Property investment can be an expensive business to get into, after all, even a low-cost property can cost tens of thousands of pounds, and that is before any renovation work is carried out. For most beginners, a mortgage is the best way to obtain the required funds, and a broker can help you find a good deal, so should you speak to more than one mortgage broker?
You should talk to at least three different mortgage brokers before making any decisions. This helps ensure that you get the best deal for your needs.
When comparing brokers, look at how many years they’ve been in business, what types of loans they specialise in, and whether they offer additional services such as credit reports or insurance. You also want to know about their fees, because these can vary widely depending on the type of loan you’re looking for.
What is a mortgage broker?
A mortgage broker is a professional who helps people secure loans to purchase property. They work with both individuals and businesses, offering advice on which type of loan would be best suited for the customer’s needs and circumstances.
In most cases, it is advisable to speak to more than one broker when taking out a new mortgage, as they will be able to offer different options and tailor their services to your specific requirements.
In some cases, they may also be able to negotiate better terms or rates on behalf of their client. In other cases, they can help people get approved for a mortgage even if they don’t have perfect credit.
How do mortgage brokers get paid?
The typical setup is that in return for introducing a new customer (you) the brokers are paid by the lender, either in commission or a fee. They work with multiple lenders to find the best product for the borrower. A mortgage broker can offer you access to many lenders, which is a big advantage over your local bank branch.
They often receive volume discounts from major lenders. This means they can sometimes help you get approved for a loan even if you have bad credit or are a freelancer. A mortgage broker can also help secure a lower mortgage rate than you could get on your own.
How do I find a good mortgage broker?
When you are looking for a mortgage broker, it is important to find one who specialises in your needs. You should interview several mortgage brokers and ask them a list of questions in order to find the best one for you.
A good mortgage broker should have access to different lenders and be knowledgeable about your specific needs and circumstances to help you compare rates and find the best loan for your needs.
What should I ask a mortgage broker?
It’s important to ask the right questions to help you find the right product for your needs. Some questions you may want to ask include:
- What are your fees?
- What is the interest rate?
- What are the terms of the loan?
- What is the repayment schedule?
- Is there a prepayment penalty?
- Are there any other costs associated with the loan?
Asking about fees might seem a little odd if you’re not paying them anything, but it’s important to understand how they’re being paid. If they’re happy to push an option that also happens to be the best one for them financially, then they’re putting their needs above yours.
What are the advantages of using a mortgage broker?
Using brokers offers several advantages. Here are five benefits:
1. Save Time
There are so many options available to you, it can take a long time to figure out which mortgage is correct for your situation. Having a professional understand your needs and requirements can hugely shortcut this process.
And when you’re ready to apply, you will find banks typically require an extensive amount of paperwork and documentation to approve a loan application, which can take a lot of time to complete. Brokers can save you time by reviewing your documents to ensure they will be accepted the first time and submitting them directly to lenders.
2. Get Preapproved Faster
Getting preapproved for a mortgage means you don’t have to wait until you have the funds available to purchase a house. Banks generally won’t give loans without first receiving proof of sufficient funds.
However, mortgage brokers can provide preapproval letters within 24 hours. This gives you peace of mind knowing you have a solid plan in place before buying a property. A mortgage broker can provide you with a Decision in Principle (DIP) which will put you ahead of the game when trying to buy a property.
3. Avoid Hidden Fees
Many banks add hidden charges to your monthly payments. For example, most banks tack on late fees after 30 days of missed payments. Having a professional who understands the fee structure gives you better transparency over the contract you’re entering into.
Additionally, mortgage brokers may negotiate better rates with lenders. If you apply for a loan with a bank, you may receive a rate that is higher than one offered by a broker.
4. Reduce Stress
Applying for a mortgage isn’t something you should have to deal with alone. Many banks require multiple visits to complete the entire process.
A broker can walk you through each step of the process, allowing you to avoid unnecessary stress. Additionally, they can answer questions and address any issues you encounter along the way.
I remember the stress that we went through when we were trying to get a new mortgage through the bank that we were with. They made us jump through so many hoops and we had to be interviewed for over an hour. They were asking questions like – how much do you spend at the hairdressers! It was totally ridiculous! We spent so much time doing it and they turned us down. We eventually got a mortgage through our broker, which was a much simpler process!
If you would like a recommendation, we would highly recommend our mortgage broker, The Didsbury Mortgage Co. You can find their details here. They have helped us so much with our new mortgages and remortgages.
5. Increase Confidence
When applying for a mortgage, you’ll probably feel nervous and unsure of yourself. But a mortgage broker can ease your anxiety and allow you to focus on the task at hand.
They will check to make sure you’re applying for the right type of mortgage for your situation and can answer any question you have, helping you understand the process and ensuring everything goes smoothly.
Plus, they can help you address any hiccups that occur during the application process.
What are the benefits of talking to more than one mortgage broker?
Now you understand why so many people make use of brokers, let’s consider why talking to more than one is a good idea.
It’s a good idea in life to follow the rule of 3.
Want a new bathroom? Get three quotes. Need new windows? Get three quotes.
The reason three is the magic number is it gives you two options along with a validator. Using the new bathroom as an example, if 2 quotes came in at £2500 and the 3rd was £3500 you can see immediately there is something not right with the final quote.
Let’s look at some key benefits of talking to multiple brokers.
1. You can compare offers to get the best deal.
When you are looking for a mortgage, it is a good idea to compare and contrast offers from different brokers to get the best deal.
It’s a good idea to use a mortgage comparison website to get an idea of what deals are available and then speak to a few different brokers to get more information.
It is important to be careful that those you speak to don’t perform multiple hard credit searches as this can impact your credit score.
Instead, try and find one who will give you advice on which products offer the best deals in the current lending climate.
Doing your research ahead of time will help you to understand the different options available and make sure that you get the best deal possible.
2. You can negotiate better terms and conditions.
As with any business, getting multiple offers gives you a strong position to negotiate better terms and conditions. By doing your research, you can be sure to find the best possible deal for your needs.
A mortgage broker can help you understand all the terms and conditions involved in a lender agreement, and may be able to find a more favourable deal elsewhere.
3. You can learn about a wider range of products and services.
If you want to learn about the different products and services that are available, talking to multiple people can help.
Those experienced in the industry can provide you with the best advice based on your circumstances, but they may operate in different areas and with different offers, meaning some brokers could have options their competitors don’t.
When employing the services of a broker, it is important to find out how many lenders they work with and what their fee structure is.
Mortgage brokers can be classified as tied, multi-tied, or independent depending on their relationship to mortgage lenders.
Tied brokers usually only offer products from one lender while multi-tied brokers have relationships with multiple lenders.
Independent brokers are not beholden to any one lender and can offer products from across the market, making them the best type of broker to consult for comprehensive advice.
4. You can get expert advice on which mortgage product is right for you.
Comparing rates and products from multiple brokers can help ensure that you are getting the best deal possible on your mortgage.
Brokers also have different levels of knowledge and experience, so talking to more than one can help you get expert advice on which mortgage product is right for you.
Submitting a mortgage application is one of the first big milestones to becoming a property investor. Up until that point, it’s all theory and ideas.
As you’re purchasing for investment purposes, it’s important to seek out mortgage advice, especially as a first-time buyer of rental property.
Don’t rush this stage; it’s important to review a range of mortgage deals to ensure you’re making an informed decision.
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