Tuesday, June 05, 2007
How Can I Find a Good Mortgage Broker? - A Guide to Using Mortgage Brokers Part 2
For part one of this guide, please see the blog entry on Thursday 24th May.
Clearly mortgage brokers are doing something right because around two thirds of all mortgages are now taken out via a broker, with the figure for buy to let mortgages thought to be even higher than this.
But mortgage lenders are now paying more to brokers so anyone taking out a mortgage may be worried about whether they are being recommended the best product or just one that pays the highest commission.
The payment that the lender makes to the mortgage broker is sometimes called the "procuration fee" - which is just another word for a commission.
Sometimes this is calculated as a flat rate per case – say anything from £150 to £600, sometimes as a percentage of the amount being borrowed or sometimes whichever of the two ways of calculating it gives the highest amount!
Each mortgage lender uses a different fee structure. The amount paid is usually dependent upon the type of product type, who the broker is (and how much business they have put the way of the lender) and what type of loan it is – with more risky “sub prime” loans paying as much as two or even two and a half per cent.
While charges may look high they can work in favour of the customer by saving the lenders money by in effect doing a lot of their work for them.
The lender saves on the cost of having to train and keep qualified sales staff and all the overheads that entails. Many brokers have the lender’s underwriters in our own office and they can sometimes get special deals that are exclusive to them.
Also, the customer can benefit from a faster service because brokers know how to properly complete the lenders’ application forms so that they are right first time.
Also, a really good mortgage broker can also help a customer get a loan where the strict application of the lender’s underwriting requirements would mean that they would not get a loan if they went direct to the lender.
The mortgage broker’s ability to “bend the ear” of a lender will depend upon the extent to which they have brokered good business (i.e. good clients who don’t default) in the past.
In part three, due soon, we will look at whether the fees paid out by mortgage lenders to compete for business from brokers, could result in a conflict of interest and the customer getting offered a less than optimum mortgage loan. Go to my main website at www.lettingfocus.co.uk Copyright: David Lawrenson 2007.
Clearly mortgage brokers are doing something right because around two thirds of all mortgages are now taken out via a broker, with the figure for buy to let mortgages thought to be even higher than this.
But mortgage lenders are now paying more to brokers so anyone taking out a mortgage may be worried about whether they are being recommended the best product or just one that pays the highest commission.
The payment that the lender makes to the mortgage broker is sometimes called the "procuration fee" - which is just another word for a commission.
Sometimes this is calculated as a flat rate per case – say anything from £150 to £600, sometimes as a percentage of the amount being borrowed or sometimes whichever of the two ways of calculating it gives the highest amount!
Each mortgage lender uses a different fee structure. The amount paid is usually dependent upon the type of product type, who the broker is (and how much business they have put the way of the lender) and what type of loan it is – with more risky “sub prime” loans paying as much as two or even two and a half per cent.
While charges may look high they can work in favour of the customer by saving the lenders money by in effect doing a lot of their work for them.
The lender saves on the cost of having to train and keep qualified sales staff and all the overheads that entails. Many brokers have the lender’s underwriters in our own office and they can sometimes get special deals that are exclusive to them.
Also, the customer can benefit from a faster service because brokers know how to properly complete the lenders’ application forms so that they are right first time.
Also, a really good mortgage broker can also help a customer get a loan where the strict application of the lender’s underwriting requirements would mean that they would not get a loan if they went direct to the lender.
The mortgage broker’s ability to “bend the ear” of a lender will depend upon the extent to which they have brokered good business (i.e. good clients who don’t default) in the past.
In part three, due soon, we will look at whether the fees paid out by mortgage lenders to compete for business from brokers, could result in a conflict of interest and the customer getting offered a less than optimum mortgage loan. Go to my main website at www.lettingfocus.co.uk Copyright: David Lawrenson 2007.
Labels: buy to let, mortgage brokers, mortgage loans
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