Archive for December, 2007
Mortgage Broker or IFA?
When you are looking for a mortgage, everyone tells you that you shouldn’t just take the first one you are offered. You need to shop around for the right one.
This is true. But it’s not exactly easy. There are thousands of products out there, all with different features. How are you supposed to know where to start in shopping around?
Obviously, the best thing is to consult a professional. But first of all, you have to decide which professional to choose! There are two main types – a mortgage broker and an Independent Financial Adviser (IFA).
What does an IFA do?
The job of an IFA is to work with individuals or businesses to help them meet their financial goals in the best possible way. The adviser works with you on a financial plan to make sure you can make the best financial choices and ensure your own financial security in the future.
First the IFA will use a fact-finding process to achieve as accurate a picture as possible of your financial situation, investment preferences, etc. On the basis of this the adviser will work out a plan and recommend the most suitable financial products. This includes not only mortgages, but investments, pensions, and insurance products.
What about a mortgage broker?
A mortgage broker, obviously, works specifically with mortgages. Like the IFA, the broker will start off with a questionnaire or a fact-finding exercise to form a clear picture of your financial situation. Then the broker will select a mortgage product that is suitable for you, help you with your application, and assist with the arrangements for obtaining the mortgage.
Which should I use?
Whether a mortgage broker or an IFA is better for you depends on what you need.
If it is simply a mortgage that you need, then a good mortgage broker is likely to have more mortgage expertise than a good IFA who doesn’t do much mortgage business. On the other hand, if you want an endowment along with your mortgage, you do need an IFA, as endowments can be tricky. And if you need your mortgage decision to be part of a wider financial review, or a complete financial plan, you should consult an IFA.
The important thing is that you do consult a professional. The world of finance is getting more complex all the time, and you need to get the best possible advice in order to make the right decisions.
By: SeanH-9584
Mortgage Brokers: What Do They Actually Do?
If you have decided to look for a mortgage, you may have originally assumed you had to go to your bank. Then perhaps someone advised you that you would be better going through a mortgage broker. But you may be hesitating because you don’t know what a mortgage broker actually does.
So why should you consult a mortgage broker and what happens if you do?
The world of mortgages is very confusing nowadays, especially for the newcomer. There are literally thousands of mortgage products out there. How do you know whether you want an interest-only or a repayment mortgage, a fixed-rate, variable rate or a tracker mortgage? Plus each applicant’s situation is unique. The mortgage broker is there to look at your circumstances and help you find out what is the right mortgage for your situation.
1. When you have decided which mortgage broker you want to use, you can either go there in person, or contact them online or by e-mail or telephone. Don’t worry if you’re busy at work and don’t know how you can get the time off. Lots of clients never meet their broker in person.
2. The mortgage broker will show you an Initial Disclosure Document which explains how he/she is paid – i.e. commission only, fees only, or both. If you prefer a different method of payment, obviously you can go elsewhere at this point.
3. After this, the first thing most mortgage brokers will do is give you a questionnaire or conduct a fact-finding session. If they are going to find the right mortgage for you, they need to be clear about your exact circumstances. So it goes without saying that you absolutely MUST be honest. If your finances aren’t in the best of shape, don’t worry, they’ve heard it all before. But the broker has to know the facts of your situation.
4. The mortgage broker will scan the market to find a lender who can provide what you need. There is special software that enables the broker to input your details and bring up a match. The broker can then make a recommendation based on what you are looking for and what you can afford.
5. When a product has been selected, you will then be provided with a KFI (Key Facts Illustration or Key Features Illustration). This explains why the broker is recommending this particular product, what services they are offering and what their fee or commission will be.
6. If you are happy to go ahead, the mortgage broker can help you with your application form, if you wish. Sometimes it’s easy for a new applicant to get confused or to misunderstand what a question means. The broker can help you complete the form in a way that gives you the best chance of a favourable response.
7. The mortgage broker will then act as a “go-between”, between you and the lender, to make sure the process goes smoothly. If you are worried about time, the broker can sort out things like chasing solicitors, arranging valuations etc.
Doing it all yourself can be extremely stressful, especially if you are working full time. Using a mortgage broker can save you time and stress, and make it more likely that you will get the mortgage you want and need.
By: SeanH-9584
Is Your Holiday Home Mortgage Broker on the Level?
Looking for a mortgage on your holiday home can seem complicated. You may have decided to consult a holiday home mortgage broker to help you through the process. However, this involves putting a huge amount of trust in the holiday home mortgage broker. How can you be sure your trust is justified?
Up till a few years ago, virtually anyone could set up as a mortgage broker. However in the last few years the profession has become much more regulated. You can now make sure that the holiday home mortgage broker you are dealing with is both qualified, and a registered member of the profession.
• All mortgage brokers must be authorised by the Financial Services Authority (FSA). When you first approach your holiday home mortgage broker, this is something you should check. You don’t need to take their word for it – you can go to the FSA web site (www.fsa.gov.uk) and look for them. It is of crucial importance that your holiday home mortgage broker is regulated. If you take advice from a broker who turns out not to be regulated, and you suffer loss as a result of the advice, you won’t be entitled to claim compensation.
• In addition, anyone who sells mortgages must have specific qualifications, i.e. they need to be CeMAP qualified (Certificate in Mortgage Advice and Practice). When you first go to see your holiday home mortgage broker, you should look for the certificate which should be on display. If it isn’t, you have every right to ask to see it. You should not under any circumstances deal with a broker who can’t demonstrate that they are qualified.
• You are also quite entitled to ask the holiday home mortgage broker to provide names of former clients as references. After all, you are going to be relying on them for advice in one of the biggest transactions of your life.
• If you are satisfied with the credentials of the holiday home mortgage broker and decide to proceed, the broker is required to provide you with an Initial Disclosure Document. This sets out exactly what services they provide, how much of the market they have access to (whole of market, a panel of lenders, or just their own lenders), and how they are paid, i.e. on a fee basis or commission basis.
Most brokers are nice friendly people and you may feel bad about appearing suspicious! But don’t! They are business people themselves and they certainly wouldn’t enter into a business transaction without checking up on the other party. Plus they make lots of checks on you! Once you are satisfied your holiday home mortgage broker is “on the level”, you can apply for your holiday home mortgage with peace of mind.
By: SeanH-9584
Choosing Your Holiday Home Mortgage Broker: Three Questions to Ask
When you have chosen your holiday home, the next step is to look for a mortgage. If you feel apprehensive about the process, the best plan would be to look for a holiday home mortgage broker to help you through the process.
The next question is, how do you choose a holiday home mortgage broker? If you used a broker for the mortgage on your first home, this could be a place to start. But some years ago, most people just went to their bank without realising how much help a broker could be.
Again, if you have friends or family who have used a holiday home mortgage broker, recommendations from them could be helpful. It certainly gives you confidence. But you don’t know if they asked the right questions in the first place. So in order to make sure you find the right broker you need to know the right questions to ask.
• Market access. Many say that you should ask a broker “Are you whole of market?” However, this doesn’t necessarily provide the right answer. A broker can legitimately claim to be “whole of market” while operating from a limited panel of lenders, provided he/she reviews the top deals every two months. Therefore a better question to ask a holiday home mortgage broker would be “Could you at this moment source me a holiday home mortgage from any UK lender?” The broker should be able to answer “Yes – apart from the few lenders who never operate through brokers”. Otherwise try someone else..
• How do you get paid? Brokers can be either commission based or fee based. If you want the best deal from your holiday home mortgage broker, look for one that is fees-free and whole-of-market. However, if you want to be certain that your holiday home mortgage broker is completely unbiased, find one who calls him/herself “Independent”. Brokers cannot use the label “Independent” unless they offer an option to charge fees only, with any commission rebated.
• How much? If the holiday home mortgage broker does charge fees, ask “How much?” and “at what stage?” If the fee is more than 1%, find someone else. Likewise if they expect the bill to be paid at any stage before completion – what happens if the deal falls through?
The right holiday home mortgage broker can make all the difference to whether your holiday home purchase goes smoothly. And don’t worry about seeming nosy. A good broker will want to help you and will be only too happy to answer your questions.
By: SeanH-9584
Holiday Home Mortgage: How to Get Your Application Accepted
When you are applying for a mortgage on your holiday home, it can be nerve-racking. You may have been presented with a complicated form to fill in and in some cases you may not be sure how to answer the questions.
Here are some tips to make sure you get your application accepted.
• It really does help to use a holiday home mortgage broker rather than trying to do it yourself. The broker has seen hundreds of these forms and knows how to present your answers to have the best chance of being accepted. Also quite a lot of the questions are ambiguous, or their meaning is unclear. The holiday home mortgage broker will be able to explain exactly what they mean.
• Make sure you apply for the type of holiday home mortgage that is suitable for you. Take account of all your outgoings and commitments including the mortgage on your first home, if you have one. For instance, if a high-repayment second mortgage will stretch your income, consider an interest-only mortgage. The lender will want to be sure that you can afford the mortgage. Talk to a holiday home mortgage broker to make sure you apply for a product that fits your situation.
• You absolutely must be truthful in your answers to the questions. If you are applying for a second mortgage on your holiday home, you may already have a lot of financial commitments. This may even have pushed you into debt or damaged your credit rating. Your holiday home mortgage broker should insist that you stick to the truth, however tempting it may be to conceal some of the facts in order to get your application accepted. If the broker encourages you to bend the truth, find another broker immediately. It would lead to serious trouble later on.
• Be prepared to supply proof of all your statements on the form. You need to come armed with payslips, bank statements, P60s, utility bills, even possibly a passport or birth certificate.
When you have set your heart on a holiday home, you can be very anxious about your application for a mortgage. You realise how disappointing it would be to be turned down. But remember that the mortgage industry is very competitive and they are very anxious for your business. Take the advice of your holiday home mortgage broker and you will have a good chance of making a successful application.
By: SeanH-9584
Second Home Mortgage – What will it cost me?
You have found your dream second home and have started the search for a second home mortgage. It’s so exciting, isn’t it? And it’s easy to be starry eyed, rushing into things without considering everything. But you need to do your sums properly. You must make sure you are very clear what the second home mortgage is going to cost you apart from mortgage fees and your monthly payments.
• Deposit. This is the main cost to consider. It’s very rare that a lender will agree a 100% mortgage on a second home, or even 90%. The maximum loan is usually 75-80 percent of the purchase price of the second property. This means that you will need to find at least 20% of the purchase price. In fact, the larger deposit you can provide, the better. It is likely to enable more favourable terms on the mortgage, such as lower interest rates, availability of discount periods etc. One way of doing this is by equity release on your main residence. Even if you don’t have enough equity to fund the whole purchase, it’s a good idea to use equity release to provide as large a deposit as possible.
• Legal costs. When you are arranging a second home mortgage, it’s even more important to use a solicitor than it is when you are buying your main home. There are likely to be all sorts of unknown quantities when you are buying in an unfamiliar area. But make sure you choose a solicitor who specialises in conveyancing, rather than just picking one at random. It is surprising what elementary mistakes some solicitors can make! And don’t forget you will be paying not just the solicitor’s fees but the land registry fees and the search fees in addition.
• Valuation/survey. The lenders of your second home mortgage will arrange a valuation survey and add the cost to your loan. If you’re really strapped for cash, you can make do with this. But it is really advisable to arrange your own as well. The valuation survey won’t necessarily alert you to any serious structural problems – it is just to satisfy the lender that the home has a satisfactory resale value.
• Stamp duty. You won’t escape stamp duty unless the house you are purchasing is going for less than £125,000, which is most unlikely these days. Stamp duty starts at 1% of the purchase price and goes up to 3% if the price is £250,000 or more – this actually comes to quite a lot of money!
The important thing is that when you are arranging your second home mortgage you factor in all these costs from the start. If you get too carried away with all the excitement and don’t take these costs into account, you could be in for some nasty shocks later in the process.
By: SeanH-9584