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

Your first meeting with a mortgage broker is a crucial step on your journey to obtaining a mortgage or carrying out some kind of transaction on your current mortgage. Although the mortgage advisor 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 advisor.

Defining your goal

If you are planning your first meeting with a mortgage broker, the most important thing is, of course, to define your goal. The advisor 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 be very important – the prospect of moving soon makes it pointless to take out a mortgage with a fixed interest rate for 5 years. If, on the other hand, you have a small budget, a mortgage with a commission will be a shot in the foot.

Also consider your priorities regarding financing itself. Do you wantlow mortgage instalments, or do you prefer to pay off your mortgage as quickly as possible and achieve financial freedom early on? If you are at the beginning of your career and see good prospects for pay rises, overpaying your mortgage can be an excellent strategy. However, if you already have many years of work behind you, it is worth reducing your debt as quickly as possible by taking out a mortgage for, say, 15 years.

If your goal is to purchase real estate, it is worth familiarising yourself withthe 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. You also need to be prepared for the fact that this type of financing will be slightly more expensive than a regular mortgage. An intermediate solution is a residential mortgage, which you can later convert into an investment mortgage through Let to buy. 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. Of course, this assessment will not be identical to that of a bank, but thanks to their experience and tools, the advisor will be able to analyse your finances thoroughly enough to clearly determine your chances of obtaining a mortgage. Factors such as the following are important:

• Sources and amount of income – when assessing your creditworthiness, it is not only your salary that is important, but also other sources of income, such as benefits, alimony, rent or additional self-employment activities;

• Financial obligations – the second very important issue is your current loans, credits or leases. It is very important for the bank to analyse your debts. On this basis, a Debt-to-Income ratio is calculated, which shows what part of your monthly income you spend on repaying your financial obligations. The DTI ratio is extremely important because it shows the bank the actual amount you are able to spend on repaying another liability;

• Monthly expenses – in addition to calculating your monthly liabilities, the broker will ask you about your regular expenses. It is worth writing 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, there is a system of credit reports maintained by independent organisations. They collect information about your past liabilities and use it to issue a score. A broker (with your consent, of course) can check your credit report, which will help them in their assessment. If you are curious about your report’s score, you can check it completely free of charge. Remember that if your credit report shows a low score, this is no reason to panic – there are ways to improve it.

You should know that, in addition to this, the amount you are able to contribute as a deposit is of great importance. In the United Kingdom, there are mortgage offers without a deposit, but these are rare and usually require another form of financial security, such as parental assets. In practice, there is an unwritten rule that applies in most cases:** the larger the down payment, the better the mortgage terms**. This is because the larger the portion of the amount paid by the borrower, the lower the risk for the bank. This is measured using theLoan-to-Value (LTV) ratio, i.e. the amount of the mortgage to the value of the property. Lenders usually require a deposit of 5%, but it is best to have savings of at least 10-15%.

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 advisor 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 during a series of interest rate increases or decreases – it is worth being aware of how the Bank of England’s decisions will affect your finances.

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

There are several issues that are worth discussing with your mortgage advisor during your first meeting so that you don’t have to worry about them during the later stages of applying for a mortgage. This mainly concerns the services themselves, as different brokers operate on different principles, so it is worth finding out more about what you are paying for.

Firstly, brokers are divided into two groups:

• Independent advisors (whole of market brokers);

• Advisors affiliated with one or more financial institutions (tied brokers).

Independent advisors have access to a much wider range of offers, so they have a better chance of finding the best deal on the market and will not select them based on which bank offers them. Meanwhile, tied advisors are limited to one or a few institutions with which they have signed agreements, which significantly narrows the range of offers from which they can choose. 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 mortgage advisor’s commission (how much it will be and when it will be charged), but also the costs of conveyancing (i.e. transferring the property from one person to another) and property valuation costs. Of course, apart from their own commission, the advisor 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. Independent advisors usually charge several hundred pounds for their services, but in return, you can be sure that you will not overpay for your mortgage.

In addition, if you have any concerns, for example, you are self-employed or expecting a child, it is worth discussing this with your broker – they will be able to answer most of your questions because they know exactly 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 advisor knows you, the better for you.

Summary

The most important thing to remember is that your advisor 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 advisor will show you preliminary offers that fit your criteria.