Using Mortgage Brokers to Get a Mortgage LettingFocus.com

USING MORTGAGE BROKERS TO GET A MORTGAGE - ADVICE FROM LETTINGFOCUS.COM

LettingFocus.com expert David Lawrenson explains how to use mortgage brokers to get a good deal on your buy to let mortgages. Ask us for more advice.

In this article, landlord advisor David Lawrenson of www.lettingfocus.com shows how to get good advice from mortgage brokers.

Whether you get good advice from mortgage brokers is an interesting question and one which is a particular concern for people taking out buy to let mortgages becuase buy to let loans are treated like commercial mortgages in that they are unregulated (unlike standard residential mortgages.)

Mortgage Brokers and the Maze

Of course, with thousands of mortgages to choose from a good broker will help you through the maze.

Many people start their search by looking at sites like www.moneysupermarket.com but these sites will not list all the mortgage companies detailed criteria - which could mean that one lender will reject you whilst another is prepared to accept you.

This is where a good broker –who will be familiar with the nuances of each lender’s criteria - can really help. A good one will look at the whole market to find the best deals for you and do all the administrative work to get the mortgage deal approved.

Some brokers charge nothing to clients for this while others charge an upfront fee for advice - thus further complicating matters.

Mortgage Broker Fees

But how much time can a mortgage intermediary really save you? Does the fee paid by the lender to the broker (the so called procuration fee) sway the advice you get from the broker? And how do "repeat fees" paid by lenders to brokers to keep clients with that lender effect the extent to which good advice is given?

Clearly 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.

Good Advice from mortgage brokers?

But lenders are now paying more to intermediaries so anyone taking out a mortgage may be worried whether they are being recommended the best mortgage product or just one that pays the highest commission.

Sometimes the fee the lender pays to the broker for introducing the customer is 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. However, 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.

Roger Francis of The Money Centre says, “Charges may look high but really they work in favour of the customer. We save 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. We also have the lender’s underwriters in our own office and we can sometimes get special deals that are exclusive to us”

Lee Grandin at Landlord Mortgages says “The customer benefits from a faster service because brokers know how to properly complete the lenders’ application forms so that they are right first time.”

Norman Ireland an Essex based broker says, “Brokers 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 though the brokers ability to have 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. “

But there are concerns over whether the fees paid out are in the customer’s best interests. Obviously, as lenders compete for business from brokers, there could become a conflict of interest.

Mortgage Procuration Fees

If a broker only gets remuneration from procuration fees (i.e. because he does not charge the client at all), he clearly is going to be more driven by procuration fees than if he is getting paid from both client and lender. In this case, he will be most unlikely to recommend a lender that does not pay a fee.

However, another broker told me “Our business is based on our reputation, so it is not in our interest to recommend a lender purely based on commission - especially in buy let where we want landlords to keep coming back as they build up their property businesses.“

About David Lawrenson and Lettingfocus.com

This is just a rough guide. If you need more advice on using mortgage brokers or buy to let mortgages please click on any one of these links or send an email to contact me.

I’m David Lawrenson from property investment mentors lettingfocus.com. I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” which is the UK’s top selling property title. Click here to buy the book: property book.

The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value.

What’s unique about lettingfocus.com is that we offer independent property coaching for landlords and other investors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, estate agent or bridging loan financier and do not receive commissions from any of these sources either.

We offer help and advice both at our property seminars and also on a one to one basis.

Lawrenson and Lettingfocus.com – Freelance Writer, Speaker and Consultant

I am an independent expert on the UK property market and a well known property investment blogger. I also contribute to newspapers and a host of property websites as a freelance property journalist.

My work as a property consultant and property speaker also stretches to helping companies such as banks, building societies, housing associations and web portals with their buy to let and property products and services.

You can read more about my buy to let networking programme at my website lettingfocus.com. For contact details, follow the links at the site or send me an email.

My next London property investors seminar meeting is coming soon.