If you are looking to apply for a home loan for the first time, many aspects of the lending process will be a mystery to you. Couple it with the fact that taking up a mortgage is possibly the largest financial commitment you will have in your life, it’s definitely a good idea to know what’s involved.
From choosing your bank to avoiding the mortgage broker, there are several myths and misunderstandings about mortgages that can disadvantage first-time borrowers. Let’s look at some of the most common misconceptions about home loans so that you can get the best deal.
1. The loan with the lowest interest rate is the best
If only life was so straightforward! Then all the banks would probably only offer one rate, right? So if you take a quick look at our home loan search engine, you’d see that we offer over 100 home loan packages from more than 10 financial institutions.
The truth is when you are deciding on a home loan, it involves several other considerations other than just the interest rate. Examples include whether there is a locked-in period, the type of benchmark rates the loan uses, as well as whether it is a fixed or variable rate. It can definitely be daunting for new borrowers, and that’s why we are here to help you.
Other than that, there might be ongoing fees, administrative costs and other charges that banks charge that can affect the final amount. Choose wisely!
2. Your current bank is the best choice for a home loan
Say you’ve always has a POSB savings account since you were 8 years old and you’d never changed your bank account. Now that you are looking for a home loan, you’d think that going back to POSB will be your best solution. After all, they haven’t failed you all these years, right?
The truth is Singapore is a small country and banks need to innovate to ensure they stay ahead of the competition. It doesn’t hurt to log onto the internet and perform a few clicks on your mouse to compare across the loans from the banks. Sticking to one bank means you miss out on lower interest rate options and better loan features from other banks.
3. Mortgage brokers are expensive
Some borrowers refuse to use a mortgage broker because they assume they charge a fee and are expensive. The fact is mortgage brokers are probably one of the best services you can use when finding a home loan – you get free consultation, someone will do the legwork for you and help you with all the administrative paperwork you’d need to do. What’s more, they are usually free because they earn a fee from the bank when you take up a loan. We listed the reasons on how mortgage brokers can help you.
4. My income is high, so I can get a home loan easily
Earning a high income is usually helpful when you want to get a loan, but being a big spender or debtor also works to discredit you. This is especially true here in Singapore where you’d need to consider the Total Debt Servicing Ratio (TDSR) when taking up a home loan. Not sure if you qualify for the loan amount you need? We can help you.
5. Being asset-rich can make up for having a low income
On the other hand, if you are low on cash and have other assets such as an existing property, you’d think that the bank can take that into consideration as a qualifying criteria.
This depends on a case-by-case basis, as banks typically use a more holistic credit assessment to decide whether you meet their lending criteria. If you can afford the loan, an experienced mortgage broker can come in handy in helping you to work with the lender.
6. You have a bad credit history so you won’t qualify for a loan
This really depends on your situation. What is considered bad credit history can range widely; a few missed credit card payments? An unresolved debt with a bank? Working with a mortgage broker can help you access your situation better.
Also, most people tend to take up a mortgage loan together with their partner, so there might be a way around this. Let us know if we can help you find a way around the situation.
Contact us today for the best mortgage advice!
