6th August 2018
There are a few alarming statistics rolling around this year. According to one recent industry survey* the following measurements show the need for better access to information when it comes to finding the right mortgage offers:
Buying a home is, for most people, the single largest purchase they’ll ever make. Still, many buyers spend much more time researching the best deal for a car or a holiday than they will on finding the best mortgage offer available to them. According to the researchers, many of the UK buyers who are dissatisfied with the deal they agreed to, opted for the first offer presented since they believed that investigating alternative mortgages would negatively affect their personal credit scores and therefore scupper their chances of actually getting another offer.
The issue of credit scoring is a big one. It is true that applying for, and being refused, several mortgage products or any large loans that involve the process of checking your credit, will likely negatively affect your credit score. So, it’s important to note the different ways of checking your credit rating and eligibility for a mortgage. In simple terms, there are ‘soft’ and ‘hard’ credit checks. Soft checks keep your current rating in tact. There are many ways to perform a soft check, such as when you inspect your own score using a credit rating agency**. Soft checks do not leave a ‘footprint’ in your credit record. There are ways of pre-screening appropriate mortgages using soft checks, but due care is required here to ensure they really are soft. Hard checks are more robust and in-depth, and are used to determine whether or not particular, non-hypothetical financial products can be offered. If a hard check by a mortgage provider returns a ‘no’, that remains on your credit record for one year, and such footprints do cause future checkers to raise their eyebrows.
So what’s the solution? Well, when you consider that over 70% of mortgages are arranged by professional brokers*** one answer is clear. Mortgage brokers are regularly trained and examined to ensure they understand the labyrinth of mortgage products. Contrary to belief (however uncommon), many brokers are not obliged to, or are in any way loyal to, particular mortgage providers. The main job of any broker is to find the right products for their clients – and their client is the buyer, not the supplier. As the name suggests, they merely ‘broker’ the best deal from hundreds available to them. Brokers will know how to pre-screen for appropriate mortgages to provide the safest options that are least likely to fail a hard credit check, thereby keeping your credit rating unchanged regardless of acceptance by you.
On average, a typical mortgage deal in the UK will net a broker around £400 in fees. Some higher, some lower, depending on the particular circumstances. These fees won’t apply if a buyer goes direct to a bank, but a buyer choosing to walk this path alone with no access to the range of products available to a professional broker may end up with a far less palatable financial agreement that ends up costing many thousands more. Here then, the statistics make a lot of sense: 70% of all home buyers use mortgage brokers while around 20% of all home buyers end up unhappy with their chosen mortgage.
JS Law works with a range of mortgage brokers and we would be glad to make any appropriate recommendations and introductions as required. If you are thinking of using a broker, here are a few questions you can ask at the outset to see if you’ve found an adviser you would be happy to work with:
For an explanation about how mortgages work, please click here.
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