worth his fees. He knows instantly whether I can get a mortgage on any property I’m interested in and roughly how much interest I’ll have to pay and he’s super speedy.
If you’re serious about investing in buy-to-let property, find a good broker and stick with them, even if you have to pay them a fee.