As an Independent Mortgage Advisor (and a girl who likes to shop for a bargain!) I am sometimes surprised by the loyalty people show their banks by turning to them for a mortgage, without thoroughly checking the market to see what other options are available. Having spoken to a number of people over the years about their opinions, I seem to get similar responses; “I’ve banked with them for years, so it feels like a safe option…”, “I’m sure they can offer me a better deal because I bank with them…”.
What I say is yes, there can occasionally be advantages with sticking to your own bank; for example you may receive a discount or reward for having all of your cash and borrowing in one place. On the other hand, you will only have access to the tiny range of deals they offer as opposed to a huge marketplace where lenders are competing to offer the most attractive rates. Plus your mortgage offer will be based on your banks specific lending criteria, which may not suit your requirements.
For example, if you a newly self-employed, most lenders will not accept less than 3 years accounts and SRA302, whereas some will accept 2 years, and one or two only 1 years. Then there are widely differing rates offered on different mortgage terms, and different lenders demand mortgages repaid by different ages. There are also variations in the LTV (loan to value) lending offered across lenders and their products.
Try the independent approach?
Over the past few years lending criteria have tightened up, more so since last year’s Mortgage Market Review, which saw much tougher controls imposed on borrowing and closer examination of personal finances become part of the mortgage application process. More people than ever are turning to Mortgage Advisors who have specialist knowledge and understanding of the marketplace, and are able to access the latest products to match specific needs.
A good Mortgage Advisor will take time to understand your current financial situation as well as your wishes for the future and concerns before taking care of the legwork for you, using software and wide knowledge to find a mortgage product which fits your circumstances and requirements, prepare, submit and process the mortgage application through to completion. Most advisors charge a fee which varies across the industry: some will charge an upfront fee, some will split the fee so part is paid up front and the rest on mortgage offer or completion, and some will only charge a fee on completion of the mortgage (which is better, as you’ll only have to pay if the mortgage completes).
When choosing an advisor, make sure they are fully independent and can access deals across the market, meaning they are not tied to specific lenders. An independent advisor, registered with the Financial Conduct Authority will be qualified to research the most suitable mortgage product for the client and will need to be able to justify the reason for the recommendation. Their professional indemnity insurance is obligatory and they will be continually updated with news of developments within their field. A good advisor should also recommend insurance products that will protect your mortgage and future financial security.
On balance I would always recommend seeking independent advice. Choosing a mortgage will almost always be the largest financial decision of your life. Getting it right can save you and your family thousands and getting it wrong can have unpleasant consequences.