The benefits of using an independent mortgage advisor

Types of mortgage advice

So what are the different types of mortgage advice and where would you expect to find it?

non-advice

This type of mortgage broker offers the least amount of consumer protection, they simply ask a series of questions to narrow down the customer’s needs and thus filter the number of mortgages available. They then present the customer with a small list of possible mortgages from which the consumer can choose a suitable one. Consumer protection is based on the script of the questions that the broker asks. The script is a process set before the consumer appointment and is impersonal. Therefore, it is unlikely that specific personal circumstances will be judged. It is also assumed that the customer’s answers are factually correct and that the final choice is made solely by the consumer. Although no advice is offered, these brokers handle the brokerage of the mortgage on behalf of the consumer and therefore take care of all the tracking and relieving stress from the process.

Where would you expect non-recommended brokers to be?

Believe it or not, many non-recommended brokers are in the high street banks and building societies.

Advice only

In this type of service, a mortgage advisor uses their knowledge and skills to provide the most appropriate mortgage for a consumer’s personal circumstances. This includes a full briefing, an affordability assessment, a discussion of the consumer’s future plans and aspirations, all of which provide important facts about a consumer’s needs and therefore provide the advisor with a means of identifying suitable products. However, the advisor will not take care of arranging the mortgage and therefore the consumer would need to contact the bank or building society directly to arrange the mortgage.

Where would you expect there to be consultants who only act in an advisory capacity?

These advisors generally do not stand alone, often it is a service offered through the Independent Mortgage Advisor type below. And often comes about when the most suitable mortgage is only offered directly down the high street (ie not through mortgage advisors/brokers). The advisor would therefore offer the client an advisory-only option and often charge a fee for this service. Although the customer must contact the bank or building society directly, their mortgage advisor will often assist the consumer.

Tied Mortgage Advisors

Tied mortgage advisors come in two forms: “only offer mortgages from one lender or their own mortgages” or “only offer mortgages from a limited number of lenders”. This severely limits the number of mortgage products available that suit a consumer’s personal circumstances and in many cases they may not be able to offer the most suitable mortgage product and therefore the advice may result in the best mortgage that they can offer is woefully inadequate.

Where would you expect bonded mortgage advisors to be?

main street branches. A consumer calls their local building society and their in-house mortgage advisor can only offer mortgage products from that building society. Consumer choice and the suitability of mortgage products are severely limited. In addition, chain stores often offer low mortgage rates/fees as loss leaders (marketing term to get business) and then try to sell their tied insurance products, which are also often woefully inadequate and expensive.

Comprehensive Market Advice By far the best coverage these advisors can offer on mortgages from any UK lender (with mortgage advisor/broker routes). The wide range of mortgages available through these advisors are likely to cover a consumer’s individual circumstances. All mortgage advisors on the market offer advice by conducting a comprehensive briefing, an affordability assessment, a discussion of the consumer’s future plans and desires and then can arrange the mortgage through the lender, reducing the stress of buying a home.

Where would you expect whole market advisers?

These advisors are usually separate companies, often found in the yellow pages or sometimes linked to real estate agents via the internet. At an initial meeting, mortgage advisors should declare whether they are market-wide and this will be disclosed in the “Initial Disclosure Document” they will provide to you. If you’re not sure if an advisor is right for the entire market, ask them.

Independent mortgage advisor for the entire market

After all, this type of advisor has the ultimate scope of the mortgage market, not only can they offer mortgage advice from across the market (lenders with mortgage advisor routes), but they can also offer an advisory process only when they determine that a direct deal on the high street is more appropriate . The statement “Independent” indicates that the adviser must provide a paid service to the consumer when required. This means that instead of a commission that the advisor receives as payment for the mortgage advice, the consumer can choose to pay a brokerage fee and any commission will be returned to the consumer. The advantage of the paid service is that the consumer knows that the advisor will not be influenced by mortgage products with higher commissions when choosing a suitable mortgage. Today, however, this is highly unlikely as the mortgage advisor must demonstrate to the regulator why a particular mortgage is the best fit. In some cases where the commission is quite high, this would mean that the consumer could get more money than the brokerage fee paid and therefore would be better off going with the fee-based approach.

Where would you expect to find independent whole-of-market consultants?

As the author of this document: Independent mortgage advisors are typically separate firms that can often be found on the high street, in business directories, or over the Internet, and are sometimes affiliated with real estate agents. At an initial meeting an independent mortgage advisor would state that they are fully in the market and that they offer a fee based approach if required and this will be disclosed in the ‘Initial Disclosure Document’ which they will provide to you. If you are unsure whether a consultant is independent and/or multi-market, ask them.

What do independent cross-market mortgage advisors do for consumers?

The advantages of opting for an independent mortgage advisor across the market include but are not limited to the following:-

  • treat customers fairly.
  • Take the time to learn important facts about consumers’ personal circumstances and desires.
  • Support and educate the consumer from initial inquiry to completion and beyond.
  • Provide an in-depth overview of the housing market in general (price negotiations, lease issues, etc.).
  • Provide a bespoke service, specifically tailored to the client’s needs, rather than a faceless “one size suits all” (no consultation) service.
  • Advise consumers to look out for their long-term interests as well as their short- and medium-term interests in order to minimize risks.
  • Working for the consumer – real estate agents, lenders and insurance providers have a different agenda.
  • Explain the features and benefits of different mortgage and hedging options.
  • Acting freely on the basis of conscience and fairness, as not usually directly aimed at specific areas.
  • Protect consumer data and privacy.
  • Provide general support during what is recognized as one of life’s most stressful events.
  • Offer a knowledgeable “ally” in a potentially very troubling process.
  • Competent, impartial review of mortgage products.
  • Identify when certain lending criteria limit consumers’ personal circumstances.
  • Expert advice in complex scenarios (shared ownership/shared equity, right-to-buy, adverse credit).
  • Identify the potential lender in unusual situations, avoiding the need for multiple credit checks.
  • Choose the best protection providers for consumers with health issues or unusual insurance histories.
  • Select the most appropriate products from across the market for every aspect of consumers’ mortgage and protection needs, increasing their ability to meet their obligations even when things go wrong.
  • Highlight unusual exclusions for protection and general insurance products.
  • Ensure the provision of suitable and customized protection products.
  • Quickly find an alternative lender if rejected without wasting the consumer’s time.
  • Able to purchase property insurance in time to be ready for exchange of purchase contracts.
  • Encourage lender competition and innovation.
  • Help calculate affordability and ensure consumers can afford their mortgage, security and other obligations.
  • Perform data entry/entry for the consumer, reducing errors, omissions, and most importantly, secrecy.
  • Take responsibility for the advice and recommendations given and thus increase consumer protection.
  • Protect the consumer from corporate sales tactics used by some lenders and real estate agency chains.
  • Understand the urgency of some transactions and “go the extra mile” to meet deadlines.
  • Collect, review and deliver documentation for the lender to reduce processing delays and expedite the process for the consumer.
  • Contacting third parties in the transaction, tracking the progress and any developments keeping consumers continuously informed.
  • Use prior knowledge and awareness to predict problems and solve them in advance.
  • Act as the consumer’s advocate during the application process.
  • Explain the mortgage offer and help meet the terms of the offer.
  • Can find suitable lenders and insurers for unusual properties (thatched roof, flying condos, etc.).
  • Protect consumers from aggressive third-party marketing.
  • Often personally available outside normal working hours to answer questions or solve problems.
  • Take care of consumers and provide continuous, long-term service, often multiple generations of the same family.