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Buying a home

A First Time Buyer’s Guide To Choosing A Mortgage Broker

August 2, 2017 by
digital mortgage broker

It’s often said that buying a house is one of the most stressful experiences in a person’s life. And when you’re a first time buyer with little knowledge of the property buying process, it’s easy to feel a little overwhelmed. With estate agents, solicitors, and surveyors to deal with, it’s only natural to feel out of your depth. One thing that can be particularly difficult when buying your first home is finding the right mortgage. Thankfully, the process can be made that little bit easier with the help of a mortgage broker.

I created this post in collaboration with online broker, Habito, so towards the end of the post I take an in-depth look at the benefits of digital mortgage brokers.


If you fancy using Habito as your online mortgage broker, you’ll be glad to know that they won’t charge you a single penny. And, if you sign up using this refer a friend link, you’ll earn £100 cash on successful completion of your mortgage. I’ll get £100 cash too.



This is going to be a long read, so if you’d like to jump to a particular section, please use the links below.

My mortgage broker experience
Why should you get a mortgage broker?
Can’t I just go straight to my bank for a mortgage?
Do I need a mortgage broker who compares every deal?
How much does a mortgage broker cost?
What type of mortgage broker should I choose?
What are the benefits of a digital mortgage broker?
TL;DR


My mortgage broker experience


In a matter of weeks, I should finally be moving into my own place. After living with my parents for the best part of the last 3 years, buying a home of my own has been a long time coming.

When I initially started house hunting at the end of last year, the first thing I did was find myself a mortgage broker. I decided to use a mortgage broker for three reasons:

1. I wasn’t even sure I’d be able to get a mortgage because I assumed my credit rating would be non-existent
2. Even if my credit rating was good enough, I was scared I wouldn’t be able to borrow enough to buy my own place anyway
3. If I was able to borrow enough, I wanted to ensure I could get the most affordable deal possible. I’m really debt-averse and paying tons of interest on the largest loan of my life terrified me

As I explain in my home buying timeline post, the first mortgage broker I chose was a bit of a nightmare. So once I found the place I wanted to buy, I decided to switch over to my estate agent’s broker. We’ll call him Henry.

From the moment I went in for an initial meeting with him, Henry was incredibly helpful. He’d complete all my paperwork quickly, respond to all my questions with helpful advice and answer my emails within a matter of minutes.

So imagine my disappointment when Henry left the company and was replaced by someone who wasn’t as helpful. We’ll call her Angela. I only found out Henry had been replaced when I sent him an email and his boss replied to say he’d left and Angela would take over. A few weeks later, Angela called to try and catch up with my case. She didn’t have a clue what was going on and I had to tell her everything from the amount I’m meant to be borrowing to the price of the property.

In the weeks that followed, I sent her a couple of emails with questions I needed her to answer. Both times I contacted her, I received an out-of-office reply to say she was on holiday. Fair enough, we all deserve time off. But even when she returned, she didn’t get back to me.

I ended up having to email her boss to see if she was still in charge of my case and it was only then that she got in touch. She said she’d never got my emails. Her auto-responder certainly did!

We’ve spoken briefly since then, but I haven’t felt like I can email her for help like I did with my beloved Henry.

 


Why should you get a mortgage broker?


As far as I’m concerned, a mortgage broker plays an essential role for typical first time buyers.

They’ll start by having a nosey at your financial situation to work out whether you’re eligible for a mortgage. They’ll look at your income, savings, and credit history. They may even take a look at your bank statements from the last few months to gain an insight into how you manage your money.

Once they’ve got a good understanding of your financial situation, they’ll point you in the direction of the lenders most likely to give you the money you need.

As a first time buyer, you’re likely to be pretty clueless about the home buying process. Thankfully, a good mortgage broker will hold your hand throughout the process and give you a nudge whenever you need to do something. They’ll also work with your solicitor to ensure the money you borrow is given to the seller.

good with money


Can’t I just go straight to my bank for a mortgage?


Although 4 out of 5 home buyers use a broker, some people choose to go directly to their bank to ask for a mortgage. There are also mortgage comparison tools like Money Saving Expert’s which allow you to review deals yourself.

Although this may sound like the most straightforward option, it could see you missing out on a ton of deals that are much better suited to you. Choosing the right mortgage matters and the wrong deal could cost you thousands over the course of your mortgage term.

There’s also a risk that your bank may reject your mortgage application. You can be rejected for anything from having a poor credit history to an irregular income.

A mortgage broker, however, will assess hundreds of deals from numerous banks to find you the very best product. If you’re buying alone, you have a small deposit, you’re self-employed, or you have a less-than-perfect credit history, your broker will highlight the flexible and understanding lenders most likely to give you a loan.

By ruling out the stricter lenders with really tough criteria, your mortgage broker will save you having to fill out countless application forms only to be turned down.


How much does a mortgage broker cost?


Some mortgage brokers charge the buyer a fee for their services, but there are other brokers who are free to use because they charge lenders instead.

I haven’t had to pay my mortgage broker a single penny. With so many other home buying costs to take into account like solicitor fees and stamp duty, this is obviously a great blessing.


Do I need a mortgage broker who compares every deal?


There are thousands and thousands of deals to be had, offering a variety of interest rates, terms, and bonuses such as cashback. As a result, it’s crucial that you find a mortgage broker who compares a wide selection of deals.

Some people recommend finding a ‘whole-of-market’ broker, but according to Martin Lewis, it’s difficult to find a broker that will compare every single deal. He says: “In reality, it’s unlikely a broker could guarantee you access to EVERY mortgage, as exclusive deals can be arranged between lenders and brokers (and clubs that brokers can join).

“Just be clear on what your broker is offering. Weigh up the need to check every deal, your willingness to do some legwork yourself, and if you’re happy paying a broker fee.”

first time buyers mortgage broker guide


What type of mortgage broker should I choose?


There are so many different types of mortgage broker and countless ways to find them. As a result, the process can seem a little overwhelming. Here are your main options:

1. Estate agents’ brokers

Some first time buyers like myself end up using a broker they found through their estate agent. Some estate agents will have an internal mortgage broker, while others will have an external broker who they work closely with and recommend to home buyers.

My broker compared hundreds of deals from more than 50 lenders before narrowing down a small number of mortgage products for me to choose from. I’m really happy with the deal I’ve been given as the interest rate is low, my repayments are affordable, and I have the opportunity to overpay if I come into some money without incurring early repayment fees. Another benefit to using my estate agent’s broker is that it felt like cutting out the middle man. My broker could work closely with my estate agent and vice versa.

On the downside, I wish I’d been recommended a longer fixed rate. My mortgage is fixed for two years but with interest rates currently at an all time low, I’m wondering if fixing for 5 years would have offered me more financial security.

A word of warning…

Before agreeing to use an estate agent’s broker, make sure they compare deals from a wide selection of lenders, particularly if you’re opting for a free broker. There have been instances where estate agent brokers have pointed buyers in the direction of less than perfect deals purely to get the commission.

Also, don’t let your estate agent bully you into using their broker. Although it’s not illegal for estate agents to do this, it’s unethical and they could be investigated by the FCA.

In an article for the Guardian, Mark Hayward of the National Association of Estate Agents says: “It’s not fair that buyers should be penalised if they don’t use an agent’s in-house broker and consumers should not be made to feel that without using the recommended financial services provider they will lose out on the home they want to buy.”

2. Independent mortgage brokers/financial advisors

Although some estate agents claim that their brokers are independent, truly independent mortgage brokers aren’t affiliated with any estate agent or lender. They operate on their own and compare hundreds of deals across the market. They won’t necessarily offer every deal, as Martin Lewis hinted earlier in the post, but they will give you a very in depth choice. Often, independent brokers and advisors will charge a fee for their services, particularly if they don’t get any money off lenders. This fee can be anywhere from £200 to £1,000, so it’s crucial that you get a quote in writing before you agree to hire them.

3. Digital mortgage brokers

Digital mortgage brokers are becoming increasingly popular, particularly amongst busy professionals who don’t want to spend their lunch breaks on the phone or have to book half a day’s holiday for a meeting with their broker. If you opt for a digital mortgage broker, you’ll submit all the required documents (pay slips, bank statements, proof of deposit etc) online and you’ll talk to your broker via the website, email and chat bots.

If you prefer to speak to someone face-to-face, this won’t be the solution for you, but digital mortgage brokers can be a great way to save time and fit the mortgage application process into your life effortlessly.


If you fancy using Habito as your online mortgage broker, you’ll be glad to know that they won’t charge you a single penny. And, if you sign up using this refer a friend link, you’ll earn £100 cash on successful completion of your mortgage. I’ll get £100 cash too.


home buying timeline


What are the benefits of digital mortgage brokers?


A few weeks ago, I was talking to my mate Chris about mortgage brokers. He’s buying his own place too and explained that he’d been using a digital mortgage broker called Habito. Funnily enough, I’d received an email from Habito just a few days previously to see if I wanted to work together to create a mortgage broker guide for first time buyers. Since I hadn’t used them myself, I was a bit concerned I wouldn’t be able to give the post that unique and personalised touch I do for all my other blog posts. But since Chris was so pleased with them, I saw a great opportunity to make it work!

September 2017 update: I’ve since used Habito myself! The developers pushed the completion date back for my flat & my mortgage offer expired. I got in touch with Habito to get me a new mortgage deal & they got me sorted within a matter of weeks. You can read my own Habito review here.

Let’s take a look at the benefits of digital mortgage brokers, paying particular attention to Habito:

1. They’re convenient

Chris’ number one reason for choosing a digital mortgage broker is that they’re often known for being more convenient than more traditional brokers, particularly if you want to deal with everything online rather than taking time off work for meetings with brokers. This is what Chris had to say:

“I chose Habito primarily because I wanted a broker I could communicate with effortlessly. I spend all day at work and I’m busy most evenings so I didn’t feel like I had time to keep popping into an office to see a broker.

“When I started looking for a house, I spent far too many of my lunch breaks speaking to estate agents on the phone. So when I found out about Habito, I figured a digital mortgage broker would help me avoid even more phone calls and answer machines.

“Dealing with everything via web chat freed up more time and offered more flexibility, and if I ever had any questions which required a proper chat, I could still arrange a call with the broker. Habito had all my information to hand so I didn’t need to worry about my broker leaving and being replaced with someone who didn’t know what was going on. I’ve also enjoyed being able to send documents over web chat rather than by post as it’s instant.”

2. They tend to compare a wide range of deals

Habito compares more than 20,000 mortgage deals from approximately 70 lenders. You can see Habito’s full list of lenders here. Although this might not be the ‘whole-of-market’, I think it’s safe to say that they have access to a suitable deal for you. Habito showed Chris evidence of their search, which showed his lender at the top of the league table for his criteria and borrowing requirements.

3. Digital mortgage brokers are often free

Habito’s service is completely free for buyers. On the FAQ page it says: “Just like any broker, we get paid by the lenders for processing your mortgage application. This fee is a fraction of a percent of the value of your mortgage. We’ll always tell you exactly what we’re getting paid at the point of your application so you know the full story.”

Although most online brokers offer a free service, if you’re researching an online broker other than Habito, you should obviously enquire about fees before you agree to anything.

4. They’re credible and accountable

According to a survey by Mortgage Solutions, 40% of mortgage brokers don’t have an online presence. This is something I noticed when I first started house hunting. My first mortgage broker (the one I ditched) didn’t have a website at all. There’s some information online about the estate agent’s broker I ended up working with, but there’s not enough to gain a good insight into how they operate or how happy buyers have been with their service.

When you choose a digital mortgage broker, however, you can find tons of information about them online. Habito, for example, has a website filled with information, blog posts, videos, guides and testimonials. A quick Google search brings up countless news stories and reviews.

The way I see it, when a broker (or a business in general) has a good online presence, they’re held accountable for their service. After all, if they do a bad job, customers will let other people know about it on Twitter and Facebook and Google reviews. When a broker is a ghost online, like mine is, it’s difficult for unsatisfied customers to find each other and kick up a fuss. A broker’s bad behaviour can be kept under the radar when they shy away from the internet.

With so much information online about Habito, you can rest easy you’re using a credible company that would be held accountable in the event of any problems. Habito is also authorised and regulated by the FCA, meaning it’s held to the highest standards of conduct. Since the company was launched in April 2016, it’s helped more than 30,000 people better understand their mortgage needs and completed £200 million in mortgage applications.


TL;DR


If you’re buying a home, a mortgage broker is essential, as far as I’m concerned. A good mortgage broker will save you time, money and stress, while holding your hand throughout the whole home-buying process.

It’s up to you where you get your mortgage broker from. The important part is that you get one in the first place and do plenty of research to ensure they’re getting you the right deal. But after researching the different types of mortgage brokers, taking the pros and cons into account, and having spoken to Chris about his positive experience with Habito, I really think that digital mortgage brokers could be a positive choice for many first time buyers looking for a reliable service that doesn’t require you to jump through countless hoops.


If you fancy using Habito as your online mortgage broker, you’ll be glad to know that they won’t charge you a single penny. And, if you sign up using this refer a friend link, you’ll earn £100 cash on successful completion of your mortgage. I’ll get £100 cash too.


A First Time Buyers Guide To Getting A Mortgage Broker

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