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Introduction?
The purpose of this article is to explain the benefits of seeking independent mortgage advice when looking to either purchase or remortgage a property.
So what are the different types of mortgage advice and where would you expect to find them? Non-advice - This type of mortgage broker offers the least consumer protection, they will simply ask a set of questions to narrow the customers requirements and thus filtering the number of mortgages available. They then present the customer with a small list of possible mortgages for the consumer to choose one appropriate. The consumer protection here is based on the script of questions the broker asks the script is a process determined prior to the consumer appointment and is impersonal therefore specific personal cirmcumstances are likely not to be assessed. It also assumes that the customers answers are factually correct and the final choice is made by the consumer (some further knowledge may be required by the consumer). These brokers deal with arranging the mortgage on the customers behalf but do/can not offer advice on the product. They will deal with chasing and removing some stress from the process. Where would you expect non-advised brokers to exist? Well believe it or not many non-advised brokers are within the high street banks and building societies.
Advice-only
This type of services is where a mortgage adviser uses their knowledge and skills to provide the most suitable mortgage to suit a consumers personal circumstances. Conduct fact find exercise, income and outgoings assessment, future plans and asperations providing a full picture of the consumers requirments and allow the adviser to offer the products best suitable. The adviser will not however, handle the arranging of the mortgage, and therefore the consumer would need to deal directly with the bank or buildings society to arrange the mortgage. These advisers generally do not exist alone this is often a service provided through the 'Independent mortgage adviser' type below. And often comes about when the most suitable mortgage is only offered direct through high street (i.e. not through mortgage advisers/brokers). The adviser would therefore offer an advice-only option to the client and often charge a fee for this service. Although the client must deal directly with the bank or building society they mortgage adviser often provides support to the consumer.
Tied mortgage advisers
These come in two forms 'only offering mortgages from one lender or its own mortgages' or multi-tied 'only offer mortgages from a limited number of lenders'. This clearly limits the number of mortgage products available to match a consumers personal circumstances and in a lot of cases they may not be able to offer the most suitable mortgage product and therefore advice may result in the best mortgage they can offer, this could be woefully inadequate. Again found in high street branches. A consumer calls into their local building society branch and their in house mortgage adviser can only offer mortgage products from that building society. Consumer choice and mortgage product suitability are considerably reduced. Whats more high street branches often offer low mortgage rates/fees as a loss leader (marketing term to bring in business) and then try to sell their tied insurance products which are often also woefully inadequate and expensive.
Whole of market advice
By far the best coverage these advisers can offer mortgages from all the UK mortgage lenders (having mortgage adviser/broker routes). The vast amount of mortgages available through these advisers is likely to cover the individual circumstances of a consumer. Whole of market mortgage advisers offer advice through conducting a full fact finding interview, affordability accessment, discussion on the consumers future plans and asperations and then can arrange the mortgage through the lender thus aleviating the stress which comes when purchasing a house. These advisers are usually separate firms often found in the yellow pages or through the internet they are sometimes linked to estate agents on an initial meeting mortgage advisers should declare if they are whole of market and this will be disclosed in the 'Initial Disclosure Document' they provide you. If you are not sure if an adviser is whole of market then ask them.
Independent whole of market mortgage adviser
Finally this type of adviser has the ultimate scope of the mortgage market, not only can they offer mortgage advice from the whole of market (lenders with mortgage adviser routes) but can also offer an advice only process if they identify a high street direct deal is more suitable. The 'Independent' statement indicates that the adviser must offer the consumer a fee based service if required. This means that rather than the adviser taking commission as payment for the mortgage advice, the consumer can opt for paying a broker fee and any commission rebated to the consumer. The benefit of the fee based service is the consumer knows the adviser will not be swayed by higher commssion mortgage products when selected a suitable mortgage, however these days this is highly unlikely as the mortgage advice must prove to the regulator why a particular mortgage is most suitable. Some occassions where the commission is quite considerable this would mean the consumer could receive more money than the broker fee paid and therefore would be better of taking the fee based approach. Like the author of this document Independent mortgage advisers are usually separate firms often found on the high street, yellow pages or through the internet they are sometimes linked to estate agents. On an initial meeting an independent mortgage adviser would declare that they are whole of market and that they offer a fee based approach if required and this will be disclosed in the 'Initial Disclosure Document' they provide you. If you are not sure if an adviser is independent and/or whole of market then ask them.
What do independent whole of market mortgage advisers do for consumers:
1.Treat customers fairly.
2.Support and inform the consumer from initial enquiry right through to completion and beyond.
3.Take time to gain detailed knowledge of the consumers personal circumstances and aspirations.
4.Provide impartial, expert, external scrutiny of mortgage products.
5.Identify when the consumers personal circumstances do not meet the criteria of specific lenders.
6.Can identify the most likely lender in unusual situations, thus avoiding the need for multiple credit checks.
7.Assist in calculating affordability, ensuring that consumers can afford their mortgage and protection commitments, along with their other commitments.
8.Provide an educated service on the housing market in general (price negotiation, leasehold issues etc).
9.Expert guidance in complex scenarios (shared ownership/shared equity, right-to-buy, adverse credit).
10.Protect the consumer from corporate sales tactics used by some lenders and estate agency chains.
11.Provide a fully personalised service tailored to individuals needs, not a faceless flowchart "one size suits all" (non-advised) service.
12.Understanding the urgency of some transactions and "go the extra mile" to meet deadlines.
13.Advise consumers not to do things that may not be in their long-term interest.
14.Work for the consumer - estate agents, lenders and to some degree, solicitors have a different agenda.
15.Explain the features and benefits of different mortgage and protection options.
16.Choose the best products, from multiple providers for each aspect of a consumers mortgage and protection needs, and thus increasing their ability to afford their commitments, even when things go wrong.
17.Select the best protection providers for consumers with health issues or unusual insurance histories.
18.Highlight unusual exclusions on protection and general insurance products.
19.Perform data input/entry for the consumer, minimising errors, omissions and non-disclosure.
20.Ensure the provision of appropriate and customized protection products.
21.Collate, verify and provide documentation for the lender to minimise delays in processing, speeding up the process for the consumer.
22.Liaise with other parties in the transaction and ensure that consumers are kept up to date with progress and developments.
23.Use past knowledge and awareness to predict problems and resolve them in advance.
24.Act as advocate for the consumer during the application process.
25.Explain the mortgage offer and assist in fulfilling the offer conditions.
26.Quickly find an alternative lender if declined without wasting the consumers time.
27.Free to act based on conscience and fairness as not usually directly targeted on specific areas.
28.Take responsibility for the advice and recommendation provided, thus increasing consumer protection.
29.Can arrange property insurance in ample time to be ready for exchange of contracts on purchases.
30.Can find appropriate lenders and insurers for unusual properties ( thatched roof, flying freehold flats etc).
31.Protect consumers from aggressive third-party marketing.
32.Protect consumers data and privacy.
33.Provide general support during what is acknowledged to be one of the most stressful events in life.
34.Often personally available outside of normal working hours to answer questions or resolve issues.
35.Provide a knowledgeable "Ally" in what can be a very worrying process.
36.Encourage competition and innovation from lenders.
37.Offer a long-term service to consumers so will always offer advice which is in line with there life circumstances.
Copyright (c) 2010 Steve Wentworth
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Steve Wentworth formed his firm Wentworth Financial Services in Nov 2007 having been in the industry since Nov 2002. Wentworth Financial Services offer mortgage advice in the Merseyside, Cheshire and North Wales. If you require an Independent whole of market mortgage broker.
http://www.wentworthfs.co.uk/mortgages/mortgageadvice.aspx?KW=Mortgage%20Adviser%20Wirral
Read the original article in context at http://www.wentworthfs.co.uk/articles/independent-mortgage-adviser-003.aspx
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