Improving mortgage business
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Firms who offer mortgage health checks will not only generate more conveyancing work but also provide a cashback or substantial saving to clients' mortgage payments.
Many firms are looking at the idea and some have put it into practice. Others, not authorised to transact discreet investment business, may also have been approached by independent financial advisers (IFAs) with a similar suggestion. Non-authorised firms which do not have an arrangement with IFAs may offer mortgage health checks, but there may be difficulties if clients require regulated financial advice. Mortgages are not a regulated product, so they can be discussed and offered to clients. It is only advice on investment products that cannot be given by non-authorised solicitors.
Many clients will have read about cashback or discounted products offered to new borrowers. Lenders usually take new borrowers to mean not only first-time buyers, but also borrowers new to them.
Many long-term customers have approached their lenders to ask if they can take advantage of the new products. They are often disappointed. But this situation is changing, with more lenders agreeing to transfer existing accounts so borrowers can take up new products. If not, it is worth seeing if a client would benefit from remortgaging to another lender.
A mortgage health check examines the client's current mortgage product and compares it with savings that could be made to the monthly mortgage package, if a discounted product is chosen, or the amount of cashback that would be received following completion. In either situation a number of fees may be incurred. There are six factors to be taken into account, the first two of which relate to the existing loan.
If the current loan has an early repayment penalty, this must be deducted from any savings that would be made. It would be unlikely to be worthwhile remortgaging if an early repayment penalty is payable.
Loss or potential loss of future share issues. It would be unlikely, for example, for borrowers with the Halifax to gain by remortgaging prior to receiving their free share entitlement. But if there is no early repayment penalty and the current lender has issued shares, or there appears to be no plan to become a public limited company, the next four factors can be considered.
The new lender will require the clients' property to be valued. The fee must be taken into account unless the new lender offers free valuation.
There may be an arrangement fee. The lender may let it be added to the mortgage, but it is a cost to the client and must be taken into account.
If clients borrow more than 15 per cent of the value of the property they will probably incur a mortgage indemnity guarantee premium which must also be taken into account.
Some lenders may pay a contribution towards legal fees or disbursements, but this is not usually the case and the fee must be considered.
This is not an exhaustive list but large savings to clients can be made while generating more conveyancing income.