Should you use an online mortgage broker?

Summary

• A 2023 Statista survey revealed that 68% of adults believe that mortgage repayment affordability is the biggest barrier to buying a home in the UK.

• An online mortgage broker can help you find the best deal based on your needs.

• Online mortgage brokers may charge a fee, procuration fee or get a commission for their services.

• Finding a qualified mortgage broker is easy online. Unbiased can quickly connect you to a mortgage broker who can help, whether you’re buying a home or remortgaging. 

How do online mortgage brokers work?

Online mortgage brokers do exactly what regular brokers do, only online.

No face-to-face meetings are required, and all communication is conducted electronically or over the phone.

An online mortgage broker facilitates deals between borrowers and lenders, assisting individuals in finding the most suitable mortgage deal for their circumstances.

They assess your financial situation, including income, expenses, and credit history, to recommend the most appropriate mortgage.

Online mortgage brokers either work with a restricted number of lenders (restricted brokers) or a wider range of lenders (whole of market).

Regardless of their scope, the fee structures for mortgage brokers typically involve:

• Broker fee: This is either charged upfront or upon a successful mortgage agreement.

• Commission: Mortgage brokers may earn a commission from lenders for connecting them to customers.

• Procuration fee: Lenders pay this fee to mortgage brokers upon completion of each mortgage deal.

Online mortgage brokers are required to ensure transparency regarding their fees and associated costs.

Their online mortgage advice should always be unbiased and considerate of each client's needs.

What are the pros and cons of an online mortgage broker?

Recently, more online mortgage brokers have entered the market, increasing clients' options.

However, there are pros and cons to using an online mortgage broker.

Pros

Below are the pros of an online mortgage broker.

• Convenience: Online mortgage brokers are highly accessible, allowing borrowers to apply for mortgages without face-to-face meetings.

• Speed: Online processes often streamline paperwork and communication, potentially shortening the time to secure a mortgage

• Comparison tools: Online mortgage brokers may provide tools for comparing and overviewing multiple mortgage options.

• Lower fees: Online brokers typically have lower overhead costs, enabling them to offer competitive fees.

• Accessibility: People in remote areas can access online brokers more readily.

Cons

Below are the cons of an online mortgage broker compared to a traditional mortgage broker.

• Limited personal interaction: Online brokers may lack the personal touch that traditional brokers provide through face-to-face meetings.

• Complex cases: Online platforms may not be equipped to handle complex financial scenarios or unique borrower needs that require more personalised attention.

• Trust and security concerns: Some borrowers feel uneasy about sharing sensitive financial information online, preferring the security of visiting a physical office.

• Lack of local expertise: Traditional mortgage brokers often have an in-depth understanding of local housing markets and regulations, which online brokers may not have.

• Lack of personalised customer support: While online brokerages may offer support via email or phone, it doesn't always match the assistance of traditional in-person brokers.

Should I use a robo-adviser?

Robo-advisers may be more cost-effective and efficient but they do not provide in-depth advice for mortgages.

This is a significant shortcoming, especially given the substantial financial commitment of a mortgage.

Robo-advisers rely on algorithms and may overlook crucial factors like your financial situation, long-term goals, and specific needs.

This limited personalisation could lead borrowers to overlook options better suited for them.

Additionally, robo-advisers are only sometimes equipped to handle complex financial situations or provide tailored advice for unique borrower scenarios.

So, while a robo-adviser may save you money in the short term, consulting with a mortgage adviser in person offers a more comprehensive service with long-term savings.

Should I find a mortgage broker?

If you prefer dealing with a human when making major financial decisions, it's definitely recommended that you find a mortgage broker. 

Below are some examples of people who would benefit from the personalised support of an online mortgage broker:

• First-time homebuyers: Given the complexity of home buying, first-time buyers should consider using a mortgage broker. A broker can guide them through the process, explaining their mortgage options, eligibility criteria, and government schemes, helping them to make informed decisions.

• Self-employed individuals: Self-employed individuals often face challenges when applying for a mortgage, mainly because their income stream is inconsistent. Mortgage brokers with expertise in this area can help self-employed borrowers find lenders who understand their unique financial circumstances and offer suitable mortgage solutions.

• Those with poor credit history: Online mortgage brokers can assist prospective borrowers with poor credit histories in finding favourable mortgage terms with a lender. They can also help with looking for alternative lending options or negotiating with lenders to find mortgage deals that accommodate their needs.

• Property investors: Property investors often have unique financial objectives that require specialised mortgage solutions to maximise investment returns. Experienced brokers can provide mortgage advice online about financing multiple properties, leveraging equity, and optimising mortgage structures to support investment strategies.

• People seeking to remortgage: Homeowners looking to remortgage their property could benefit from the expertise of a mortgage broker in assessing their current mortgage deal while comparing alternatives and securing a more favourable deal.

How do you find a mortgage broker?

To find the best online mortgage broker suited to your needs, consider the following: 

• Research and compare: Look for experienced brokers with positive reviews and a good reputation. Compare their services, expertise, and fee structures.

• Seek recommendations: Ask trusted friends, family, and colleagues who recently used a mortgage broker if they have any recommendations.

• Check their credentials: Ensure the broker is appropriately qualified and registered with the relevant regulatory bodies.

• Ask lots of questions: Enquire about their services, processes, fees, and approach to mortgage advice.

• Evaluate their communication: Choose a broker who communicates promptly, clearly, and transparently.

• Review contracts and fees: Carefully review contracts, fee structures and payment terms before signing with the broker.

• Trust your instincts: Select a broker you feel comfortable working with. This broker should listen to your needs and demonstrate a genuine interest in helping you reach your financial goals.

Seek expert financial advice

When you're looking to buy a property, you should get expert advice from an online mortgage adviser who can guide you according to your unique situation.

Robo-advisers are becoming more commonplace and are less expensive in the short term. However, their services are limited and rarely account for your unique needs, so may not be beneficial in the long run.

Ultimately, there is more value in seeking guidance from a qualified and registered online mortgage broker when applying for a mortgage.

Unbiased can match you with a mortgage broker who will help you find the best deal that suits your circumstances and goals while offering expert financial advice.