What to expect from your first mortgage broker meeting in the UK

Your first meeting with a mortgage broker is an important step towards getting a mortgage, or remortgaging or making changes to your existing mortgage. Although the mortgage adviser will be happy to answer all your questions and help you understand each step in detail, preparing for the meeting in advance will allow you to work better with the broker and achieve better results from the meeting. In this article, we will help you with this task and tell you what to expect at your first meeting with your mortgage adviser.

Defining your goal

If you are planning your first meeting with a mortgage broker, the most important thing is to define your goal. The adviser will ask you whether you are planning to buy a house, remortgage, or perhaps transfer equity. Think about your goal and specify what you expect – if you want to buy a property, should it be a house or a flat? What options or alternatives are you willing to consider, and which ones are you definitely not interested in?

It is important to determine what you expect from a mortgage and what your financial and life needs are. By clarifying your situation and considering what is most likely to happen in the future (e.g. prospects for promotion or starting a family), it will be easier for the broker to tailor the strategy to your situation. Such circumstances can matter a great deal. If you may move within a few years, ask whether the mortgage is portable and what early repayment charges would apply. If you have a small budget, compare the options carefully: a fee-free deal may suit a smaller loan, and if the fee on a mortgage with a product fee is added to the loan, interest may be charged on it, increasing the total repaid.

Also consider your priorities regarding financing itself. Do you want low mortgage instalments, or do you prefer to pay off your mortgage as quickly as possible and achieve financial freedom early on? If you expect your pay to rise, overpaying your mortgage may reduce the interest you pay, but many lenders limit overpayments and charge early repayment charges above the limit. A shorter term such as 15 years reduces total interest but means higher monthly payments, which must be affordable.

If your goal is to buy a property, familiarise yourself with the types of mortgages available (fixed mortgage, variable rate mortgage). There are several options, each with a slightly different approach to repayment. If your goal is to buy a flat to rent out, check out what a buy-to-let mortgage is, as this is the type used for property investments. Bear in mind that buy-to-let mortgages often have higher interest rates and larger deposit requirements than residential mortgages. If you later want to let out a home bought with a residential mortgage, you could ask your lender for consent to let, or remortgage it to a buy-to-let mortgage (often called let to buy when you are also buying a new home); both need lender approval. As you can see, there are plenty of options.

Getting to know your financial situation

In order to find the right financing offer for you, the broker will need to assess your affordability (creditworthiness) and credit score. This assessment will not be the same as a lender’s: using their experience and tools, the adviser can give you an initial view of your chances, but the final decision rests with the lender. Factors such as the following are important:

• Sources and amount of income – your salary is not the only thing that counts, as some lenders may also consider other income, such as benefits, maintenance, rental income or self-employed earnings;

• Financial obligations – the second very important issue is your current loans, credit cards and other credit agreements. Lenders look closely at your debts. On this basis, a Debt-to-Income ratio can be calculated, which shows what part of your monthly income you spend on repaying your financial obligations. Your existing debts and outgoings affect how much a lender may be willing to lend, as lenders carry out their own affordability assessment;

• Monthly expenses – in addition to calculating your monthly liabilities, the broker will ask you about your regular expenses. Write everything down – from basic living costs, such as transport, food and bills, to less obvious ones, such as subscriptions, membership cards or insurance policies;

• Credit history – in the UK, credit reference agencies (Equifax, Experian and TransUnion) hold credit files showing how you have managed credit and other accounts. A broker (with your consent) can check your credit report, which will help them in their assessment. If you are curious about your report’s score, Checkmyfile offers a free trial followed by a paid subscription; check the current price, cancellation terms and eligibility before registering. Remember that if your credit report shows a low score, this is no reason to panic – there are ways to improve it.

The amount you are able to contribute as a deposit also matters a great deal. A small number of lenders offer 100% mortgages with no deposit, but eligibility criteria are strict. In practice, as a general rule, the larger your deposit, the more likely you are to be offered lower interest rates. This is because the larger the share of the price paid by the borrower, the lower the risk for the lender. This is measured using the Loan-to-Value (LTV) ratio, i.e. the amount of the mortgage relative to the value of the property. In most cases you will need a deposit of at least 5% of the property price, and a larger deposit can give you access to lower interest rates.

Having your paperwork ready can make the meeting more productive. You may be asked for:

• photo ID and proof of address;
• recent payslips (or SA302s/tax calculations if you are self-employed);
• recent bank statements;
• evidence of your deposit;
• details of your existing debts and regular outgoings.

Assessment of potential mortgage products

Once the mortgage broker has familiarised themselves with your expectations and financial situation, they will be able to preliminarily check the mortgage offers that are right for you. Don’t be afraid to ask questions – that’s what the adviser is there for, to help you understand how the financing works and to explain why they chose this particular product and not another. The broker can also provide you with a simple simulation showing what repaying the product will look like – they will present the instalment amount, interest rate and other costs you will incur during the mortgage period. Such calculations are particularly important when interest rates are rising or falling, as they help you see how the Bank of England’s decisions could affect your finances.

What questions should you ask a mortgage broker in the UK?

There are several issues worth discussing with your mortgage adviser at your first meeting so that you don’t have to worry about them during the later stages of applying for a mortgage. Different brokers work in different ways, so find out what you are paying for. Questions you could ask include:

• What fees do you charge, and when are they payable?
• Do you receive commission from the lender?
• Do you search the whole market or a limited range of lenders?
• Are some deals only available directly from lenders?
• What does your service include?
• What are the next steps?

Brokers are divided into two groups:

• Advisers with an unlimited range (whole-of-market brokers) – only these may describe themselves as independent;

• Advisers with a limited range, who offer mortgages from one lender or a selected panel of lenders.

Independent advisers can consider mortgages from across the market rather than from a limited panel of lenders, although some deals are only available directly from lenders. Limited-range advisers choose from the lenders on their panel. Extend Finance is an independent advisor, so when you choose our services, you can be sure that we will present you with offers based solely on their quality and suitability, not their origin.

It is a good idea to ask about the costs you will incur when applying for a mortgage. This includes not only the broker’s fee and any commission they receive from the lender (how much it is and when it is payable), but also any lender product or arrangement fees, the costs of conveyancing (i.e. transferring the property from one person to another), property valuation costs and the cost of any survey. Apart from their own fee, the adviser will not be able to give you the exact amounts you will have to pay, but they can estimate the approximate costs you should expect. Mortgage brokers may charge a fee, receive commission from the lender, or both. Any applicable broker fees should be explained before you agree to proceed. A mortgage adviser can help you compare suitable options, but cannot guarantee the lowest overall cost.

In addition, if you have any concerns – for example, you are self-employed or expecting a child – discuss them with your broker. They will be able to answer most of your questions because they know what is and isn’t important when taking out a mortgage. Clarifying such issues will give you peace of mind and sometimes prove crucial in choosing the right strategy for your mortgage. The better your adviser knows you, the better for you.

Summary

The most important thing to remember is that your adviser understands that you don’t need to be an expert on mortgages – feel free to ask even the most obvious questions and find out everything you want to know. When preparing for the meeting, it is important to at least have a rough idea of your financing expectations. In addition, it is a good idea to analyse and write down every aspect of your financial situation – this will allow the broker to estimate the amount you will be able to borrow and the terms of the mortgage. Based on your expectations and financial situation, the adviser will show you preliminary offers that fit your criteria.