5 Questions to ask a mortgage broker before working with them
In our last article, we discussed how a mortgage broker can help you obtain the best buy-to-let mortgage. You learned why comparison sites may fall short of offering you the comprehensive market view you need. We also examined the type of advice you will receive from a mortgage broker and the benefits of their qualifications and experience. The question now is, how do you select a mortgage broker when you invest in property?
Ask questions to uncover the diamond you need
Before you settle on a mortgage broker, you must be sure they will fulfil their promise. The buy-to-let mortgage market is more complex than the residential mortgage market. The rules and regulations are more complicated. There are many specialist lenders who you may not have direct access to.
While a mortgage broker charges a fee for their service (usually paid via commission from the lender, or a fee directly charged to you), they can save you a heap of time and stress, and ensure you get the very best mortgage for your individual circumstances. To learn whether a mortgage broker is the right one for you, you should ask them questions that identify their capabilities. Here are those questions.
1. What lenders do you work with?
There are three types of mortgage broker. The first is the mortgage broker who works for a single lender. Typically, these advisors are to be found in high street banks or building societies. Second are mortgage brokers who are tied to a limited number of lenders. With these, you will receive a wider choice of lender. This choice won’t be as wide as the choice you get when you work with an independent mortgage broker.
An independent mortgage broker has access to the whole market. The wider the pool of lenders available to you, the bigger the choice of mortgage products you will have.
2. Why should I use you and not a lender directly?
OK, so you already know the answer to this question. The mortgage broker should tell you, too. They should describe the advantages of working with them rather than a lender. They should also talk you through the process, describing how they will work with you to find the best lender and product for you.
If they haven’t given you this information, ask them. The answer should give you confidence in their abilities and capabilities. If there is something that they say with which you are uncomfortable, then you should ask them to clarify. If you still feel uncomfortable, then this mortgage broker probably isn’t for you. It is difficult to feel as if you are getting value for money from someone you don’t entirely trust.
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3. Do you think I’ll get a mortgage?
This is a question that will help you decide whether the mortgage broker has the relevant qualifications and experience to help you. You should expect to discuss potential deposits, potential rental income, and interest rates. The mortgage broker should help you understand the PRA rules dictating the maximum amount you can borrow, and how this is affected by rental income and notional interest rates.
The mortgage broker should be honest with you, providing realistic expectations of your ability to obtain financing.
4. What fees do you charge?
Mortgage brokers may charge fees in several ways. Often, they will be remunerated by commission paid by the lender. Other times, they may charge you a fee directly. If they are paid by commission, you should make sure that this does not cause them to be biased toward a certain lender.
5. Can I speak to a recent client?
OK, so client testimonials may or may not be valuable. There are different schools of thought on this. Certainly, the mortgage broker is highly unlikely to provide you with a negative testimonial. When you ask this question, you are measuring the response.
If the broker is happy to supply a couple of names and numbers (they will need to confirm their clients first), then this is a good sign. If there is hesitancy, then you may wish to avoid working with the broker.
When you speak to former clients, find out how well the mortgage broker worked with them. Was it easy to communicate? Did the broker keep the client informed through every step of the process? Did they help with paperwork? Did they provide more than one mortgage option?
Use reviews and referrals
Online reviews and referrals can tell you much about a mortgage broker. People post reviews because they want to, whether those reviews are good or bad. You can read about bad experiences, and what it was about those experiences that caused the clients to post the reviews.
Look also for how the mortgage broker has responded, and if complaints have been satisfied. A caveat here is that not all online reviews are genuine. If you notice a pattern of a rash of bad reviews within a short period, it could be that a competitor or someone with a grudge is trying to discredit the broker’s business.
Direct referrals, either from someone you know or an investment partner or trusted source, are the best reviews you can receive. Always ask for recommendations from experienced property investors, people who have been through the process of finding and working with mortgage brokers.
Our recommendation is that you should always use a specialist mortgage broker when financing your property investments. It could make a huge difference to your profitability, by ensuring that you obtain the best mortgage for your unique circumstances and investment goals.
However, it is not enough to simply sign up with the first mortgage broker that comes along. You should work with a broker who has the qualifications and experience, the market knowledge and access that will benefit you in your search for the right mortgage.
Also, ensure that the mortgage broker you select communicates well, keeps you informed at every step, and has received many positive reviews.