A recent mortgages study conducted by the FCA found that 80% of mortgages were advised and 50% were arranged by an intermediary. Throughout this article, Grosvenor will discuss why so many choose to gain advice during the mortgage process rather than go it alone.
For many of us, buying a home is the most expensive purchase we will ever make. Likewise, the only way in which most of us are able to afford such a purchase is by taking out a mortgage. The Financial Conduct Authority’s Mortgages Market Study has found that the majority of mortgages proceed on an advised basis or via an intermediary. There are many elements to consider when choosing the best mortgage for you. Here we break down those elements, and confirm why seeking advice can be highly beneficial to future borrowers.
What is a mortgage adviser?
A Mortgage Adviser gives advice on the different types of mortgage products that are available to borrowers. They can help you from the very start with getting your finances together to ensure you are mortgage ready, right through to the day you pick up the keys to your new home.
A Mortgage Adviser will:
- Explain what the first steps are
- Tell you what research you need to do
- Help you budget when saving for a deposit
- Find you a mortgage and process the application
The benefit here is that you can get this advice before you even start to look for a property. Not only can a Mortgage Adviser provide helpful advice to assess your income and expenditure, they will also use a budget forecast model to work out how much you could afford to borrow.
Dealing with the mortgage application is easier with an Adviser
Once a Mortgage Adviser has found a mortgage which suits your needs, the Adviser will sort out the application for you, saving you time dealing with the paperwork. They will also deal with surveyors, your legal consultant and handle any paperwork that comes with a mortgage application. Another reassuring benefit is that a Mortgage Adviser will keep you informed every step of the way and are on hand should you have any questions.
Mortgage Advisers can also help with mortgage protection insurance
When you eventually buy a house, you will need to think about buildings and contents insurance. You should also consider income protection insurance. Income protection insurance pays part of your income if you’re unable to work. It can help pay the bills so you can focus on getting better. Juggling insurance and mortgage paperwork can become very time consuming, confusing and can feel like a weight on your shoulders. Thankfully, most Mortgage Advisors are qualified to help advise you on mortgage protection insurance. They can compare the best rates and policies for you and deal with any paperwork, allowing you the time and energy to concentrate on your new home.
It’s not all about cost
The first aspect that naturally comes to mind when choosing a mortgage is cost. No-one wants unnecessarily high repayments coming out of their bank account each month. However, the Building Societies Association (BSA) suggest that cost may not be the most important factor to look out for when observing mortgage comparisons. The BSA stated that ‘mortgage brokers play a key role in identifying a number of factors that are important to a borrower before making a recommendation.’
They believe that it’s important to also look out for other factors such as the speed and quality of service when it comes to mortgage providers. Further to this, the Intermediary Mortgages Lenders Association (IMLA) believes that most people are able to identify the cheapest deal themselves anyway. Therefore, speaking to a financial adviser can allow you to utilise their knowledge and expertise of the market in order to establish key factors that may not be obvious to the average consumer.
Switching can be troublesome
It’s not just establishing your first mortgage that can seem like a long process. The procedure of switching products is also a big issue for some. The FCA report estimated that 30% of borrowers struggled to find a cheaper alternative mortgage. There are many consumers who, after their fixed term period, remain with the same lender despite significantly higher reversion rates.
Furthermore, the FCA has also estimated around 140,000 ‘mortgage prisoners’ who are unable to switch to a better deal due to inactive or unauthorised lenders. Although a firm could have been authorised when your mortgage was first established, over time they may stop lending to new or existing customers. This has meant that a small minority of borrowers have been trapped in their current deal. Although the FCA has said they will do more to assist these borrowers, it may be beneficial to get advice from a financial advisor in order to gain assistance in choosing a reputable lender.
Evidently, there is more to choosing the right mortgage than meets the eye. Buying a property is a stressful process, but having a Mortgage Adviser supporting you and dealing with any worries or problems you may have during the buying process can be incredibly helpful.
Whether you’re a first-time buyer or looking to re-mortgage, gaining comprehensive, independent financial advice could put you in good stead for making the right decision for one of life’s biggest financial commitments.
An important point to remember:
Your home may be repossessed if you do not keep up with repayments on your mortgage.