Working with a mortgage broker is one of the most sure-fire ways to save time, money and hassle when it comes to buying a home.
A mortgage broker is different to a bank advisor, as they have the ability to assess the whole market and identify the most suitable deals. But it’s still a good idea to be prepared, by being armed with questions to ask them.
Here are the eight questions you should ask:
Are you a regulated broker?
In the UK, all mortgage advisors are required by law to be regulated by the Financial Conduct Authority. You can check whether a broker is regulated by checking its register.
Do you have access to the whole of market or are you restricted to a panel?
Before working with a mortgage broker, it’s important to understand that there are different types of advisors. The advice they provide you is often dependent on whether they are independent or not. For example, an advisor in a bank is tied to one lender and will only provide you with mortgage options from that bank. On the other hand, some brokers will look at deals from a limited number of lenders. Some, like KB Mortgage Services, will check the whole market for the widest range of products.
What is the current interest rate?
An interest rate affects the amount you have to pay back, on top of the value of the loan. There are a variety of interest rates offered by mortgage lenders, which are calculated based on a number of factors.
Your mortgage advisor should be able to explain these thoroughly.
The Bank of England base rate – currently set at 0.10% – and the London Interbank Offered Rate (LIBOR) are the main drivers of the representative rates advertised by banks. Individual lenders will also consider unemployment rates, which will set their headline rates.
But the actual rate offered to individuals will differ from the representative rates. And that largely comes down to your own financial health, your credit history and your loan-to-value (LTV). Your mortgage advisor will be able to help you find the best rate for your circumstances.
How much can I borrow?
The rough rule of thumb is that most mortgage lenders use an income multiple of 4-4.5 times your salary, some offer a 5 times salary mortgage, and a few will use 6 times salary, under the right circumstances.
However, the amount you can borrow depends upon your individual circumstances, and your mortgage advisor will work this out after carrying out some affordability checks. The most accurate calculation can therefore only be made after assessing your circumstances, such as your job, your outgoings, credit score and so on.
How much deposit will I need?
Generally speaking, lenders will look at potential borrowers’ loan-to-value (LTV) ratio. That is, the lump-sum deposit they have, compared to the overall value of the house they are purchasing. Lenders look at borrowers in terms of their risk, so the bigger the deposit, the less ‘risky’ the borrower becomes, making them more attractive and helping them to secure better mortgage deals. Across the board, anything above 15% is generally considered a healthy deposit.
But when it comes to mortgages, this is just a rule of thumb, and there are always exceptions. Some lenders are more prone to risk than others, for example.
Ordinarily, lenders may offer a mortgage worth up to 95% of the property value, meaning that just a 5% deposit will be required. On a £100,000 home, this is £5,000, compared to the £20,000 required by a 20% deposit. However, this isn’t the case during Covid-19, with many lenders requiring 10% deposits, unless using the new build Help-to-Buy equity loan.
However, it’s important to remember that mortgages with the best interest rates are available when you have a good-sized deposit, and they come in increments of five. In other words, it’s a good idea to aim to hit the nearest 5%, 10%, 15% and 20% milestones. If you have 18% saved up, try and tip into the 20% mark, as this will reduce the interest you pay on the borrowings.
What are the associated fees?
Some lenders will charge mortgage arrangement fees, and some will charge for valuations, whereas others will offer free valuations and no arrangement fees at all – it varies widely from bank to bank. But you can ask your broker what to expect, along with any fees they may charge. At KB Mortgage Services, we work out whether it is cheaper overall to take a lower interest rate with an arrangement fee or look at a higher interest rate with no fees.
How long will the process take?
In terms of securing a mortgage offer, there’s no firm answer. But most people can expect to wait between one-two weeks from a mortgage application to an offer, provided that the process goes smoothly. However, the market is moving slower at the moment, due to the Covid-19 situation and an influx of applications.
Can you support me in other areas?
If you start working with a broker, they can often provide added expertise in other areas of your home purchase. Insurance, such as life insurance, income protection and home insurance, are often available from mortgage brokers. KB Mortgage Services can support you with this.
If you’re seeking advice on applying for a mortgage and unsure where to start, get in touch today on 07834 818805 or email us at email@example.com and we’ll be happy to help.
Please note: Your home may be repossessed if you do not keep up repayments on your mortgage. As with all insurance policies, conditions and exclusions will apply.
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