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In 2015 my mother gave me some great advice. She knew that I had the desire to get my foot on the property ladder and as I had no idea where to start, she advised me to go to the Bank with my then fiancé and see what we were “worth”.
As my fiancé worked for HSBC at the time, we booked an appointment with a Mortgage Advisor, disclosed our salaries, savings, commitments etc and based on our situation she gave us a flat maximum amount that we’d be able to borrow.
This meant that regardless of what property we found, that’s the maximum Mortgage amount that we qualified for.
I can’t remember what that max lend was, but let’s just say for arguments sake that it was £300,000. This means that even if there were mortgage deals at HSBC where you could get a 90% Mortgage with a 10% deposit and the property we sought after was £450,00, we would have to cough up £150,000 and not the simple 10% deposit of £45,000 that the product suggests. This is due to what we were “worth” and the maximum HSBC was happy to lend to us based on our salaries, credit score etc.
I hope this makes sense.
Here’s where Mortgage Brokers come in to play…
There are numerous High Street Lenders, and I suppose my finance and I could of gone up and down the streets from various bank to the next getting a rough idea of what they’d lend us, but this is extremely tedious and time consuming.
Our next point of contact was a Mortgage Broker which my finance found on Google – Alexander Hall.
We got in touch with a Mortgage Broker who was amazing! He offered an amazing service and until this day, I still remember his name.
The Mortgage Broker took more or less the same information we provided to HSBC and sourced which lender would give us what we were looking for.
“Source” the phrase used to describe the action taken on a system similar to Google for lenders. Most lenders are on this system and the great thing is that some Mortgage Brokers get exclusive rates and deals from lenders. For example the lowest rate at TSB if you were to walk in to a High Street Bank could be say 2.04% however with a broker, they have access to exclusive interest rates like 1.69% for TSB opposed to the 2.04% High Street rate. That’s a huge difference!
To cut a long story short, the Broker found us a lender that was willing to lend us way more than HSBC and we were able to then look for an affordable property, make an Offer and secure a Mortgage.
The 3 Major difference between a High Street lender and a Mortgage Broker are:
High Street Lender
They tend to have a 2 week wait for you to be able to secure an appointment with a Mortgage Advisor.
Application to Mortgage Offer can take anything from 1 Month – 6 Months.
For many no appointment is needed. You can get in touch with your Mortgage Broker over the phone/on email with the option to book in a face to face meeting if that’s your preference. However some brokers require face to face interaction like Capricorn Financial and Alexander Hall due to verification etc.
You also have the option to do everything online and through a chat window. Convenient and no need for any face to face interaction or time consuming meetings. Brokerages like Habito and Mojo operate in this kind of manner.
Application to Offer can take anything from 3 working days to 21 days. (I’ve seen case where a full Mortgage Application was submitted and an Offer followed immediately after due to the lender being able to verify the applicants electronically and carrying out a desktop valuation) – rare but possible.
2. Interest Rates
High Street Lender
What you see is what you get.
Dependent on the Bank of England base rate.
Not many options
You can play with the term length and Mortgage features (E.g cash back, free legal representation, split terms, payment holidays)
The Broker will be aware of when new rates are going to be introduced/when old rates are going to be pulled off of the market.
High Street Lender
They will require hard copies of documentation
Proof of ID
Proof of Address
Bank Statements etc.
Hard copies of documentation not required
PDF copies acceptable
The convenience of being able to email across any additional information required from you.
Some people don’t like the idea of using unpopular lenders like “The Mortgage Works” or “Atom”, but if getting value for your money is important to you, I highly suggest using a Mortgage Broker.