I've been asked this question recently and I wanted to highlight the importance of this as a piece of the bigger investment puzzle. It's an excellent question and one I also grappled with in my early days of investing, however these days I wouldn't do anything without my broker involved, and here's why.
A couple of years ago I was processing a loan for a client and together with our mortgage broker (MB) we had selected Woolwich as the best provider and began the application process. Everything was going smoothly and then an issue arose which required some further documentation from my client and Woolwich contacted her directly to obtain this.
What was strange in this instance was that the loan had already been agreed in principle and what’s more important was that Woolwich should have gone back through the MB first to verify the requirements and not directly to my client. The documents required were actually not necessary, and by contacting my client directly who wasn’t completely aware of the requirements, they actually delayed the process by close to 2 months going back and forth, until I was made aware at which point I got back to the MB about why this was even required.
Our MB agreed there was a problem and they contacted Woolwich directly whom they already have a business relationship with, and within a few hours, they sorted out the problem, and got the fee taken off the loan because of the mess Woolwich had created, the time wasted and how they could have gotten the answer directly from the MB originally had they done things correctly.
This story highlights how a great business relationship works when things don't go according the plan.
So here’s why having an MB is vital to a property investment business:
- MB's have existing business relationships and direct contact with ALL lenders and can often speed applications up, work on the borrowers behalf to bypass certain requirements, and leverage those relationships to work faster for the client. That’s how you can get Decision in Principle approvals in 24hrs or less. You would only get that without a broker whom you have a good relationship with. This power of the relationship flows between us and the MB so in effect what we get is the influencing power of the MB with lenders at our disposal.
- MB's have systems which allow them to cross compare the WHOLE lending market, which often means they will be aware of mortgage products that aren’t even advertised or marketed. It means they can get you a better deal if one is out there. There is no way as an individual I could ever check every lender on the market to find the best deal, there’s just too many lenders out there and too many mortgage products to choose from.
- LTD mortgages are currently only available through a broker, no high street bank has any LTD mortgages at present. This is considered specialist and these high street banks will typically leave it to their specialist subsidiaries. E.g. Nationwide own The Mortgage Works (BTL specialists), Lloyds bank owns Birmingham Midshires (also BTL specialists). Specialists prefer working with brokers.
- MB's works closely with us to understand how and why a client is building a portfolio and works to help that process by selecting lending which meets the needs of the portfolio. Often clients do not read all the terms and conditions of a loan to fully understand what features there are and what penalties there may by. Sometimes one might need a feature (e.g. further advances) which isn’t specified, or you might want to be aware of Early Repayment Charges (ERC) which are often in the T&Cs. Good MB's makes us aware of all these things because they know what I am looking for when I’m building a portfolio or working with a clients’ specific needs.
- Find an MB's who have consistently won industry awards, good MB's are hard to come by, but they are certainly worth looking for.
- MB's works with hundreds of other professional landlords which means they are exposed more regularly to what other professional landlords are doing in terms of strategy and portfolio building. Because they have these relationships, whenever we speak to them on the phone we often have a long conversation and I always learn or hear of some great ideas which have passed along the grapevine amongst professional landlords. I have on more than one occasion tweaked my own strategy out of what I’ve learnt in conversations with our MB.
There are other reasons too, but these stand out as important ones to me. Without an excellent broker on my team, I wouldn’t have the success in property which I currently enjoy.
This is why a mortgage broker is a vital team member if you are serious about property investing.