Today’s blog entry will be shorter than usual, because I have to leave soon to go to the annual MoneyMate awards for 2008, Irish Mortgage Brokers has been shortlisted for Mortgage Broker of the Year. The awards are kind of like the Oscars of the Irish finance world, it’s a time when all of the incredibly dull folks (like me) get to let our hair down and talk about things like APR and not have to be ashamed. Just kidding, it’s actually a savage craic shin-dig. We were shortlisted last year as well, and in fact I’m hoping that we can stop being the bridesmaid and become the bride this time around!
We have gotten a few queries lately from people asking about mortgage brokers and what we actually do, because I work in this industry for a living I was under the assumption (now proved to be false) that people knew what we do. I went out onto Lombard Street and asked a few folks, this is not the first time I did impromptu market research, and the Walking-Mocha crowd were not really in the humour for stopping, I did get one friendly face but that was another person from the Industry so no point in quizzing them, I settled for a friendly Russian shopkeeper a few doors down, ‘do you know what a mortgage broker is’ I asked, He smiled ‘something to do with mortgages?’ and looked at me with grin, I think he half expected a punchline….
That made me feel like I was an actor from Fair City at the Golden Globes. I have no place in this mans world. The broker spirit in me wanted to sit him down and tell him all about what we do and why it’s important but instead I bought a kit-kat and left.
So what is a mortgage broker? What does a mortgage broker do and what’s the advantage of a Broker v.s. a bank? Bear with me and I’ll do my best not to rant.
A mortgage broker is a person who’s professional ability lies in ‘brokering mortgages’ to ‘broker’ means that they act on a clients behalf with some other third party. Sometimes people get called a Broker when they actually are not, for instance, a ‘stockbroker’ doesn’t do the actual deal, a person in a trading room does, your mortgage broker (and hopefully it will be somebody from Irish Mortgage Brokers!) actually deals with the financial institutions and strikes the deal for you. We do this all day every day and for that reason a mortgage broker with experience and the relevant education should be a valued member of your advisory staff.
You can laugh at the use of ‘advisory staff’ but most people do have a list of people they think of when they have questions, ‘sink is leaking? Hmmm… I’ll ask dad what he thinks’ or ‘phone has muck reception? Hmmm…. I’ll call my mate Joe who works for O2’ and so on. So although you may not think about it in terms of having a staff of advisers – and I use this term half in jest but just to make the point – you probably do have people you call on when you have questions, if you ever have mortgage questions you should have a person there to help you with that and in my opinion there is nobody better than a good mortgage broker. A mortgage is the single largest debt most people will ever have to undertake and pay so be sure to have a professional on side. If you wouldn’t ask a Bin Man to fix your teeth (or if you wouldn’t attempt DIY dentistry) then don’t ask a non Mortgage Professional about your Mortgage, get opinions from where ever you like but Advice is another field.
I just read over what I’ve written so far and saw that I promised not to rant, forgive me for the last paragraph. So a broker actually carries out the deal for you, in our industry that means we liaise with banks, we search for the best rates that apply to your particular situation and then try to get the banks offering them to approve the deal. We work with banks every day and know how to concentrate on the strengths of cases so that the bank doesn’t put in any punitive conditions. It removes a lot of work and stress, as well as that it saves time, banks have ‘broker’ channels that are designed to work only with brokers and they run more efficiently than retail operations.
Think of it like this, broker centres are like proper building centres, retail banking centres are like Woodies, yes they have a place in the market and can be handy but if you want to do something big then you don’t go ordering everything at Woodies, you go the industrial route. Your broker also knows the ins and outs of the process so they know what to ask for and when, if you know anybody who ever worked in a builders provider ask them what their difference in opinion is of a two identical clients who walk in, one asks for ‘timber’ the other asks for ‘wood’.
Using a broker versus a bank is another question. Simply put choice is the biggest advantage, the following sentence will crystalize it for you: If you went to your bank for a loan and it was approved do you believe they would ever send you down the street to another bank because that banks products would save you money? If you answered ‘no, I don’t think they would send me elsewhere’ then you have pounced on precisely the reason that you need a broker, independent choice.
Beware though! To call yourself a broker means you only need the ability to place a loan with a third party, that doesn’t mean you offer ‘choice’, there are people who are ‘tied brokers’ or ‘tied agents’ and they can only place business with one provider so make sure that when you are sussing out a prospective broker that you make sure they have at least ten agencies for lending and at least three to five if they are dealing in life or pension business. If they say they have X amount on one hand but only 1 on the other (for instance we deal with all the banks but we are a tied agent to insurance company X) then don’t deal with them on any insurance aspect, in fact if it was me I would not deal with them at all and would instead go with a broker who offers full choice in all aspects of their business. Choosing a broker is an important part of getting good advice.
The other advantage is that Brokers spend all day every day just dealing with mortgages, so again, its honed expertise, if you had a heart problem you’d go to a cardiologist, not a GP, a GP is still a qualified doctor but they are not a specialist, in a bank the advisory staff are kind of like GP’s but only for the things their bank offers, Mortgage Brokers are like cardiologists who can advise on many different banks. Granted comparing a broker to a Cardiologist is a long shot but deep down I wanted to be a doctor and didn’t get the points in my leaving.
If you are going to get a mortgage you should talk to a broker EVERY time, you dont’ have to do the actual loan with them, you can chose to go direct or not proceed or whatever you like, but passing by professional advice that in most cases won’t come with an up front fee simply doesn’t make any sense at all.