Mortgage Broker, should I use one? How a mortgage broker can save you time and money?
Mortgage brokers are specialist that are well versed with the banking loan process and have access to hundreds of mortgage and loan packages across many banks. Mortgage brokers help property buyers to get the best home loans and home owners to refinance home loans.
By Angeline C and Paul HO (iCompareLoan.com)
In today’s digital age, technological disruption has brought many changes. People no longer call into hotels to book hotel rooms, instead they go to a hotel-room booking site to choose the best matching hotel room.
People no longer sign-in to a specific airlines website to book tickets, people go to airlines booking sites to find the best and cheapest airline ticket.
The same is also gradually coming to dawn on people that rather than going to a specific bank directly, which may or may not give them the best home loan offer at the specific time. Home buyers and owners are going to mortgage brokers who has a purview to all the bank’s packages and can help advice clients accordingly.
Sure, you can easily walk into the bank and ask for quotes. Most of the time, your property agent would also refer to you a contact at a bank. The point is, does the property agent know which bank package is good for you? How to calculate your loan affordability and interest costs? Do the property agents have the supporting home loan reports to assist you to find the right home loan packages and layout the facts for you?
In Singapore, where we have a good number of local and foreign financial institutions, the choice of a lender and its packages can be mind boggling. Imagine having to compare over hundreds of different loan packages and wondering which is best for you. Even if you are a specialist in finance, it is not so straight forward as there are quite a few variables.
That is where the mortgage broker comes in. The mortgage broker is typically an experienced professional who is familiar with the loan approval process, and having worked with different banks, they know their criteria and what makes the cut. As they are independent, they will also be able to tell you which lender offers the most suitable loan package rather than selling the loan package from the financial institution they represent.
Info-graphic: How a Mortgage Broker can save you time.
Engaging a mortgage broker will help you in the following ways:
Assess your MSR and TDSR Affordability and Loan suitability Assessment
1. Access your financial risk profile and advise on a suitable loan package, saving you the hassle of:
- running around;
- going to a bank that does not offer a loan for your housing type or your personal profile;
- not knowing what documents are needed,
- having to make 5-10 loan application and even
- the possibility of impacting the process of your home purchase.
Highlight Potential Issues and Financial Lingo
2. Highlight potential issues and help you navigate your way to a suitable home loan.
A mortgage broker, who is independent of any financial institution, is here to address your concerns and highlight potential issues of any particular loan package such as claw-back period right from the start.
They can help in the application process and explain financial lingo and misconceptions.
Shortlist loan packages and Streamline loan applications
3. Streamline the process for you because mortgage brokers know what lenders are looking for. Instead of making 5-10 loan applications, the mortgage broker will narrow the choice for you, eliminating those that are not suitable, and allowing you to save time and energy.
4. Do you know that too many loan applications are deemed to “Marginally increase risk” in your Credit Report and can damage your credit record? A mortgage broker will streamline the choices down to 1 to 3 packages, thereby helping you to keep your credit report good.
Mortgage Brokers helps the banks lower cost – so you get good packages
5. A mortgage broker is essentially a distribution channel for the bank’s loan products. This lowers the bank’s marketing costs. A good mortgage broker helps the customers to filter down and shortlist packages, so as to reduce frivolous loan applications. Frivolous loan applications caused the banking system to be clogged up with many bank loan applications from applicants that has no wish to take the loan, but simply to “see what the bank can offer”.
Can you imagine 100 loan applicants making 5 applications each, there will be 500 loans being processed while only 100 loans or less will actually be taken.
With mortgage brokers, banks have an efficient distribution channel, an optimum number of bankers and credit officers and save a lot of money. If the banks can become cost efficient, they can offer you better rates.
If banks collectively find that the cost of doing business is too high and every applicant applies to 5 to 10 banks, then surely the banks will see increased costs and correspondingly raise its prices too. It is possible that banks may even impose an application fee in the future if a loan is applied and eventually not taken up.
Detailed Home Loan Analysis and simulation
6. Provide analysis and home loan tools so you can make an informed decision.
Some brokers offer Home Loan Reports for FREE:
- Property Buyer Report.
This report analyses property buyers’ income and financial status, help them decide and make the purchase faster.
- TDSR, MSR Analysis
This report helps property buyers assess how much they can borrow, loan to values, tenure of loan, weighted-income-average-age, etc.
- New Loan Interest Cost Analysis
This report looks at the interest cost analysis for completed properties.
- Refinance Savings Analysis
This report looks at the refinance savings analysis.
- Loan Package Detail Sheet
Details of loan packages and amortisation tables laid out nicely in columns’
- Progressive Repayment (BUC) Detail Sheet
Looks at the loan disbursement dates and the draw down dates and its estimated loan repayment schedules
- Sibor, Sor Analysis
Assess long-term interest rates trends by looking at the history.
Assess Equity Term Loan, decoupling and a myriad financing options.
In case you are wondering why it is free to the borrower, it is because the lenders will pay the mortgage broker a distribution fee upon successful disbursement of loan. This does not cause your rates to become higher as banks save money using brokers as distribution channels.
icompareloan also has tools such as the home loan comparison system, which compiles all the available loans that meet your search query, when you input the loan quantum, duration, housing type and whether the property is completed or under construction.
You can download the sample property buyer home loan report here.
Get your property agent or Financial Advisor to generate an analysis report for you at www.iCompareLoan.com/consultant
In summary, engaging a mortgage broker can help you save time and money and ease the process of shopping for a home loan.
For starters, you can read up more to give you some basic understanding.
Read about how a mortgage broker can help you or simply find out more about https://www.icompareloan.com/resources/a-guide-to-housing-refinancing-in-singapore/ or if you want to find out more about Fixed vs floating rates.