When you apply for a mortgage you might speak to a mortgage adviser, though some people get one without taking advice. Find out what each approach means for you.
You can get advice directly from a lender (like a building society or bank), or from a mortgage broker or financial adviser. They will discuss and ask for information on your personal circumstances and needs, income and spending, and future plans.
This helps them find and recommend a mortgage product that is right for you.
What an adviser must tell you
An adviser should tell you about their charges and the range of mortgages they offer in your first conversation with them. If you are taking out a mortgage online or by post, they must give you this information in writing before you select the deal you want.
The range of products
If you use an adviser to find and apply for a mortgage, they have to tell you if there are limits on the range of mortgages they can recommend.
This will tell you whether the adviser or broker can consider the whole mortgage market, a particular range of mortgages, products from particular lenders, or deals usually only offered if you go directly to a lender.
If the adviser does not consider the whole market they usually have to give you a list of the products and lenders they do consider.Be aware that if you take advice from a lender, they will usually only tell you about their own range of mortgages.
The price of advice
A mortgage adviser or broker also has to tell you their charges and how they are paid, which could be:
- a flat rate for their service
- an hourly rate, though they must tell you what the rate is and what might affect the number of hours they spend on your application
- a percentage of the amount you borrow for your mortgage
- a commission payment from the mortgage lender
The lender may also charge you a fee for arranging your mortgage.
The lender’s or adviser’s fee can be added to the mortgage, but you have to agree first. They must explain that you will pay interest on the fee as well as the rest of the mortgage, until the whole mortgage is paid off.
Interest-only mortgages mean you only pay off the interest on the loan, rather than repaying the loan itself. But you will have to repay the whole amount you have borrowed when the interest-only period ends.
Advisers will not recommend these mortgages for everyone, but they may be suitable for some people.
To be considered for an interest-only mortgage you will have to show evidence of your plan to repay the full loan when the interest-only period ends.
Getting a mortgage without advice
Some lenders may let you apply for a mortgage without taking advice.
You can do this online, or by post with an application form. However, you will need to know the details of the mortgage you want, and be able to arrange it yourself without speaking to an adviser.
The details you will usually have to know include:
- the lender’s name
- the interest rate
- interest rate type (fixed or variable)
- the length of the mortgage term
- the value of the property
- the amount you want to borrow
- whether you want an interest-only or repayment mortgage
You may be able to ask a lender or adviser to arrange your chosen mortgage deal without giving you any advice, if you are:
- a mortgage professional with a good understanding of the risks involved
- remortgaging a home to raise money for business purposes
- a ‘high net worth individual’, which means you have an annual income of £300,000 or more or assets worth £3m or more.
An adviser or lender will need evidence that you fall into one of these groups before they can arrange anything for you. They will let you know what information they need.
If you choose to get a mortgage without advice, your lender or adviser must tell you in writing or in conversation about the legal protection you will lose. This may include the right to complain about how suitable the mortgage is for you.