Is a broker worth it?

[EdHat]

Having a bit of a dilemma and would like to ask for peoples thoughts to help me decide.

 

I've got planning and am in the process of securing a self-build mortgage, discharging pre-start conditions and doing the technical design.

 

I always intended to use a broker as I am doing the design works myself, will be project managing the build and would like to do as much of the construction work myself, so using a broker was one less thing to worry about. My situation is slightly unusual as well, buying my parents garden below market value and using a Lifetime ISA.

 

The broker I've approached is easy to talk to, seems very much on the ball and has a good reputation. They have found me an mortgage offer, however it isn't as attractive as I expected.

 

The broker fees are £1,300. The lenders fee is £1,500. The rate is around 6.4% for 2 years with a 1 year lock in.

I looked at what the lender offered direct and it's £1,000 fee and a 6.1% rate for 2 year with a 2 year lock in. And there are others offering 5.85%

 

The paper work says the lender will pay the broker £4k (on top of the fee i pay the broker), and it seems to me I'm effectively paying for this through a larger lender fee and higher rate.

I thought lenders would give brokers better offers than going direct as they save the lender time and bring them customers.

 

The pros I see for going with the broker are:

- Quicker, i haven't got to wait for other lenders to review.

- Saves me time, I haven't got to have conversations with multiple lenders which takes me away from getting the technical design complete.

- They provide a build cost estimate which they say the lender will accept. I work with Chartered Quantity Surveyors so should be able to get something acceptable for the lenders for not too much of a cost, or I'll need to spend time getting quotes/tenders (which i can't really do until the design is complete. 

- Only a 1 year lock-in on their offer. My high level programme is 15 1/2 months to BC sign-off and 18 months to practical completion and I'll be drawing down a small amount to buy the land. So this could potentially save a lot of money, as my understanding is it means I could remortgage to a standard residential mortgage if I complete in less then 2 years rather then keep paying interest only up to the 2 year point even if I've completed. From a quick look around, a 2 year lock-in seems most common.

 

The cons are obviously the cost, but I'm wondering if I'm not fully appreciating the 1 year lock-in aspect. If I've borrowed £300K for 12 months, the difference in interest between 6.4% and 6.1% is less the £1,000. However if I borrow £300k for 1 month, that's £1,525 in interest, so could make a big difference if I complete before 24 months.

 

 

I'd welcome peoples thoughts or stories of similar experiences and decisions, and also how long your builds took.

[nod]

I’m not sure that you are gaining much going through a broker You are a third party presenting your financial position will make little difference when it’s forwarded to there head office 

If he’s getting 4K off the lender You could ask him to wave your contribution 

I think I’m in the wrong job 

[MikeSharp01]

It's a balance of risk in that when you think of it the £4K you are paying is going to be relatively small beer on the overall cost of the build and it gets you on the rails with ease. Can you earn the £4K doing other aspects, spend time to save money, of the  project in the time you save going via the broker. If not I would perhaps question it.

[MikeSharp01]

PS @nod is not in the wrong job, I don't suppose the average mortgage broker can plaster a wall perfectly, lay a tile flat, build their own home mainly on their own - several times, let alone be able to afford to do that .

[nod]

3 minutes ago, MikeSharp01 said:

PS @nod is not in the wrong job, I don't suppose the average mortgage broker can plaster a wall perfectly, lay a tile flat, build their own home mainly on their own - several times, let alone be able to afford to do that .

Hit a nerve 😂😂

[EdHat]

14 hours ago, MikeSharp01 said:

It's a balance of risk in that when you think of it the £4K you are paying is going to be relatively small beer on the overall cost of the build and it gets you on the rails with ease. Can you earn the £4K doing other aspects, spend time to save money, of the  project in the time you save going via the broker. If not I would perhaps question it.

Thanks guys.

The broker fee is £1,300 and the lenders fee is £500 more than going direct, so going with the broker will only cost me £1,800 plus a worse interest rate of 6.4%. As you say a small amount in the grand scheme of things but not an insignificant amount.

 

What I can't decide is whether the 1 year lock-in vs a 2 year lock-in will be worth the extra fee (although I suppose only I can decide that based on my build programme) and whether a 1 year lock-in is an uncommon offer.