Everyone is familiar with the role of a mortgage broker. In fact, you probably know one yourself. For decades, these dedicated professionals have worked in our villages up and down the country, seeking to sit you down, offer you mortgage advice, and arrange your mortgage. This is the way it has always been done, and right now, there are still 25,000 or so mortgage brokers offering services in this traditional way.
In this article we will look at the choices available to you, the customer, addressing the pros and cons of each option, and exploring how the landscape is changing, making way for the emergence of specialist digital mortgage brokers, like Holiday Cottage Mortgages Limited (HCM).
Let’s say that you are trying to secure a holiday let mortgage for your beautiful Cornish cottage. Today, you have two main choices:
- go directly to a single mortgage lender; or
- use a mortgage broker.
Let’s look at how both work and consider the dynamic of these options…
Direct to lender vs using a broker
If you go direct to the lender, you have to go through the mortgage process with that single lender – applying to a number of mortgage lenders simultaneously is not recommended! If you don’t meet your chosen lender’s criteria, you’ll have to start the process all over again with another one. As a result, this method can be a waste of time and effort – it is like all of your eggs are in one basket.
It’s also worth being aware that it is normal for mortgage lenders to do a ‘hard’ credit check on you early in the application process, in order to prevent them from wasting their time. This form of credit check can have a negative impact on your credit score, if you get issued with a mortgage offer but don’t take up the mortgage.
On the other hand, if you choose to work with a mortgage broker, they will aim to keep your stress to a minimum and source for you the best deal to suit your individual needs and circumstances. As mortgage experts, they will have a broad understanding of the housing market and good working knowledge of what mortgage deals are available. A traditional mortgage broker will normally arrange everything for you, sometimes free of charge, although these days, most now charge a fee for their services. It’s mostly done face-to-face and still uses a lot of paper.
Emergence of the Online Digital Broker
It was only recently that you had the option of using an online mortgage broker and even now, the very concept is still not widely known.
So, what is a digital mortgage broker? Let’s try to explain…
The key features of a digital mortgage broker are that it:
- Exists solely through the internet, via sophisticated websites. No house visits or face-to-face meetings.
- Is digital in nature and has moved away from old-fashioned paper-based forms and processes. Instead, they provide slick, easy-to-use, self-service technology, allowing the customer to easily input their data (financial information, for example, is best input directly, rather than read out over the phone or in a meeting) and review it whenever they want.
- Uses multimedia such as SMS and email, to keep the customer updated on the progress of their mortgage application in real time.
- Operates nationally, is unconstrained by physical geography, and can serve customers anywhere in the country with a consistent service.
- Is always open and doesn’t take holidays, so the customer can benefit from a 24x7x365 service.
- Can give quick answers and is equipped with special tools to guide the customer through each step of the process.
Considering the points above and seeing how the internet has already disrupted other key industries, it seems likely that the traditional mortgage broking model will evolve in this direction.
Over the next few years we believe that we will see the wider adoption of the online mortgage broker model as the logical solution, if you want to save time, hassle, money and stress.
Success through specialisation
As the digital broker model becomes more mainstream, we are now seeing some organisations splintering off to focus on specific skill areas, such as Buy to Let or Holiday Let mortgages.
HCM is one of those businesses and we are pioneering the space for raising affordable mortgage finance for short term and holiday let properties. Let’s look at how such specialisation can benefit the customer:
Holiday let mortgage broker vs general mortgage broker
- Holiday let mortgage brokers understand the nature of the holiday letting business, for example, how booking revenue is priced and, quite fundamentally, which cottages will work well as successful holiday lets and which cottages might struggle.
- The application process for a holiday cottage mortgage requires the broker to obtain and analyse certain specialist information. Getting that data wrong or presenting that information poorly can jeopardise a customer’s application.
- Holiday let mortgage brokers focus on mortgages for holiday lets – nothing else – no distraction, just pure specialism. As mortgage experts, they have detailed understanding of the lender’s criteria, their stress tests, and how they assess rental income as part of their affordability calculations.
- Taking a holistic viewpoint, holiday let mortgage brokers, like HCM, talk the same language as the holiday letting agents, property owners and lenders, meaning they act as the link between all three parties to facilitate the application process – thus, resulting in a higher chance of success for everyone.
Bringing together the benefits of the digital broker model with the deep knowledge of holiday letting, specialist online brokers like HCM provide the best of both worlds. When it comes to securing a mortgage for your holiday cottage, they are the most effective solution.
In conclusion, the customer benefits with a digital holiday let broker, like HCM, are:
- Greater efficiency and effectiveness at getting the loan secured.
- A 24x7x365 service.
- You only have to complete one set of easy forms, that you control.
- A sophisticated online design that offers simplicity and ease of use throughout the application process.
- The necessary expertise and understanding of the holiday let process to provide a great source of support.
The information contained in this article is accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time and so please speak to one of our Consultants to confirm the most accurate up to date information. Nothing in this article constitutes financial advice. Please always consult your accountant or solicitor for all financial, taxation or legal matters. Your home may be repossessed if you do not keep up repayments on your mortgage. Pure holiday let, buy to let and commercial mortgages are not regulated by the FCA.