Mortgage Broker Versus Direct to Bank or Lender

Hi, this is Tom Soane and welcome to another episode of the anonymous landlord. And today. I’m going to talk through the pros and cons and the benefits and features of using a mortgage broker or a mortgage advisor versus going direct to a bank or mortgage lender for your mortgage now always steer more towards using a mortgage broker and I’ll talk through the reasons  for that in a second, but there are also some reasons you might go direct to a mortgage lender or a bank to get your mortgage.

So first of all, let’s have a look at why you would use a mortgage broker what the benefits are of a mortgage broker. It starts with the deal itself. So the actual mortgage products and the rates and the loan to values and the criteria that you’re offered now, it’s important  to know that a lot of mortgage lenders will only work through intermediaries like mortgage brokers and it means that you have access to more  mortgage lenders for a start and you won’t miss out on really good deals and better options for you and for your purchase because bear in mind is not one-size-fits-all with a mortgage different mortgages are better for different types of purchases. But you also have different lenders. So you’ll have access to more mortgage lenders that you would never even know about or would never be able to approach and all of those different  lenders may well have different criteria and are more suitable for you and your circumstances to get the deal through, some lenders offer different levels of loan to value which basically means the amount of money and mortgage will lend you against the purchase price.

Now most mortgage lenders will offer you 75% in the current climate right now that has dropped slightly for a lot of mortgage lenders and other lenders are still offering 80% loan compared to the value of the purchase.

But also some mortgage lenders will have better rates than others and this is quite important because it’s all part of your expenditure. And, if you can get a much lower rate by working with a mortgage broker, then you’re saving some money each month, which means more of the rent turns into profit and more income for you. But, also there are better rates for different types of purchases. It’s not all again. Like I say, it’s not one size fits all so you might have some lenders that have very specific rates and products and services for different types of property different purchase types different types of people what your circumstances are what your situation is, there’s different rates different criteria for four different people and different properties. But you also get a bit more flexibility with specialist lenders and this is why I like going to mortgage brokers really because you get access to real specialist mortgage and finance  lenders and there are a lot of lenders that specialize in specific types of lending that suit you better for this particular purchase.

Next thing is that a bank will only offer you their own mortgage deals and products. So you might not get the best rate and the best deals available. Whereas a mortgage broker will access the whole of the market will a decent mortgage broker will anyway, there are some types of Brokers that only work with a panel of mortgage lenders and make sure you ask them if they’re whole of market if the mortgage broker  is whole of market as it sounds they have access to the whole of market if there are a panel  based mortgage broker. It means they are only signed up to a certain number of mortgage lenders. So they’ll only be able to offer you those products now, they should by law make it clear to you from the beginning what type of mortgage broker they are.

The next thing is that you don’t then have to go around asking all the mortgage lenders and all the banks to give you a quote you then have to register all your details, you have to go through the same application process just to get those quotes and you have to do over and over and over and over again to be able to compare what the best deals are there. Look well, don’t mean to sound silly there. But you and I both know that well, I don’t want to do that. I don’t know about you  but that certainly sounds like a waste of my time when I could just pay someone else a little bit of money in comparison to do all of that for me. But also brokers and mortgage advisers have access to exclusive deals and this  is something that may be a lot of investors don’t realize but a mortgage lender will release a special deal, a special offer for a period of time to mortgage brokers and they’ll say to them see if you can sell this product. Basically, what they do is they release a special offer and say hey go and sell this product great. So you might have access to those your them those yourself but you won’t be offered those either by just a standard bank. Now a bank will obviously have advertised rates and special offers and things like that. But generally there won’t be exclusive deals that mortgage brokers can get hold of but also mortgage brokers can be much more creative with the deal because it’s not just about buying a property with this mortgage might not be about that. There might be a better option for you where you might combine certain services you might combine bridging with secured loan with mortgage  or you might decide on different mortgage products to suit your targets and suit your goals, but then there’s the work involved and I touched on it briefly just then about the amount of effort that you would have to put in to compare all the different mortgage lenders rates a lot of work because you don’t subscribe to the same systems that are mortgage broker does so yeah you could do all of this yourself. No doubt. You can go into your bank. You can start the process. And do it all yourself. No problem. But the advisor is experienced not just in finding the right deals, but also getting the job done as well. They can also guide you on  filling out the application accurately to make sure this mortgage application goes through, you’ll be so surprised how many people do it themselves and then the mortgage lender returns the application saying no that’s wrong you need to redo it, just gets a bit messy and the mortgage broker has systems that get this done much faster. Well a good mortgage broker will anyway, but there’s more to it as well. So a mortgage broker  will often be able to populate most of an application for you because they know the information, so what they’ll effectively do is talk you through that information and then input it for you to save you doing it as what you’re you know, you’re paying them for their time right because it’s not all about finding the deal. Yes. It’s important to find the right deal for you, but it’s also making sure you get it.

You know, you might find a really good deal yourself with a mortgage lender, but then you’ve got to get that through and there’s so many complications that can be brought in if you try and do it all yourself. So a mortgage broker uses their his or her experience to get that job done because that’s the most important thing find the right deal. Yes. That’s great. But get the job done.  That’s the most important thing that we should by the way. There are actually companies like there’s one local to me called “Yes Can Do” and they do provide the full broker service for no fee to the customer. Now. I’m not being paid to endorse that. I’m just sharing that because it’s hey, why not so you can pay Brokers or a broker fee for their services. You can pay cut your or you  can work with companies like “Yes Can Do” and not pay a broker fee of any kind. I won’t comment on the differences between the two but the options are there to get all this done for you for free.

So why wouldn’t I guess it’s the question have it all done for you for free. I think that’s pretty easy choice for me. Anyway, then there’s obvious reasons why you might go to the bank to do all of this yourself. Look if you’ve got a really good mortgage right now, then you may be able to port that mortgage across to the new property that you’re buying it certainly can’t hurt to ask  the question. There are lots of mortgages that have been set up with a porting clause in the contract so can’t hurt to ask the question and just ask your mortgage lender just say hey, I am I able to put this mortgage.

There’s a trust element with your bank isn’t there. I think people feel where they’ve been with their banks for so long and they’ve got their current account there for 20 years. They feel a trust element where they can go to their bank. It’s easier. It’s more trustworthy and reliable. I understand that, you know what fact is it doesn’t really matter, but it’s all going to fit with your own comfort zone and if your comfort zone is actually did you know what I’d much rather just keep it with my bank. You may well pay an extra naught point 2% percent interest, but what’s the price of your own comfort and peace of mind I wouldn’t want to comment on that but there’s also the speed because sometimes your own bank will already have access to the information required to process the application.

So for example financial information now the amount of time it would take you if you went to another lender  to fill out all the financial application information and gather all that together might take so  much longer than your bank who’ve already got it. So that could be another factor for using your own bank. But also there’s some instances that you could go to your  own bank and they’ll give you a mortgage product which includes other products. So for example, it might be a product that includes life insurance or legal fees or surveyors costs or different types of insurances, buildings insurance and stuff like that. You might be able to get lenders to provide you with a mortgage that includes landlord Insurance. There are loads of different options available and it can’t hurt to ask the question.

However with all of that. Yes,  I recommend going to a mortgage broker. It’s somebody who is qualified and regulated in order to provide you with accurate mortgage advice, right? That’s what you want. And yes, you could go and do it yourself with your bank and there are pros to that as well. However with all of this my question is why wouldn’t you go to a mortgage broker? Personally? I see the comfort zone in having a mortgage broker do all of that for me. Do all the comparisons give me the advice and tell me what deals they recommend and why that’s vital to me, especially as a property investor. Because then I can present the broker with the information about the property and the circumstances around it and they can use that information to make sure that they’re recommending me a deal that is definitely going to go through, so I’ll and also I’d never want to do all that legwork. I’m not loyal  in that way to my bank. I’ve been with the same bank personally for 25 years or more than that actually, but that doesn’t mean that I would naturally trust them to sort my mortgage for me especially because  I know how banks work so actually if you know how banks work you’ll probably have a little bit less trust in them, but I’ll leave that for you to decide but in all of this it’s whether you go to a broker or whether you go directly to the bank or whether you go to other banks or lenders, whatever it is vital to compare all the mortgage deals. Because then you know you’re getting the best deal and we’re property investors. The word is investors. And that means we have to make a profit. We’ve got to make a return on that investment. Otherwise, we’re not investors. We’re just savings accounts where we’re just putting money here from here to here and not actually turning it into more money. So we are investors which means we have to try and make as much profit as we possibly can and there but safely as well and remember if a property investor and you’re saving money in property.

Then you’re actually making money because property investors saving money is making money. It’s the same thing. So, I hope that helps just to recap like I say, yes. I’m a little bit biased towards the mortgage broker but not because I’m loyal to mortgage brokers. It’s because I’m a property investor myself. I work with property investors and there’s so many reasons why you should use a property broker a mortgage broker compared to doing all of that leg work yourself.

So I’d love to hear your thoughts on that. If you head over to my Facebook page, I think this is probably going to be on the Facebook page as well. And please comment on the page. Send me anything you think is relevant to this topic. If you’re a mortgage broker tell me why you think people might go to the bank directly or why they should use a broker? What are your thoughts on that or if you’re a property investor who goes directly to the bank all the time or you do all this legwork? yourself. Why do you do that? I’m really interested in finding out the the other side to the argument. But yeah head over to my Facebook page and you can follow my other stuff on there if you want to but anyway, I hope that helps and I will speak to you very soon. Thanks!