Some people may not be familiar yet how does a mortgage consultant (or broker) work in general. For longest time homeowners in Singapore would either call the respective banks’ hotline (and be told to wait for call back) or surf the banks’ websites only to find incomplete information on mortgage rates. Walking into the branch hardly makes any difference as most branch officers do not handle mortgages and, those who do, are not “mortgage specialists” and come with limited knowledge.
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With advent of internet age since early 2000s, the mortgage industry is undergoing sea change especially in recent years where this pace gathers. And just like how classified ads has been almost totally displaced by property search portals the likes of PropertyGuru since 2007, the trend of financial comparison sites in particular mortgage sites becoming the norm over the next 10 years is almost unstoppable. More homeowners would turn to such one-stop shop that provides the most updated mortgage rates and useful content for mortgage planning.
A mortgage consultant usually works for one of these comparison sites or mortgage intermediaries. He is paid a distributor fee for helping lenders “distribute” or sell their packages via such third-party distribution channel, as opposed to internal sales force. A good and professional mortgage consultant should stay independent, and be adept in advising on mortgage solutions and regulatory requirements, as well as being well-versed in all packages from various lenders in the market.
Now let us briefly summarize the five key benefits of taking a home loan via a mortgage consultant, be it for a new purchase or remortgaging:
1. It’s More Efficient
Unless you have the time to talk to bankers from all 12 major mortgage banks plus a few more finance companies in Singapore. Most people will just enquire rates from the 3 local banks plus one or two foreign lenders, probably the more active ones. Even so that is still a lot of work and it is also difficult to properly analyze everything and make an informed decision when there is a lack of complete information. Lenders will always present information in a sales pitch to sell, and there is no solid historical and independent data to look at.
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2. It’s More Effective
There is also no one to give you that independent and objective perspective, like what factors you should consider on a holistic basis taking into account the loan quantum, total interest sunk costs, lock-ins, breakage fees, implications on owner-use vs investment properties, etc. As more and more people now prefer to work through a professional mortgage broker even for new purchases, at the very least, one could find out from brokers which are the more popular packages and why so. Not that majority always knows best and everyone’s situation could be unique, but there is some collective wisdom found in how most would analyze and decide.
Good mortgage consultants can also share with you what are some of the potential pitfalls to look out for and how best to position oneself for maximum loan, with inkling on the risk appetite and credit policies of each lender.
3. You Get Better Service
Another major issue with applying directly to the banks is that you end up working with bankers who are pretty much “sales-centric” instead of “customer-centric”. Why so? Some people may not be aware, bankers are after all driven by sales commissions for every product they sell, notwithstanding they are paid a basic salary. To hit their product targets, do not blame them but their focus is for you to sign on the dotted line. To be fair, some do care for the long-term interest of their clients and advise them to look elsewhere, provided they see themselves staying long term with the same company. The same banker will usually not be there two or three years down the road when your loan comes up for home loan refinancing. Even if they are, you would normally talk to another department in the bank that handles repricing.
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4. Works For The Long Term
Contrast that with building a relationship with a trusted mortgage consultant or advisor for the long term just like you would turn to your insurance agent or IFA (independent financial advisor) to review your investments. Would you want to “try out” a new agent every time? And go through the search process again? Sometimes you have to when you are forced to.
Mortgage interest costs, taken together over the duration of a lifetime (while you may remortgage and change lenders many times in between), can amount to 40% or more of your original loan! It is definitely a much higher cost than the sum of your insurance premiums for most. So why would you not want to find that special advisor that you could trust and count on to give you the true “whole of market” perspective and the best mortgage solution every few years?
I am glad to say that more people are beginning to see the wisdom of having such a trusted partner for mortgage planning that is separate from financial planning. It is too specialized and too much dynamic information to grapple with for any one person to try and perform both roles well. As opposed to dealing directly with banks or for that matter property agents (who just conveniently get a few bankers to call you), the long term benefits you derive can be immense, when you get the right loan through a consultant. We are have seen clients who are “trapped” signing on the wrong loan with 3-year lockins, or clients who are forced to refinance later as their existing lenders could not offer them competitive repricing rates. These homeowners may pay back much more than the rebates or promotional gifts that they had gotten in the beginning, in the form of higher interest or more transaction costs later to move again.
A good and competent mortgage consultant should always work for the long-term interest of his client. This includes doing regular mortgage reviews to ensure busy clients are not taken for a ride by their lenders when their lock-in expires, and that they do not lose out on “the next best deal” out there in the market at any point in time. There is always a lender out there who is “more hungry” for your business should the incumbent takes you for granted. Happens all the time. Someone who is not a specialist in mortgage loans with broad overview of market will not be able to do that for you.
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5. Don’t Miss The Best Deals
As mortgage brokers “live and breathe” home loan rates, keep watch closely, and remember all the rapid changes at times, going through them allows you not to miss out on the best deal possible. This could be sending in application one day late for a promotional offer and be disqualified if you go to the bank, but when you work through brokers sometimes we have our “internal connections.” This could also come in the form of special privileges (usually not interest rate per se) extended exclusively to some firms who bring large volume of business to certain lenders. In this regard, the bigger players then to get more concessions be it service, support, privileges or special tranches as it is still a business world after all.
The last point on how mortgage broker could actually bring you better deals is an interesting one. As we know in the marketplace some people may still have the perception that it is better go direct to the banks for better deals as the intermediary takes a cut. The best way to explain this is to think of it as an iMac – it is controlled-price item be it you buy from an authorized Apple dealer or Apple website itself. In the same way, lenders could incur more internal costs like paying higher sales commissions or hiring more sales staff to do more business, or they could switch to an external distribution channel where they only pay when they close a deal. They will have to ensure that the core product (the interest rate) stays the same for this dual distribution strategy to work. In fact I like to believe they will save substantially more switching from paying fixed overheads to distributor fee model which is why you do not see Apple opening proprietary stores everywhere. Businesses have to recognize that like it or not, with information age, more and more the power shifts to the consumer. Comparison sites and mortgage intermediaries are but outcome of this unstoppable trend.
At MortgageWise.sg, we seek to provide thought leadership in the area of mortgage planning in Singapore, taking deep dive into developments and news on mortgages & helping clients track interest rate movements. We do not just go for one-time business with clients but rather choose to build long trusting relationships by giving truly independent advice to the extent of losing the deal. We strive to become the first-choice mortgage partner for homeowners and the creditable distributor of mortgage products for banks and financial institutions in Singapore.