THERE are often some easy tweaks to your finances which can save you quite a bit of money, so I had a chat to my mortgage director about some of the easy, but common mistakes made when applying for a mortgage.
When you apply for a mortgage, try to avoid making your way around lenders and applying to each of them. Each time you do that, there is a search created against your name, which lowers your credit rating, particularly if you are turned down.
Every penny counts, so ensuring your credit score is as clean as possible is important. A broker will know if a lender will be happy to lend to you. They are fully aware of all lenders’ criteria and if they will lend to you and will normally only apply to the lender that will be accepting your application. That will ensure there is only one application.
Loyalty doesn’t apply any more. I remember my first mortgage 36 years ago. Because I had saved for 10 years with one bank, I thought it a good idea to go to them first, because, well we were friends, weren’t we? They looked at me like I was trying to rob them, not borrow from them. It also used to be the case that my local branch knew me, knew the family and they would have a bit of clout when I applied. Not so any more, so leave your loyalty to your bank balance.
Due to the demise of the local branch network, and the cost of running it, you can often get a better rate by going through a broker to get to that same lender. When a borrower goes to a local branch, they know they don’t really need to be competitive, so some banks have a different price plan for those who come direct, versus those that come through a broker.
Banks and other lenders are often targeted to sell lots of secondary high profit products to their customers. Life insurance and home insurance are two of the obvious ones. Just because a lender is competitive with their lending rate, doesn’t mean they will be competitive on the ancillary products they try and sell.
Here is an example of the savings you could make. On our broker quote system, I looked at the most competitive top 10 companies on life insurance. I’m not referring here to banks, just the competitive top 10, so you can expect
their rates to be much further down the list. The gap between number one and nine was nearly 40 per cent, so in this instance, the family would have been insured for 40 per cent more. That money is better in your, or your family’s pocket than theirs. So, use a broker for your house contents insurance as well as an independent financial adviser for your life insurance.
Estate agents are your gateway to your home. I recently saw reports of unscrupulous behaviour by an agent that I thought had ceased 25 years ago. It’s called conditional selling, where the agent is selling the home and insists the buyer takes out a mortgage through their in-house adviser, as well as their financial products. The buyer is made to feel they won’t get the house they are trying to buy and so they take out their products. This is simply not acceptable and not legal, and you should use who you want to choose.
:: Peter McGahan is chief executive of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you have a question about mortgages, and if you would like a copy of our mortgage interest rate guidance report, email my mortgage director Pat Greene on email@example.com or call 028 6863 2692.