Is a Remortgage Broker Right for You ?

Mortgage brokers negotiate for the best mortgage deal possible – but they do so at a cost to you. In some cases, the cost may be well worth it when you end up with a much better mortgage deal than you could have negotiated on your own. On the other hand, many banks offer special mortgage deals directly to customers, which are not available through a mortgage broker.

To determine whether a mortgage broker is the right choice for you, consider the following:

• How independent is the broker?  While some brokers do work with just about any lender on the market, others work from a smaller pool of lenders that are representative of the entire market, but not truly the entire market of options. To ensure your broker has complete freedom to find you the best deal possible, ask if he is "whole of market."

• How much service does the broker offer?  Part of the advantage to working with a broker is a smoother mortgage process overall. This won't happen if your broker is only involved in a portion of the procedures. Find out what your broker will do from the very first day you sit down and choose a loan product until you sign on the bottom line to close your new mortgage loan.

• Is the broker regulated by the FSA? Like other financial professionals, you want to ensure your mortgage broker is authorized by the proper authorities. That way, you can register any complaints against your broker if necessary and rest assured that your broker is working to the highest possible standards set by this agency. You can confirm the authorization by checking the website of the FSA.

• How much does the broker charge?  Brokers get their income through two different sources. First, most lenders pay a commission on loans the broker lands for them. This commission can be fairly steep in some cases, with banks paying anywhere from 0.3% to 0.5%. The other way brokers make a living is through broker fees charged to the customers for their services. The most expensive brokers usually charge around 1.25% of the total amount of the loan. While the fee may seem steep, it is often worth the money to get the best deal on your remortgage. However, many brokers also provide their services without charging a broker fee, so it pays to shop around for the best price.

• What does the broker offer you that a bank can't?  This is an important question, particularly if you will pay this advisor a fee for his services. A broker should provide an advantage by offering objective advice and guidance in the mortgage loan process. Because he is not linked with a single company, he can scan the market to find the best products tailored to your specific needs. This advisor may also be able to negotiate a deal with a lending company that is much more attractive than the one you would secure on your own. These extras ensure the fee you pay to your broker is worth every penny.

Whether or not to use a broker is a matter of personal preference. However, if you decide a broker is the right choice for you, it is important to shop around for the best broker for your needs. The one offering the cheapest fee may not be the best at finding you the best remortgage product. You need to weigh the cost of the broker against what he can offer to ensure you get the best value for your dollar.

Just Say No: Protect Yourself from the Hard Sell

Once you get into the remortgage process, you may be faced with the "hard sell" on a few key features. This may happen whether you work with a bank or a broker, since both may benefit from their ability to sell you the extras that often accompany a mortgage loan. While some of these additional features are good, and even necessary, with a mortgage loan, that doesn't mean you necessarily have to settle for the product and price offered by your lender. These additional features include:

• Building Insurance – Yes, you need to have your property insured to get your mortgage approved. The finance company or bank wants to know the property they are taking as collateral is properly protected against fire, flood or other types of damage that could affect the overall value. The mortgage company will probably have an insurance package ready to sell you at the same time you receive your remortgage. While this is an option, you may be able to get your building insurance from another source at a better price. It pays to shop around for this protection before you begin searching for a remortgage to give yourself some leverage against the hard sell.

• Mortgage Payment Protection Insurance (MPPI) – This insurance is used to protect your mortgage in the event you are no longer able to work due to illness, injury or redundancy. Many MPPI policies being paying benefits several weeks after you are first out of work and continue for up to one year afterward. While MPPI is a good choice for some homeowners, it is not right for everyone. Some may find that a spouse's income or savings can cover them equally well without the additional cost.

If you are the primary breadwinner of your family and you do not currently have the savings balance to make up your salary difference if you are unable to work, MPPI might be a good choice. However, you might find better deals on the insurance coverage by shopping other companies, rather than simply settling on the product your mortgage company provides.

Higher Lending Charges – These charges are often assessed on mortgages that are offered on properties with an LTV of more than 90%. When you own very little equity in your property, the mortgage company assumes more of a risk with the loan, and they make up for that risk in some cases by assessing additional charges on the mortgage. Higher lending charges tend to run quite high and only benefit the lender. If you are remortgaging, you should have an LTV of 90% or lower. If you are borrowing additional money with your mortgage balance that takes you over the 90% threshold, you might want to reconsider whether this is a sound financial decision, rather than pay the exorbitant fees