Do I need a mortgage broker or a lender?
You can take out a mortgage through a mortgage broker or directly from a bank or building society. Using a broker could save you time and money, as they will do a lot of the work for you, but they may also charge a fee. We explain everything you need to know.
Key takeaways
A mortgage broker is a financial adviser specialising in mortgages, acting as an intermediary between you and lenders
A mortgage lender is a bank or building society offering mortgage loans
Mortgage brokers can save time and money by finding the best mortgage deals, including special offers not available directly but some charge a fee (0.3% to 1% of the mortgage amount), while others earn commission from lenders
By choosing a lender, it might save broker fees and could offer better rates if you have an existing relationship
Mortgage brokers can be useful as their job is to search the market for the best mortgage for the property you want to buy. However, some mortgage deals are only available directly from a bank or building society, not through a mortgage broker. So, which should you opt for?
What does a mortgage broker do?
A mortgage broker’s job is to find you a mortgage. When you contact a mortgage broker, you’ll be asked about your financial situation, the property you want to buy (or remortgage), and the type of mortgage you want.
The mortgage broker will then use this information to find mortgage deals that suit your needs.
They act as an intermediary between you and potential lenders, aiming to find the best mortgage rates and terms that fit your financial scenario.
Why would I need a mortgage broker?
Using a mortgage broker can speed up and remove some of the stress involved in the house-buying process.
As mortgage brokers have access to special deals, they may also be able to get you a cheaper mortgage than you can find yourself. Some will even tell you about better mortgages you can only get direct.
Brokers can be particularly helpful for those with unique circumstances, such as self-employment or a less-than-perfect credit history, as they're skilled in finding lenders who are more likely to approve your application.
What does a mortgage lender do?
A mortgage lender is a bank or building society that offers mortgages.
It can only offer you a mortgage once it’s satisfied you can afford to repay the loan, which is why applying for a mortgage involves checks on your income and your credit score.
The mortgage lender also sets the terms of your mortgage, including the interest rate you pay and the size of your monthly repayments.
Why would I choose a mortgage lender?
There are benefits to choosing a lender, instead of using a mortgage broker. Many lenders have a range of mortgages designed to appeal to different borrowers. These could include fixed-rate mortgages, tracker mortgages, and offset mortgages.
Some of these deals are only available through mortgage brokers, while others are only available directly. But it’s important to remember that a lender will only ever tell you about its own mortgage range.
Do I have to pay a mortgage broker?
Some mortgage brokers charge you a fee for their services. Others, including those offered by MoneySuperMarket, charge you nothing.
Instead, they make their money by claiming a commission from mortgage lenders. You may even be given the choice of paying a fee or allowing the broker to earn commission on the deal.
Either way, make sure the broker is properly qualified and regulated before going ahead. You can do this by checking the Financial Conduct Authority (FCA) register.
How much do mortgage brokers charge?
Most companies charge between 0.3% and 1% of the amount you need to borrow. So, say you want a £150,000 mortgage, your mortgage broker fee will probably be between £450 and £1,500.
If you’re paying a fee, you need to include this in the overall cost of the mortgage when comparing it with other deals. Check also that it’s only payable if you choose to take out a mortgage and complete your home purchase (or remortgage) with the firm.
Fee-free mortgage brokers usually receive commission, also known as a procuration fee.
Generally, this is about 0.35% of the amount borrowed from the lender offering the mortgage. So, on a £150,000 mortgage, the broker would receive £525.
Again, it’s a good idea to check how much they will receive by looking at your Key Facts document.
You want the broker to find the cheapest deal for you, regardless of the commission rate.
What if a mortgage broker gives me bad advice?
Mortgage brokers in the UK are regulated by the Financial Conduct Authority (FCA), which ensures they provide sound advice.
If you receive poor advice from a broker that leads to an unfavourable financial outcome, you may be entitled to compensation.
Brokers are responsible for their recommendations and must take into account your ability to repay the mortgage.
Broker vs lender: who should I opt for?
Choosing between a broker and a lender comes down to your individual needs and situation.The ultimate goal is to find the cheapest mortgage for your property, and one which suits your circumstances.
Brokers offer the advantage of access to a variety of lenders and deals, assistance in finding low-fee or low-rate mortgages, and the convenience of comparing multiple options.
Conversely, opting for a lender might be more straightforward, potentially saving you broker fees, and you might secure better rates if you have an existing relationship with the lender.
Our other guides
Compare mortgages
It’s easy to find and compare mortgages from a range of lenders using MoneySuperMarket’s mortgage comparison tool.
Once you’ve got an idea of the deals available, you can then approach a mortgage broker to see if he or she can beat the mortgage rates you can find online.
Use our mortgage repayment calculator to see how much your mortgage repayments could cost.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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Rebecca Goodman
Personal Finance & Insurance Expert
Rebecca is an award-winning financial journalist with over a decade of experience writing for print and online media. Her mission is to take the jargon out of personal finance and to help everyone...
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