Whether you’re a first-time buyer, moving home or remortgaging, it can be tempting to go it alone when taking out a mortgage.
After all, a quick internet search for ‘best mortgage deal’ will produce hundreds of results from comparison sites and lenders.
Unfortunately, comparing mortgages isn’t straightforward. There are a baffling number of products and an even greater array of charging structures. If you end up with the wrong mortgage, it could prove very costly.
A mortgage broker will help you find a mortgage that’s suited to your needs and financial circumstances. Read on to discover why getting advice from a mortgage broker could save you thousands of pounds.
A mortgage broker has access to a wider range of products
Mortgage brokers usually have access to special deals that borrowers can’t access directly.
Research by Twenty7Tec
, a mortgage sourcing platform, shows there are almost 12,000 mortgages available through mortgage brokers, compared with just over 2,000 that are directly available from lenders.
The more deals at your disposal, the greater your chances are of finding the right deal for your needs and circumstances.
A mortgage broker will calculate and compare charges
Working out the cost of a mortgage can be extremely difficult. Many people assume the mortgage with the lowest interest rate will be the cheapest, but this isn’t necessarily the case. Other charges could make a seemingly cheap deal more expensive than you expect.
Some fees to look out for include:
– also known as the product fee or completion fee, this can range from £0 to more than £2,000
– lenders sometimes charge between £99 and £250 when you apply for a mortgage deal
– this is charged when the lender values your property, although it is waived on some deals
Mortgage account fee
– this covers the lender’s administration costs
Higher lending charge
– some lenders apply a charge of around 1.5% of your mortgage if you have a small deposit.
A better way of comparing mortgages is to look at how much they cost each month, taking into account both the interest rate and fees. A mortgage broker will calculate and compare all the costs involved, so you don’t get any nasty surprises.
A mortgage broker will advise on the right type of mortgage
There are lots of different types of mortgage, including fixed, variable, tracker, discount, and capped. They all have their pros and cons.
With a fixed rate mortgage, the interest rate stays the same throughout the deal, which makes budgeting easier. The downside is you won’t benefit if interest rates fall. You could also face high early repayment charges if you want to remortgage or move home before the deal ends.
With a variable rate mortgage, the interest rate can change, so some months you’ll make higher repayments and other months you’ll make lower repayments. Trackers, which are a type of variable rate mortgage, tend to have lower early repayment charges than fixed-rate deals, which might be useful if you think your circumstances will change.
A mortgage broker will describe how each type of mortgage works, explain the terms and conditions, and advise you on the right mortgage for your financial circumstances.
A mortgage broker will encourage you to switch to a better deal
When you come to the end of a fixed-rate deal, many lenders automatically switch you to their Standard Variable Rate.
Data from Moneyfacts
shows the average Standard Variable Rate is 2.5% higher than the average two-year fixed rate deal.
So, if you have a £180,000 repayment mortgage with 20 years remaining and your rate increases from 1.98% to 4.48%, you could see your monthly repayments increase by more than £200 a month, according to the Which? repayment calculator
. On a yearly basis, your mortgage repayments could be £2,400 higher.
Even if your lender gets in touch with a new deal, it won’t necessarily be the best available rate. Sticking with your lender might seem like the easy option, but by getting in touch with your mortgage broker you could potentially save hundreds of pounds.
Even a 0.5% reduction in the interest rate could help you to free up money to spend on other things or save for your future. The Which? repayment calculator shows that, on a £180,000 repayment mortgage with 20 years remaining, a 2.5% rate would cost £954 a month, whereas a 2% rate would cost £911 a month. That’s a saving of £43 every month. If you have a bigger mortgage of £300,000, you could save £72 a month.
As well as searching the market for the best deal, a mortgage broker will check whether you could reduce your loan-to-value, for example, if the value of your home has risen. By reducing your loan-to-value, you might qualify for better rates.
A 2019 survey by Legal & General
found people who take financial advice benefit from better deals, thereby saving them money. More than a quarter (29%) of respondents who took advice had switched their mortgage in the last five years, compared with only one in five (19%) of those who went direct.
Get in touch
At NM Money we search through thousands of mortgage options to find you the best deal. Get in touch to discover how we can help you save money on your mortgage. Request a callback
or call us on 03300 583 859 to find out more.
Please note: Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.