Technology is rapidly becoming the staple tool for many banking and financial service providers to reach out to their customers. What used to take hours of time at long, dreadful queues can now be done over your computer or mobile phone. The demand for fintech (aka financial technology) is so great, in fact, that it fueled nearly a quarter of new jobs available in the financial sector in the last three years.
Despite this, there are many pockets of the financial industry that still require the human touch. One of them is in the area of home mortgage.
What Mortgage Advisors Do
You may be thinking: Since fintech is so popular, shouldn’t it be much easier to apply for mortgage? Just go online to any mortgage providers and make the application, right?
Technically, yes. But there is something more to mortgage application than just a click of a button. When you take up a loan, you are essentially asking for money from a financial provider (e.g. banks) with the promise of paying it back at a later date. Of course, the providers would need to understand your financial capabilities beforehand. It is only right for the providers to make due diligence before giving away what usually is a substantially high amount of money.
Mortgage advisors, therefore, are the bridges between you and the providers. They are professionals who can connect your mortgage needs with what the bank is able to provide. They are well versed with the process of obtaining mortgages and often have access to the various loan packages.
This offers several advantages:
1. Cut Your Time Spent
Since mortgage advisors have extensive access to various loan packages, they are often the quickest and surest way to acquire the best mortgage solution. Essentially, they have done the shopping for you. This cuts down the need to go bank-hopping, or piling hours of research on what is the best mortgage or refinancing package available.
2. More Independent Advice
Unlike banks who are more interested in offering their own home financing solution, independent mortgage advisors deal with solutions provided by a few. This is good news because it ensures a more unbiased and fair pool of solutions that is more customized to your home financial needs.
3. Balance Between Great Package Offerings & Actual Needs
We have seen it too often: Home owners selecting the “lowest” rate mortgage package on their own, only to find out years later that it is costing them more than they first thought it would!
What many home owners don’t realize is that the best solution comes together with their own set of risks and opportunities. Even though some packages are more attractive than others, they are not without their own disadvantages. While their primary role is to help you obtain the best financing, a good mortgage advisor would be able to discern whether the package with “lowest” rates is really the right home financing fit for you.
4. Understand Regulations From Authorities
There are different regulatory authorities such as the Monetary Authority Singapore (MAS), Housing and Development Board (HDB) and Central Provident Fund (CPF) that create regulations that directly impacts property ownership. A good mortgage advisor is likely to understand and be updated on how these regulations would offer great advantage. They would be able to walk you through the rationale behind these requirements and provide a preliminary assessment on how much a bank could offer you.
5. Their Service Is For FREE! (Sort of)
The banks/financial institutions pay mortgage advisors a distribution fee for each successful loan application. Hence, home owners is not required to pay fees to the mortgage advisor. Home owners only need to ensure your payment to the bank is timely.
Truth be to told, there’s no real difference between the rates of the distribution fees between banks (which is only a small percentage of the loan amounts). This means that there’s no particular bank that offers more favourable rates to the mortgage advisor than others, that may cause advisors to skew in favour of one bank over the other.
Mortgage advisors (brokers) are essential to the loan process ecosystem in order to help the banks save costs through finding an efficient distribution channel and employing an optimum number of employees (bankers and credit officers).
If the banks are more cost efficient, they may be able to provide better rates for the end user. That will allow home owners to acquire a living space that they can truly feel at home in.
About The Author
Shamir has more than 8 years of banking experience across various areas in Retail, Corporate and Private banking (including Islamic finance) for one of the largest banks in Southeast Asia. In Corporate Banking, he was involved in structuring loan transactions for real estate developers and REITs. He also worked with private bankers to provide credit solutions to their high net worth clients.