Mortgage Lenders
There are different types of mortgage lenders, including banks, building societies and specialist lenders. Mortgage brokers can be used as an intermediary between the mortgage lender and borrower. They can help the borrower find the best mortgage deals.
Banks and Building Societies
Banks and building societies are the main mortgage lenders in the UK, and they compete with each other for customers. In the past, the difference between a building societies and banks were that banks were listed on the stock market. Building societies on the other hand were owned by their members.
Building societies traditionally had cheaper mortgage deals in comparison to banks. This was because they did not have to pay any dividends to shareholders. However today there is little difference between banks and building societies, as most building societies today are now part of the stock market.
Specialist Mortgage Lenders
Specialist mortgage lenders offer less traditional mortgages than the banks and building societies. These include buy to let mortgages, self certified mortgages, and equity release. Buy to let mortgages are suitable for those wishing to rent the premises they have bought. Self certified mortgages do not require proof of income, and are usually sought by the self employed. Specialist mortgage lenders can also offer mortgages to people with a low credit rating.
Equity Release Schemes
Equity release schemes are offered by specialist mortgage lenders, and are used by the retired. Most of the wealth of people of retirement age is locked up in their homes, and equity release schemes allow them to gain access to this money.
Mortgage Brokers
Mortgage brokers act as a middleman between the mortgage lender and borrower. They compare mortgages between different lenders. There are three major types of broker: tied brokers, multi tied brokers and independent mortgage brokers.
Tied mortgage brokers are affiliated to a single mortgage lender, and only offer the mortgages the lender provides. Their product range is limited, and so generally it is not a good idea to get a mortgage from a tied broker.
Tied mortgage brokers are usually used by consumers that have a good relationship with the particular bank or building society, and want to use that provider for most of their financial requirements. However, it limits the products available and the consumer may not gain the cheapest deal.
Multi tied mortgage brokers are tied more than one lender. They have a larger selection of products when compared to tied mortgage brokers. However, there is a risk they will select the products they gain the highest commission from. It is important to decide whether the breadth of products offered by these advisors is suitable.
Independent Mortgage Brokers
Independent mortgage brokers do not (or at least should not) show any bias towards a certain lender, and compare different mortgages. Comparisons from these brokers are tailored towards the borrower’s circumstances, and these brokers usually find the best deal available.
Commercial Mortgage Lenders
Commercial mortgage lenders specialise in properties bought for business. Commercial mortgage lenders will usually expect a business to be profitable before they will offer a mortgage. They will usually need to see businesses plans and long term financial projections.
Wholesale Mortgage Lenders
Wholesale mortgage lenders fund the loan, and mortgage brokers offer this mortgage loan to the borrower. The wholesale mortgage price is cheaper than the price offered to the consumer. This is because the mortgage broker gains commission, so that they make a profit. Banks usually have a wholesale mortgage division and fund the loan. They offer mortgage at a higher price to the consumer, again to make a profit. However, wholesale mortgage lenders can also be independent companies.