Free financial advisor - what's the catch?

mushtafa

mushtafa

mushtafa

Soldato
Joined
17 May 2013
Posts
2,943
Location
West Sussex, UK
I'm looking for a financial advisor to answer a few questions before I take out my first ever mortgage.
I've seen a lot advertised as being free - what's the catch? Some say they get payment from the mortgage company for arranging it - but what if they don't find the cheapest? What if I decide it'll be too difficult and decide not to proceed?

I was hoping to find someone who would offer x amount of time for £x. Any suggestions?
 
mushtafa said:
I'm looking for a financial advisor to answer a few questions before I take out my first ever mortgage.
I've seen a lot advertised as being free - what's the catch? Some say they get payment from the mortgage company for arranging it - but what if they don't find the cheapest? What if I decide it'll be too difficult and decide not to proceed?

I was hoping to find someone who would offer x amount of time for £x. Any suggestions?
Click to expand...

They are getting paid by the mortgage company in some way if it's free. There are some real independent ones but the fees can be several thousand to arrange a mortgage (at least that was what I was quoted when I tried to use one)

Unless you have a particular reason to need a broker ( bad credit, self employed, non dom, etc) you will often find the cheapest rate using the generic mortgage provider searches
 
As above.

If yours average Joe with no bad markers, as the industry is so well regulated…just go to some of the banks websites/compare sites and fill in the forms and see what is what.
 
My main questions were regarding my credit card and loan. Should they be cleared? Are they a bad thing? If I got a new loan to consolidate my existing one and clear the credit card - good idea or bad idea?

I don't want to do something wrong which could lower my credit rating and affect any mortgage decisions.
 
mushtafa said:
My main questions were regarding my credit card and loan. Should they be cleared? Are they a bad thing? If I got a new loan to consolidate my existing one and clear the credit card - good idea or bad idea?

I don't want to do something wrong which could lower my credit rating and affect any mortgage decisions.
Click to expand...

The more existing debt you have the lower your max amount to borrow will be. If your not going right up to the max then it probably won't be an issue

Mortgage companies expect people will have credit card debt and personal/student loan debt and will take this into account. Most banks will have an online affordability calculator you can play around with. Put in one with loans one without to see the difference

Eg https://www.barclays.co.uk/mortgages/mortgage-calculator/borrowing-calculator/#/borrow

Consoldating or paying off short term debt before a mortgage isn't a bad move but don't do it at the expense of having a bigger deposit that gets you a better rate. Remember any hard credit pulls will ding your rating a few points each time
 
Last edited:
mushtafa said:
My main questions were regarding my credit card and loan. Should they be cleared? Are they a bad thing? If I got a new loan to consolidate my existing one and clear the credit card - good idea or bad idea?

I don't want to do something wrong which could lower my credit rating and affect any mortgage decisions.
Click to expand...
Bad idea. Don't do any new credit, even if it is to consolidate existing credit.
 
mattx4 said:
The more existing debt you have the lower your max amount to borrow will be. If your not going right up to the max then it probably won't be an issue

Mortgage companies expect people will have credit card debt and personal/student loan debt and will take this into account. Most banks will have an online affordability calculator you can play around with. Put in one with loans one without to see the difference

Eg https://www.barclays.co.uk/mortgages/mortgage-calculator/borrowing-calculator/#/borrow

Consoldating or paying off short term debt before a mortgage isn't a bad move but don't do it at the expense of having a bigger deposit that gets you a better rate. Remember any hard credit pulls will ding your rating a few points each time
Click to expand...

dLockers said:
Bad idea. Don't do any new credit, even if it is to consolidate existing credit.
Click to expand...

413x said:
Yeah definitely don't take out any new lending.
Click to expand...

Thanks, I'll leave alone
 
I think its all ultimately down to affordability. If you have commitments to paying debts right now then ideally you'd want them cleared. Although I'd you pay debts yet still have a large amount of disposable income you should be fine.

And in the current climate don't push too hard to a house at top end of your budget. Now is maybe a time to dream little.
 
Hagar said:
NOTHING IN LIFE IS FREE.

As said do the research yourself. Most institutions will give advice on how much they will lend.
Click to expand...

Air's free, haven't been charged for that yet.

Although there were rumours at the time that Thatcher wanted to introduce a breathing tax...or was it a breeding tax.

Knowing the witch, it was probably both.
 
Last edited:
Hagar said:
NOTHING IN LIFE IS FREE.

As said do the research yourself. Most institutions will give advice on how much they will lend.
Click to expand...

The brokers get paid by the banks, so it's not free, it's just not you paying them.

OP having some credit/loan is fine, but it can eat into your affordability. It could be worth clearing some of your debt off if you can but they do expect people will have things like loans for cars, or a bit on credit cards.
 
HungryHippos said:
The brokers get paid by the banks, so it's not free, it's just not you paying them.

OP having some credit/loan is fine, but it can eat into your affordability. It could be worth clearing some of your debt off if you can but they do expect people will have things like loans for cars, or a bit on credit cards.
Click to expand...
This.... and the fact they can get you what is on the high street, it basically means they are subsidised by everyone else taking out mortgages too.
 
Last edited:
mattx4 said:
They are getting paid by the mortgage company in some way if it's free. There are some real independent ones but the fees can be several thousand to arrange a mortgage (at least that was what I was quoted when I tried to use one)
Click to expand...

That seems ridiculous given there are comparison websites around. Also, banks like HSBC etc.. used to have some of the best rates a few years back and various financial advisors/mortgage brokers couldn't or wouldn't deal with them. They can only deal with the subset of products they have access to and I guess in reality that means the institutions are willing to pay them a commission.

While they're not the complete scam/BS artists they may have been a few years back I don't think they're offering much value if you're having to pay a few grand just for them to advise you on a mortgage. IIRC the commission (which needs to be transparent) can be like a few hundred on a mortgage for the no-fee ones.

They may be useful for people in unusual situations and self-employed ppl, contractors etc. or rather a dedicated mortgage broker with experience dealing with people like that.
 
What you're after is a mortgage advisor or mortgage broker. A financial advisor is a bit more rounded - savings/pensions/investments etc.

Unless you've got really unique circumstances, I certainly wouldn't pay out for a mortgage advisor. They will pretty much dig up the same rates that you can Google for yourself. Free ones make a commission from the lender.
 
I've always used free mortgage brokers for two reasons:
1. They do all the crap admin of turning bank statements into summaries (and know the redlines)
2. I've made £1800 in cashback. I used Habito for my first mortgage, and Mojo for my second mortgage.
 
It's called a "proc fee" brokers typically get about .35% of the loan amount but that can vary.

So they are not doing it for free.

Really if they charge you an arrangement fee they are getting paid twice.

I got a dim view of most mortgage brokers if I'm honest, most of them would rob their own grandmothers if they thought they could get away with it. There is the exception to be fair, the odd one here and there are genuinely decent people.
 
They also sell other things alongside the mortgage which I think can be very lucrative. When I met my wife (12 years ago) she was paying over £100 a month for policies connected to her mortgage. All unnecessary when we delved into them. The one that would pay off her mortgage when she died sticks in my mind. She had no dependants, no will and her death in service payment from work would have covered it anyway...
 
You must log in or register to reply here.
Back
Top Bottom