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Bad credit mortgage broker?
In today's age of the credit crunch with more and more people worrying about debt we thought we would outline the pros and cons of using a bad credit mortgage broker and why someone with impaired credit may want to look at using a specialist broker rather than what could be classed as a normal, high street mortgage broker.
To start with I suppose its worth mentioning that all mortgage brokers, whether you class them as specialist bad credit brokers or not should be classed as professionals in their field as every mortgage broker would have to have passed a number of exams - the industry standard is CeMAP which stands for Certificate in Mortgage Advice and Practice and consists of three 2 hour exams, couple this together with cutting edge computer systems linking through to the majority of lenders and their interest rates and mortgage deals, all mortgage brokers should have the ability to provide detailed proof that any deal recommended is as good as can be provided.
So, what's the difference between a 'normal' mortgage broker and a 'specialist' bad credit mortgage broker?
It would be very easy to say its down to broker experience and leave it at that but we thought we should provide you with a more detailed breakdown based on our findings of the mortgage industry as a whole - but we will start with broker experience.
Bad credit mortgage broker experience
Its fair to say that most people, regardless of their industry are familiar with their job - they do it day in day out. Mortgage brokers are no different and the mortgage market as a whole is segmented into sub markets - you have normal high street lenders, mortgage related insurance, equity release or home reversion plans and the adverse credit market.
A mortgage broker who specialises in adverse credit applications may find it hard recommending the very best mortgage from a high street lender for someone with no credit problems as its unlikely they deal with high street lenders very often and as such would be unfamiliar with their mortgage products - at best they would take longer to source the very best deal due to their unfamiliarity with the lenders and products.
A 'normal' mortgage broker trying to source a mortgage for someone with impaired credit would have an even harder task as the normal rules for what would qualify as the most suitable product rarely apply - what we mean by that is the clients needs and requirements will differ greatly from someone with no bad credit. For instance if the clients main goal is credit repair, it is unlikely they would want a fixed rate with an adverse credit lender for anything more than 2 or 3 years, even if their were a very good adverse credit rate fixed for 5 years the chances are, if the broker knows what they are doing its very likely that they would recommend the higher rate with the shorter tie-ins.
The reason for this would be simply, if the client wants a credit repair mortgage (or more typically, credit repair remortgage) then after 2 or 3 years its likely any credit listed on the clients credit file will be repaired meaning they can then go back to a high street lender on a much better interest rate. There would be no point in tying the client into a 5 year deal on an adverse credit lenders rate - even if it is the best adverse credit rate, it is very unlikely it will match a high street lenders interest rate so the shorter term with the higher rate may be more suitable. This would definitely not be the case with a high street mortgage as typically the interest rate would more than likely be the ruling factor as to what's best for the client - although it has to be said that everyone has an individual set of circumstances and each case would be taken on its own merit.
Bad credit mortgage deals
A bad credit mortgage broker should also be aware of any special deals not advertised on the sourcing systems - such as free or reduced valuations, free or reduced lender arrangement fees and free or reduced conveyancing being offered which are not always listed on the sourcing systems used by brokers.
A specialist adverse credit mortgage broker should also be able to understand your credit file and decipher the information in a way that may benefit your application - for instance. If your mortgage payments are showing a number of payments missed on your credit file a specialist broker may suggest applying for a mortgage statement prior to applying for a mortgage as, depending on when the payments were made, they may be classed as late payments and not missed payments from a new lenders point of view - simply going of what's on the credit file may mean you do not get the best deal available - an adverse credit mortgage specialist should be able to tell when its worth apply for a mortgage statement and when its not really going to make any difference to the mortgage products available (depending on what else is listed on your credit file).
Bad credit mortgage broker - the down side
If there are downsides to bad credit mortgage brokers it would have to be the costs involved - they would typically charge to reflect the additional work needed to be done on a case by case bases (which can vary depending on the broker, we have seen certain firms charge as much as 3% of the advance) - they will also have to charge to make up the lost work for mortgage applications that do not complete - some do this by using a combination of up front fees and fees payable on completion but if your broker does specialise in adverse credit its likely they will have a number of options available to try and accommodate your circumstances.
Other deals available within the adverse mortgage market
There are also other things which can be done to benefit you, the borrower - much will be dependent on broker experience. These will include the use of mortgage packagers - when one should and should not use a mortgage packager, we have found that a 'normal' mortgage broker will tend to use only one packager whilst a specialist broker will only use a mortgage packager when it best suits the client - and then they will select the best mortgage packager for that client which may even enable the specialist mortgage broker to obtain something not advertised - for example, the specialist broker may be able to get the mortgage packager to offer a free valuation due to the relationship they have with the packager - it is unlikely a 'normal' broker would speak to the packagers or adverse credit lenders regularly enough to build up any sort of relationship.
From our experience talking to clients we would recommend speaking to a number of brokers initially and settle on using a broker who understands your needs and is able to be as flexible as possible with any costs they may need to charge - it may be worth your while getting a number of quotes to compare them on an individual basis but we would recommend letting the broker know you are doing this so as not to offend anyone. Either way, whether you opt to use a 'normal' high street broker or a specialist adverse credit mortgage broker be sure and ask about anything you are unsure of to put your mind at ease and so you are certain you are getting the best deal available for your individual circumstances.
