Buying a home is a huge financial commitment, and for many can be a daunting experience. Fortunately, help with home buying is available through a wide range of sources. A number of independent organisations have trained financial advisers that can help you better identify and understand your options and the questions you should ask mortgage lenders or brokers when buying a property.
When searching for any type of finance, it is important to shop around and compare quotes from various lenders. There are a number of websites that provide comparison tools which help make it easier to compare different mortgage deals.
When shopping around for the best deal, you should also know what sort of help you're looking for. You may only need some information to help you make your own choice, or you may feel that you require expert advice to help highlight the options available and to recommend suitable mortgages for you.
Homebuyers that do not require advice from their mortgage lender/broker are usually provided with balanced and neutral information about the mortgages available, including product terms and conditions and comparison tables, to help them make their own choice.
If you are in need of advice, mortgage lenders/brokers will steer you in the direction of and/or recommend that you take out a particular mortgage by:
- explaining the various options open to you;
- assessing whether a particular mortgage meets your needs and circumstances and is the most suitable mortgage for you; and if it does
- assessing whether you can afford it.
Whichever type of help you need, it is important to check that the firm you're dealing with is regulated by the Financial Services Authority - the UK's financial services regulator - and is therefore allowed to arrange or advise on mortgages. If you enter into an agreement with a lender that is not regulated by the FSA and it turns out the mortgage you chose or were recommended was not to be suitable after all, you won't be able to make a complaint or have access to compensation procedures.
Firms, individuals and other bodies that are FSA-regulated are listed on the FSA Register, which can be found at www.fsa.gov.uk.
Read the Key Facts
When you contact a mortgage lender or adviser they that is regulated by the Financial Services Authority (FSA), they are required to provide you with two Key Facts documents, which will include important information about the range of products they offer, any mortgage product they recommend and the level of service you will get (i.e. whether you will be given advice or information only).
The first Key Facts document (Key Facts about our mortgage services) will provide details of the service the lender/broker or mortgage adviser offers. It will explain:
- whose mortgages they offer - do they offer mortgages from the whole market, a limited range of lenders or just a single lender;
- the range of products of available;
- whether you'll be given advice and a recommendation, or just basic information about the products available; and
- whether you will be charged for their service, and if so how much?
The second Key Facts document, called Key Facts about this mortgage, should be given to you when you are recommended a mortgage, or the broker or lender provides you with personalised information. This document is also known as a Key Facts illustration or KFI, and will include:
- confirmation of the service you're getting;
- a description of the mortgage you've chosen/recommended to you and who the lender is;
- the interest-rate type and the rate of interest;
- the overall cost of the mortgage
- the monthly repayment figure and how much this would be if interest rates went up
- information on early repayment charges, if there are any;
- any special features of the mortgage, for example overpayment and additional borrowing facilities; and
- the fees you'll have to pay.
Note; Make sure you fully understand these documents and that you are getting the level of help that you need. Ask your lender or adviser to explain anything that is not clear. Also remember to use these documents to shop around and compare similar mortgages from other lenders to ensure you get the most suitable product service at the best price.
Getting help from a mortgage broker
If you decide to use the services of a mortgage broker to help you taking out a mortgage, there a few things you will need to consider:
- Product range - find out whether the broker offers products from the whole of the market or just a limited number of lenders, and whether it can give information and advice or just the former on the products available. This will be detailed in the Key Facts about our mortgage services document.
- Cost – find out whether the broker charges for their services, including advice, and if so how much. Bear in mind that the way you pay for a broker's services can vary. Some are paid commission by a lender for selling one of their products, while those that have access to 'whole of market' mortgages will give you the option of paying a fee for their services to avoid any risk of product bias. The Key Facts about our mortgage services document will explain whether you will have to pay a fee or whether the broker will be paid by commission.
- Shop around – bear in mind that there may be mortgages available that your broker cannot offer as some lenders provide products direct to consumers. Check what else is available and compare the broker's fees with those charged by other brokers and lenders.
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