Why It Pays To Go Via The Middle Man

September 28, 2017
Taryn Lee-Johnston

We’ve all seen the adverts on TV (and elsewhere), cut out the middleman, go direct and get the best, possible price.  In theory, that’s sound advice – provided that you know exactly what you’re doing.  In practice, however, going to a reputable middleman can be exactly the right move to save money (and hassle).  This is particularly true with mortgages because they are complex products and as they tend to involve large sums of money, mistakes can be magnified, while astute moves can generate very meaningful rewards.  Let’s look at three examples of what this can mean in practical terms.

Choosing the right type of mortgage for your situation

Is that a standard repayment or an offset mortgage?  Is it a tracker or a fixed-rate mortgage?  If it is a fixed-rate mortgage for how long should the rate be fixed?  The answers to all these questions, and possibly many more, will determine what mortgage is best for your situation right now and in the foreseeable future.  You can only choose the right provider when you know what it is you need, so doing this ground work is essential and unless you really know your way around the topic of mortgages, you’re unlikely to have the same sort of insight as a professional who deals with them as part of their daily business.  Even if you do feel confident you understand mortgages, it can still be helpful to have a fresh pair of eyes look over your calculations, because getting them right could have a huge impact on your overall financial situation.

Choosing the right provider

How many lenders provide mortgages in the UK?  Do you really know all of them or at least all of the ones who provide the sort of mortgage you’ve decided you want?  Do you know how to approach them to get the best deal?  If we asked the average person to name as many mortgage lenders as they could, we suspect they’d be able to name all the major high-street brands and possibly a few niche providers as well.  If you went to a price-comparison site, you’d get access to a list of companies which work with price-comparison sites, but for many and varied reasons, there are numerous companies out there, large and small, which prefer to steer clear of being involved with them.  A mortgage broker, by contrast, will have an in-depth knowledge of the market and will be able to direct you straight to the best lender(s) for your overall situation.  These may or may not have the very lowest price in their range, as your broker will look at the complete picture rather than just the headline figures.

Mortgage brokers may actually be the lowest-cost option

Mortgage lenders are in business to make a profit.  That’s a simple reality.  Maximising their profits means that they have to sell their product to as many people as possible for as high a price as possible.  To achieve the first objective, many mortgage lenders combine direct selling with working through intermediaries such as price-comparison sites and mortgage brokers, both of whom have their own bills to pay and therefore expect payment for the work they do.  The main price-comparison sites are free for consumers to use, hence they make their money from the companies which use their services.  For example, they may receive a commission on sales made through their site.  Mortgage brokers may take an upfront fee from their clients or they may take a commission on sales from the lender, however, as they are real people, who genuinely work on behalf of their clients, they can offer flexibility about this, for example they may forgo some of the commission available to them to get their clients a lower price.  In theory, individuals could try to negotiate a lower price directly with the lender, but in practice lenders who rely on affiliates to generate sales for them may be very loathe to put those relationships at risk by offering better deals to customers who bypass them.

Your property may be repossessed if you do not keep up repayments on your mortgage.

 

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