mortgage broker advising homeowner

How Does Mortgage Brokerage Industry Work In Singapore?

We always get the question – what is the difference between getting a home loan through us, a mortgage brokerage firm, versus going directly to the bank?  So I think it might be good idea to explain in this article what does the industry work in general.

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To answer that question directly, it would be a “No”.  There will be no difference in terms of the interest rate or the loan package offered by the bank whether you apply for it through a mortgage broker, or if you walk in directly to the bank.  The only way to prove this is for you to do some random checks directly with the banks if you like.  Check to see if there is any difference in the rates quoted by the bankers and those from the brokers (occasionally do note there are differences due more to rates not being updated in a timely manner on websites, or preferential rates given to Priority banking clients of the banks which cannot be quoted outright on websites but will be granted on requests basis).  This is the way the mortgage brokerage industry works apparently in Singapore for a long time and it can be quite different in other countries based on my understanding.  Part of the reason I guess is that the “distributor fee” paid by the banks to the brokers are so miniscule that it really gets built into bank’s loan margin as a “fixed” marketing or distribution costs, and not some kind of variable component which then affects the final interest rate.  In USA, when you get a loan through a broker, either the bank or the borrower will need to pay the broker 1-2% of the loan and obviously that model is not going to work as the bank then levy a higher interest to the borrower.

In a way it is a better model in Singapore as homeowners will now enjoy the service, convenience and professional advice of an intermediary party paid for by the banks.  Occasionally there might be some variations in the referral fee paid by one bank versus another but it is largely the same.  And it is our belief that a good mortgage consultant should really overlook all these subtle variations and just focus on recommending the best home loan to his client, which is exactly our philosophy here at MortgageWise – being your partner in mortgage solutions and building long-term relationships, not unlike a financial advisor or a wealth manager.

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In fact I put to you very few mortgage brokerage firms out there dare to discuss or talk about broker fees and structure as openly as us, for fear of backlash or maybe simply because some are not doing their work of recommending the best loan to clients properly.  We beg to differ.  In fact I do personally believe very strongly that for the good work and advice we provide to clients and the overall value proposition we deliver, we do deserve to earn our keeps paid for by the banks anyway.  One of my pet peeve in this industry is how you have property agents who also try to earn this distributor fee from the banks by referring bankers they know, out of convenience rather than a bottoms up comparison and in-depth analysis of which bank loan best suit the needs of his or her client.  We certainly do a much better and more professional job than property agents, with mortgage brokerage being our core business that we run on a day-to-day basis.  We know and understand the pulse of the market, the changes in rates over the years, and the idiosyncratic nature of each bank when it comes to credit approval and risk appetite.

We hope you do see the value in working with a professional mortgage broker like us.  Those who have yet to try one we certainly hope you would give us a chance to prove our worth.  If there is no difference in the interest rate you are getting be it going directly to the bank, or through a broker, you certainly have nothing to lose but everything to gain via the latter.  In fact when every banker you approach tells you that their bank’s package is the best, it would make more sense to speak to someone who knows all so well about the different banks’ packages and suggest to you why one is better than the other – an independent view.  And again I re-iterate, for all the good work and advice we provide, help us make this mortgage brokerage industry a sustainable one where those who do their job properly and who make a living on a full-time professional basis gets to earn their keeps from the banks.

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Going back to the question at the start of this article – Is there any difference between going through a broker or going straight to the bank? The answer could also be a “yes”.  The difference lies not in the interest rate or package, but the value add a good mortgage broker bring to you.  We have already covered one key aspect – independent view.  In subsequent article I will highlight at least 7 other ways we can bring tremendous value to you as a homeowner who choose to have a long term partnership with a professional mortgage broker.

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest trends in the industry, providing useful mortgage tips, and making sense of rate movements. We aim to build trust with clients for longer term partnership and not just do product-pushing for a one-time deal unlike bankers. That’s why we always present “whole-of-market” perspective including packages that banks do not pay us. That’s why many have chosen to refinance home loan with us in the end notwithstanding the sheer number of brokers and agents out there.

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