Page last updated at 00:12 GMT, Wednesday, 5 December 2007

How to get good mortgage advice

Money Talk
By David Elms
Chief executive, Unbiased.co.uk

David Elms

Buying a house is an expensive project, and likely to be one of the biggest financial commitments you'll ever make in your life.

It can also be a complicated task - especially when it comes to choosing and arranging your finances to fund your house purchase.

There is a host of information available for you to do some research of your own.

But it is easy to become confused by the many different products and rates on the market, so speaking to an expert can help to identify the right mortgage for you.

Types of advice

The whole landscape of how people access and pay for financial advice has been changing over the past few years, and is set to change further in the near future.

At the moment, you can choose from three different types of adviser to help you find a mortgage.

With a tied adviser, you are literally tied to one lender, so you are not seeing the full choice of products available in the market, while with a multi-tied adviser, you are simply seeing a limited range of mortgages.

An independent adviser, on the other hand, can scour the whole of the mortgage market range - without any financial ties to any one company.

Independent?

The definition of independence is currently under review.

But in order to get the best possible advice you need to differentiate between a mortgage adviser that calls itself independent for mortgages (IMA) and a whole-of-market IFA for both mortgages and all other product areas (mortgage IFA).

The former offers independent, whole-of-market mortgage advice, but does not have to offer the same choice of advice on other product areas.

IFAs can offer whole-of-market advice across these financial product areas

A mortgage IFA offers whole-of-market independent advice, not just on mortgages, but across the whole spectrum of product areas relevant to buying a home, such as building and contents insurance or life assurance

This is important given that over three-quarters of mortgage borrowers take out at least one insurance or investment product alongside their mortgage.

More than half take out life insurance, for example, while nearly a third take out another form of financial protection.

Therefore the fact that IFAs can offer whole-of-market advice across these financial product areas is important to bear in mind when selecting an adviser.

Paying for advice

When it comes to paying for mortgage advice, you should be aware that not all advisers charge in the same way.

You should discuss the payment options open to you when you sit down with your adviser and make sure you are happy from the start.

There are three main ways to pay for advice - either paying a fee, or through commission, or a combination of the two.

Paying by fee means that whether you buy a product or not, you will pay the adviser a fee (plus VAT) for their advice and services, either at an hourly rate, or through a fee for the whole job.

Paying by commission means you pay nothing up front, but pay indirectly instead, through the commission the adviser gets on the sale of the product from the product provider.

By opting for a combination, the adviser will either rebate some or all of the commission back into any recommended financial products, or hand it back to you and will use the remainder to offset against the fee due.

Or they will take commission from the product provider and charge you a fee to cover their time costs.

Picking and choosing

Not all advisers will offer all three options and only an IFA has to offer you a fee payment option.

Tied and multi-tied advisers do not have to, but they may choose to.

As with anything in life, getting a good deal is vital, so don't be afraid to haggle or negotiate.

Advisers can also sit and pass subject-specific exams for areas of the market such as equity release

How qualified is your adviser and why does it matter?

All financial advisers are required by the Financial Services Authority to hold the Certificate in Financial Planning, or equivalent, before being allowed to provide financial advice.

Advisers with these benchmark qualifications are also obliged to keep up with relevant financial developments, and some choose to take additional qualifications, whether in general financial planning or specific product areas.

In the home-loan arena, mortgage-specific qualifications include the Certificate in Mortgage Advice and Practice (CeMAP) awarded by the Institute of Financial Services, and CF6 awarded by the Chartered Insurance Institute.

Advisers can also sit and pass subject-specific exams for areas of the market such as equity release.

Sound confusing? Ask your adviser about his qualifications.

It is worthwhile knowing that he or she has taken the time to take additional exams and is dedicated to providing the best advice possible.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.



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