Why buy-to-let mortgage advice is so important



When reading guides on various aspects of mortgages, you’ll often be recommended to speak to brokers, intermediaries or advisers.

While this can be somewhat self-promotional, it’s generally for a good reason.

Regardless of how these professionals label themselves they’ll generally work by comparing products and getting you the right mortgage for your needs.

Here, we’ll run through why using a good mortgage intermediary can be so worthwhile.

Complexity

The mortgage market is difficult to understand for a newcomer, with its own terminology and rules around affordability, whether you’re buying a house to live in or as an investment.

While it’s good to understand terms like loan-to-value, loan-to-income and staircasing, when using an adviser there’s far less of a burden for you to comprehend everything.

With their understanding brokers are in a good position to recognise what mortgages you can and cannot qualify for at any given time.

Ideally you don’t want to apply for a mortgage and get rejected, because it can impact your credit file depending on the lender. It’s also a waste of time.

Intermediaries can also tailor your mortgage application for your needs.

Should you use an interest-only mortgage? Do you need the certainty of a fixed rate? A good broker will work for you to get what you want. It’s valuable to have someone in the know fighting your corner.

Keeping track on the deals

Even experienced investors can find value in using brokers, because intermediaries are able to keep track of the latest products on the market.

Lenders are constantly adjusting how much they will lend and at what price, making it difficult to keep up with the best deals for anyone who doesn’t live and breathe that world every day.

For example, buy-to-let lenders tend to lend at a higher loan-to-values (to those with smaller deposits) in times of economic confidence, but they demand bigger deposits when the economy is looking edgy.

Take the pandemic as an example. The Mortgage Works pulled out of lending at 80% LTV when the market practically closed its doors and only returned once things started looking up in June 2021.

Information like this is the bread and butter of a mortgage brokers’ job. They will know what’s available at any given time because they’re dealing with different cases every week.

They will also know situations when a lender may bend their criteria to lend to you. These grey areas do exist but in general only intermediaries are privileged enough to know about them.

Brokers vs lenders

If you go direct with lenders they will give you what’s known as ‘advice’, but it’s not the same level of advice as from an independent broker.

When going direct they will only be able to ascertain whether you’re able to qualify for one of their products, without comparing the wide array of options available from other lenders.

Being too loyal can cost you when getting a mortgage.

Indeed, sometimes lenders receive too much business and raise their rates to try and control the flow of business – you don’t want to get a mortgage with them in that situation.

Another factor is lenders can process your mortgage application faster or slower at certain times. Brokers get these insights but you might not be aware if you go direct.

As a landlord you are running a business, so you shouldn’t be blindly loyal.

Types of advisers

While I’ve championed the value of brokers in this writeup, not all advisers are made equal.

Some brokers are part of ‘networks’. These brokers aren’t authorised by the regulator directly, and instead get their permissions to give advice via an external firm, known as a ‘network’.

This can sound worrisome, and indeed these advisers are limited in the number of lenders they can use.

However it might not necessarily be a problem. Some networks are able to use the vast majority of the most competitive lenders on the market anyway. It very much depends on the speciality of the network.

It can be a similar case with brokers who are affiliated with a particular ‘mortgage club’. Clubs have similarities to networks, except the broker firm holds the regulatory permissions directly, while intermediaries aren’t necessarily limited to one club.

If you care about your broker being able to compare all products on the market, you generally need to find one with ‘independent’ in their name.

You’ll also find some brokers who specialise in the buy-to-let sector, which may be an attractive option for investors.

However there are numerous intermediaries who are perfectly capable of placing both residential and buy-to-let business with skill and professionalism.

Cost of using a broker

One final factor to look out for is how much advisers charge.

Mortgage brokers get paid by lenders when they put through business – as a result some don’t charge you a fee at all.

Many do charge a client fee however, and if they’ve got a solid reputation it can be worth paying for their expertise.

However you should shop around to make sure you don’t pay over the odds for your advice.

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