Can I be tied to one provider only
Yes, a mortgage broker can be specifically attached to one mortgage lender, although this affiliation must be clearly stated to the borrower so that they are aware that they are only receiving advice on the products offered by one lender. It is typical for a tied broker to charge commission to the lender rather than an up-front fee to the borrower. Alternatively, a tied mortgage broker may in fact be an employee of the lender.
How should I approach the first meeting
Once you have arranged a first meeting with a borrower, it is advisable to ask the borrower to bring a range of documents with them to this meeting. Typically, the information needed will include financial status (pay slips, P60s or accounts if they are self employed). Information on the type of property they are looking at and questions about any lifestyle issues that may be relevant should also be asked, at this stage.
Do I have to declare my commission
Yes, a broker under the Financial Services Act Regulations must disclose any fees or commissions they receive to the borrower. It is not uncommon for a borrower to ask that the commission or fees received are offset against any fees that you may be charging the borrower, directly.
The decision to do so is entirely up to you, although it is generally considered good policy to do so as you are in effect then offering a free service to borrowers, which in an increasingly competitive market may be seen as a highly desirable option.
Can I still charge a fee if the mortgage does not proceed to completion
Yes, although there used to be a section in the Consumer Credit Act that prevented brokers from charging more than £5 for incomplete applications, this is no longer the case. Despite this, most brokers do not charge for a mortgage that does not go to completion.
If you opt to charge borrowers for an incomplete mortgage application, make sure that you inform them of this charge during the first meeting and that the charges are reasonable.
What other services can I offer alongside advising borrowers
The range of services that a broker can offer is incredibly extensive. Provided you have the necessary qualifications, it is possible to offer a range of complementary services to potential borrowers. Typical add on services include locating the best insurance policies such as life assurance, payment protection and home insurance.
Some brokers will also offer the option of facilitating the mortgage process for the borrower, i.e. filling in the application forms and processing the whole mortgage.
Always make sure that you have the necessary registration with the Financial Services Authority, before offering additional services.
Are there any specific rules of which I need to be aware if I am acting as a mortgage intermediary
The Council of Mortgage Lenders does not deal with mortgage intermediaries and it is not possible to become a member of the Council if you are purely an intermediary. The Financial Services Authority requires that a mortgage intermediary has an appropriate qualification. Currently, there are two such qualifications, the Certificate in Mortgage Advice and Practice provided by the Institute of Financial Services and the Mortgage Advice Qualification provided by the Chartered Insurance Institute.
A mortgage intermediary can become a member of the Intermediary Mortgage Lenders Association as an accreditation. This association also represents the intermediaries to the Council of Mortgage Lenders.
What issues potentially affect the credit worthiness of a potential borrower and could they impact on the types of mortgages that are available to them
Although a broker will rarely complete a credit reference on their client, it is useful to understand what factors may affect your client, before you refer them to a specific lender. Generally, credit ratings will depend on factors such as how long the individual has been at their current address, the regular income of the borrower, the length of time that the borrower has been employed and the type of employment contract.
If several of these factors do not seem positive, it should at least be considered that the borrower may need to use a sub-prime lender. In particular, this may be of even more importance if the borrower has an outstanding or recent CCJ.
What information must a broker give to a client at the first meeting
The Financial Services Authority states that a broker must give certain information to a new client at the first meeting; this is normally in the form of a leaflet.
Included information should be that you are registered with the Financial Services Authority, what mortgages you offer (i.e. whether you are a whole of market broker or not), the extent of services that you offer, what you have to pay for the various services and whether or not the borrower will be entitled to a refund of fees in any circumstances.