Homebuyers have two basic ways for procuring mortgages. They can go the direct route by sitting down with a lender who will arrange a loan based on prevailing rates and terms. As an alternative, they can work with a mortgage broker who can both advise and assist with loan application and arrangement. Note that there are traditional mortgage brokers and online brokers like TheMortageBrokerLtd.
Also note that both methods for obtaining a mortgage have their pros and cons. But for most people, going through a mortgage broker ends up being the better choice in the long run. You obviously have to decide for yourself by assessing your needs.
To help you get started, check out these four ways a mortgage broker can save you money:
1. They Can Find the Best Deals
A mortgage broker is capable of finding you the best deals in most cases. Before we get to that, however, be aware that there are three kinds of mortgage brokers recognised in the UK. These are as follows:
- Tied Brokers – These are mortgage brokers that offer products from a single lender only. They are not much different from banks and building societies in practice.
- Multi-Tied Brokers – These are brokers offering products from a select group of lenders.
- Whole of Market Brokers – These are brokers with access to virtually every mortgage product the market makes available through brokerages.
As you can see, working with a multi-tied or whole of market broker gives you access to more deals than you would get from a bank or building society. More deals mean more choices. And more choices mean more opportunities to find deals with lower rates, shorter terms, and fewer fees and charges. This is where most of the savings is found when you go through a mortgage broker.
2. They Can Arrange for a New Deal
Your average mortgage in the UK starts as a fixed rate loan with an introductory deal. Whether the deal is for two, three, or five years, those introductory interest rates vanish upon expiration. The mortgage is then converted to the lender’s standard variable rate, a rate that is typically at least a few points higher than the introductory rate.
It should be obvious that these kinds of mortgages result in higher payments and more interest paid once the standard variable rate kicks in. However, working with the mortgage broker could avoid all this. A good broker can keep track of when your introductory period is drawing to a close and proactively arrange a new deal before expiration.
This could potentially save you thousands over the life of your mortgage. Moreover, you do not have to spend the final year of your introductory deal worrying about paying more than you have to. You can trust your broker to arrange the best possible deal he or she can find.
3. Their Fees Are Often Lower
It is true that traditional mortgage brokers charge a fee for their service. It may be a flat fee, an hourly fee, or a percentage of the amount borrowed. Either way, broker fees are often lower than the combined fees banks and building societies charge for mortgage origination. And even when they’re not, the money you could save by getting a better deal could offset any fees the broker charges, still saving you money in the long run.
With all that said, there is something else to consider here. Online mortgage brokers provide the same services as traditional brokers but with lower or no fees. Yes, you read that correctly. Many online mortgage brokers do not charge any fees at all. How do they make money? They earn commission paid by the lenders whose mortgages they arrange.
This may seem counterproductive, but it’s not. A mortgage broker still has to earn your business by presenting you with the best possible deal. He or she has no incentive to offer you a more expensive deal in order to increase commission payments. You are not going to take that more expensive deal, so the broker loses out.
4. They Save Money by Saving Time
The fourth and final way a mortgage broker can save you money is by saving you time. The time you would have spent shopping around for your own mortgage deal is time you could put toward other things. You could use the time to compare insurance policies and save money there, for example.
When you consider all the things you do with your time, it is apparent that your time is worth money. So the less time spent shopping for mortgage deals is more time you can put into other activities that also save money.
If you are in the market for a new mortgage, you might consider going through a mortgage broker rather than directly to your bank or building society. A good mortgage broker can save you money under the right circumstances. What’s not to love about that?