Sun 30 Oct 2022
Carol Bryson MNAEA, Managing Director of JP Harll
Whether you are a First Time Buyer looking for a mortgage or, you are moving on to another stage in the house buying process, the first thing to nail down is your choice of mortgage adviser.
There are three main types:
‘Tied’ which means they are limited to one lender e.g. a bank adviser,
‘Multi-Tied’ which means they are limited to a Panel of Lenders or,
‘Whole of Market’, which means they have access to the whole of the market.
People often do not realise that ‘Independent’ simply means they are not ‘tied’ to one lender and that an independent can still be very restricted in the options they are able to provide. It is a common misconception that ‘Independent’ means ‘unrestricted’, which is not the case. This misconception means people will look for an ‘independent’ and believe the adviser is not restricted and what they are looking for. In reality, any adviser who is not a ‘Tied’ adviser is considered ‘Independent’ and it is very much a misconception that the majority of ‘multi-tied’ advisers are happy to ignore. When you are choosing your adviser, you will want to consider how many Mortgage Lenders are being looked at.
The other key point to consider when choosing your adviser is how much they charge.
The majority of independent advisers charge a fee for arranging a mortgage. Typically in the region of £500 but it can be as much as £3,000. Just because the majority charge does not mean there are no free options available. You just need to know that they exist so you can look for them. Many people speak of only finding out about broker fees at the last minute and claim they are not made aware upfront. Not only is this morally wrong, it is also a breach of the Financial Conduct Authority (FCA) regulation. To make sure you are not ‘played’ by an unscrupulous adviser, make sure you ask for an illustration or the formal term ‘ESIS’ which stands for European Standardized Information Sheet. It will show how much the Mortgage Lender is paying the adviser under section 2. Under section 3, it will show the loan amount and overall term. Under section 4, it will show the interest rate and costs e.g. product fees, valuation fees and potential broker fees. If the adviser is charging you - it must be written here. It will show whom the money is paid to so they cannot pull the wool over your eyes. The adviser should not refuse to provide a copy - it is a regulatory requirement to provide one. If they are difficult about it, find another broker.
*Just a little caveat for ‘porting’ illustrations. If you are moving an existing mortgage to a new property and topping up with more money, these illustrations are not as quick to produce so there may be a delay with these, but they will still be able to provide one. If you do not know what this means, do not worry, it probably does not apply to you.
The last point to consider when choosing an adviser is, where and when the appointment can take place. Some advisers will come to your home whilst others will work from an office and not carry out home visits. Some can do appointments over the phone, via email and video call like Zoom. Advisers that will come to you will typically charge. You may want to consider whether you would rather pay for the convenience or, whether you would rather take a fee free option and work around the adviser.
When can I make an offer on a property?
Before you make an offer on a property, you should speak to your adviser and have them assess your mortgage capacity. This should include them reviewing your documentation (payslips etc.). Some advisers will arrange a Decision in Principle (aka DIP), sometimes called an Agreement in Principle (AIP) or Mortgage in Principle (MIP). A DIP is the usually the first part of the application. They sometimes provide a printable Certificate - which you can hand out to estate agents to show you are mortgage ready. They usually show a value of the mortgage that has been agreed. You might not necessarily need one at this point but some people like to know they have one ready to roll. If they are going to do one before you need one, they should aim to arrange one that is completed using a soft credit search. The vast majority of DIP’s include a credit search, a soft search will only show for 24-48hrs and after that only the applicant(s) and that specific Lender can see its ever happened, everyone else is blind to it. This way it does not adversely affect your credit score, which could cause a problem when they come to submit the full application, which will then incur a hard footprint. Some DIP’s include a hard footprint, which means it will show on your credit file for the next 6 years and will temporarily reduce your credit score.
In the appointment, the adviser should provide you with an idea of what deals are available and give you an indication of costs. (Get an example illustration/ESIS mentioned above). The mortgage deals are only available as long as the Lenders allow. Some will allow reserving them for a period but for the most part, you will want to apply to the Lender with the most competitive deal when you apply. Not the most competitive Lender when you are initially assessed. If you wanted to watch a movie this weekend, you would not go to Blockbusters. Well, maybe back in the day, but time moves on and, the mortgage market moves quickly, sometimes with notice, sometimes without.
Mortgage ready and making an offer
When your offer is accepted, the estate agent will need certain documentation that the adviser needs and may already have. Your solicitor will need some too. Such as, proof of deposit, proof of Identity and proof of Address. The estate agent will want a copy of the Decision in Principle or some form of evidence that you are mortgage ready. They will also want to know which Solicitor or Conveyancer you are using. Once the offer has been accepted, they should issue a Memorandum of Sale. A copy will be issued to the buyer, seller and each of their legal representatives to begin the process. The Memorandum of Sale is a document that outlines what has been agreed, the purchase price, address, who is buying, who is selling and whom their legal representatives are.
At this point, you want to go back to your mortgage adviser and tell them that you have had the offer accepted and you will need to give them the details of the property e.g. price, address, how many bedrooms etc.
The adviser should then refresh the research and apply for the most competitive option available to you. They may need more paperwork at this point but they should be in touch with you if needed. You will want to make sure the solicitor or conveyancer you are using is aware you want them to act for you. They will start sending you paperwork to fill out, but ultimately at this point the professionals should take the reins. If you need to do anything, they should be in touch with you. It is probably worth dropping them a call or email if you do not hear anything for a week or so, but once the mortgage offer issues, for the most part, your mortgage adviser’s job is done. It is mostly down to solicitors at this point. The estate agent should keep you informed with progress periodically.
Our Adviser Recommendation
We would recommend IFO Financial Options. They are Independent, Whole of Market and offer a fee free service. They work from their office and do not offer home appointments, but given that they can do every deal without charging means, they will likely be at least £500 cheaper than most advisers will even if they get you the same deal. They also share our offices here at 24 Finkle Street, Selby YO8 4DS. You can telephone them directly on 01757 709888 or find their website at www.ifo.co.uk