Mortgage advice tips

The government has recently reformed UK financial advice, with changes due in 2012. This will affect advisers' commission and qualification requirements. The changes aim to ensure financial advice is independent and in consumers' best interests. Despite these welcome changes, deciding which type of financial advice to use and which adviser to consult can seem like a minefield. Laura Edgecumbe-Ansdell looks at how and where ftbs should seek advice to avoid costly mistakes

Getting Professional advice
When selecting a professional adviser, you need to do some thorough research. Consider how they're paid, their professional qualifications, their scope of advice and their membership of professional bodies.

What type of adviser?
Tied advisers work for just one building society or bank and only sell products from that provider. Limited advisers advise on a limited range of products from different providers.

Whole of market advisers/mortgage brokers
Whole of market advisers, who are not tied to specific providers, can compare all options and are considered best. As 'whole of market' is a Financial Services Authority (FSA) regulated term, a mortgage broker must tell you exactly what kind of advice they can offer. This information is in the 'Key Facts' document a mortgage broker gives you at your first meeting. The main advantage of using whole of market brokers is their access to a wide range of mortgage products. A broker should have the experience, connections and technology to assess your financial situation, compare different mortgage products and recommend an option that's right for you.With mortgage availability limited for most ftbs, a mortgage broker can help you apply for the best deals as soon as they become available. Many lenders, especially specialist lenders, offer deals exclusively through brokers that wouldn't be available otherwise. Brokers may know which lenders are most likely to approve your application, reducing the risk that multiple applications will damage your credit history. Getting professional help should save you time and effort by carrying out research and filling in applications. Typically you only provide information, which can be used to find deals and submit applications, to brokers once. However, some lenders provide the best deals direct to consumers so your broker cannot access these, and some brokers charge fees which is an extra cost for cash-strapped ftbs.

How do brokers get paid?

Fees
Some brokers charge fees for their services. This will either be an hourly or 'flat fee' basis and can be charged up front or on completion. A fee-based broker offers the reassurance that they should make their recommendations on your best interests rather than which deal will earn them the most commission.

Commission
'Fee free' mortgage brokers are compensated directly by lenders, which means their services won't cost anything extra. The FSA regulates and checks to try to ensure that brokers receiving commission offer genuinely independent advice without being influenced by potential earnings from a deal.

Fees and commission
Some mortgage brokers will charge fees for their services and take commission from a lender. In this instance they may offer to offset the commission earned against their fees. Frequently, it will look like there is no fee. The fee may already be priced into the mortgage through the interest rate or the mortgage arrangement fee. Alternatively, the adviser's fee is often added on to the mortgage. Although these may help cashflow now, it will cost you significantly in interest over the life of the mortgage. The level of fees should be considered, though remember that good (paid for) advice now can save you a fortune in the future.
FSA registered
Whatever type of financial adviser you choose you must check that your financial adviser is registered with the FSA. Check the FSA registrar at fsa.gov.uk/register/home.do and search by company or individual. This is important because if a firm becomes insolvent and holds any of your cash, the FSA should pay compensation to you for any financial loss you may have incurred.

Finding a suitable adviser
It is vital to choose an adviser who is suitably qualified to give you the right advice. Unbiased.co.uk, which promotes the benefits of independent financial advice, holds the details of 9,000 UK Independent Financial Adviser (IFA) firms on its database. Consumers looking for local IFAs can find an IFA that holds qualifications in 'generic' financial advice or specific qualifications in areas such as shared ownership, mortgages, pensions, savings, investments and tax.

Getting a mortgage without an adviser/ broker
Not all mortgage deals are available through brokers: some banks and building societies offer deals for direct clients only. The extent to which banks and building societies offer direct-only deals varies: some providers offer products through brokers as well as 'exclusive' deals for direct customers, while others have no dealings with brokers at all. Some banks and building societies offer discounted mortgage rates to direct customers who hold other financial products with them. These deals are not available to mortgage brokers. Dealing with a lender directly has the benefit of eliminating any broker fees.

Free advice
There are many government or independent advisory services that give general advice on mortgage processes/ types. For more information, go to:
citizenadvice.org.uk
direct.gov.uk
moneyadvicemap.com
moneyadvicetrust.org
moneymadeclear.org.uk
whichmortgageadvisers.co.uk

Comparison sites
Comparison sites can help you identify the best mortgage rates. Make sure you use independent sites, which have signed up to the Consumer Focus Confidence Code. These include: Confused.com and MoneySupermarket.com.

Going to your bank
If you want, you can arrange your mortgage with your bank or building society directly. However, remember that you'll be subject to the same rigorous checks as any other customer. You will also be restricted to the range of mortgage products that your bank offers.