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Wednesday, 3 October 2012

Choosing a mortgage - where to start

With hundreds of mortgage deals on the market, it's hard to know where to start. You can use a mortgage broker, or shop around yourself and go direct to the lender. Whatever you decide, it's important to understand how mortgages are regulated and sold.

Using a broker

Mortgage brokers must be authorised by the Financial Services Authority (FSA) or must be agents for authorised firms. The FSA is the UK's financial regulator set up by government to regulate financial services and protect your rights. Its standards require firms to be competent, financially sound and to treat their customers fairly.

This means mortgage firms have to give you certain documents with the 'Keyfacts' sign. Keyfacts documents are set out in a standard format to help you compare different services and products with each other. The two mortgage keyfacts documents are: 'Keyfacts about our mortgage services' and 'Keyfacts about this mortgage' (sometimes called a key facts illustration or KFI).

Check that your adviser is authorised

Provided you deal with an FSA-authorised firm or the agent of an authorised firm, you will have access to complaints and compensation arrangements. To check whether a firm is authorised you can use the FSA's 'Check our register' service.

Shopping around and buying from a lender

Instead of using a broker or financial adviser, you can shop around and arrange a mortgage directly with a building society, bank or specialist mortgage company. A useful starting point might be to compare what's on offer on the FSA's impartial mortgage tables.

Of course lenders will only recommend from their own mortgage range - but may have several you can choose from. You'll still receive the Keyfacts documents described above.

The difference between mortgage 'advice' and 'information'

If you get written information about mortgage products, it doesn't mean you've had advice. Getting advice means that the adviser looks at your particular circumstances and recommends a mortgage that's suitable for you. Buying with advice puts you in a stronger position to complain and get compensation if you later discover that the mortgage is unsuitable.

If you take out a mortgage over the internet, by phone or by post you might not have the option to get advice. Consider whether you need to get advice before you buy.

The Keyfacts document 'About our mortgage services' will tell you whether you're being offered information or advice.

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