Home Loan: Why Is It Important To Get The Right Advice?

In today’s modern society where information is just a quick Google search away, we question the need for intermediaries in our transactions. For example, some may question the necessity of intermediaries for property transactions, such as home loan, in view of multiple listing websites which offer a suite of services.

Do we even need advisors?

While online resources do provide more information than many of us have grown up with, contextualising this information to your needs require experience within the local market and a broader understanding of industry practices that may not be documented, “trade secrets” if you will. This takes time, time that we may have, but certainly not as much as compared to someone who has made a career dedicated to understanding this industry.  

Prospective homeowners such as yourselves have worked hard at making your real estate goals come to fruition. Just like how one would consult the most well-seasoned mechanics with that strange noise coming from your car’s air-conditioning, finding the right advisor for your next real estate transaction will benefit your enjoyment of the property for many years down the road.

Why should we have an advisor for home loan?

You may already understand that real estate purchases are financed with a relatively large amount of debt. It certainly is a daunting prospect, and securing the right financing is one of the final steps after months of searching.

For many, the idea of having an added monthly financial obligation can be dizzying, especially alongside existing financial responsibilities.

An advisor can firstly help you navigate your way through the jungle of financial jargon to deliver synthesised results for your selection, saving you time and energy.

Secondly, a good advisor will recommend products tailored to your long-term financial goals.

The latter is important for individuals who seek to establish multiple streams of passive income, retirement planning, or capitalising on opportunities for your child’s future housing needs.

What to look out for when selecting an advisor

1. Neutrality

The basis of working with an independent advisor is to navigate around the products that banks simply wish to sell you, and to find the loan product that suits you. After all, why would we want to be pressured to sign a loan that may simply benefit someone else?

This basis of neutrality can only be established if your advisor has an understanding of how each mortgage provider reacts across market cycles, which leads to…

2. Knowledge

It is understandable that the right home loan advice usually comes from those who have the most experience in the field most relevant to you.

For example, you may wish to obtain advice on home loan in a decoupling scenario, and concurrently with to seek advice on CPF usage in line with your retirement goals.

Some advisors may also have a better understanding of which banks offer better long or short-term loans, and which banks have slightly more flexible credit requirements for your given annual income. 

Such value-added services require the expertise of professionals who have seen a wide range of unique cases. The more you speak to your advisor, the more they will understand the specific needs that you face.

It is easy for us to associate age with experience. While in most cases that may be true, some younger advisors may be more in touch with current market trends. Which is why it is equally important to be tuned to their…

3. Market Relevance

Like many trends within the financial markets, only the rare few top performers catch on to important trends before they occur. In the Singapore fast-paced real estate market, opportunities are usually exploited by those astute observers before legislation kicks in, levelling the playing field.

On the other hand, having an outdated understanding of the market may lead to an advisor recommending poor decisions which may put you further away from your financial goals.

Strong market relevance includes having a strong understanding on HDB schemes that one could take advantage of, and the recent changes in stamp duties, to mention a few.

If you are searching for an investment property, your mortgage advisor should point you to the right loan that would balance the interest rate and credit risk with the returns that can be derived from that property and recommend a product or a plan over a given investment horizon.

Hiring a mortgage advisor can therefore reduce some risk during the mortgage decision making process, the benefits of which are carried forth throughout the entire holding period. With real estate prices soaring year after year, rain or shine, it would make financial sense to get the best advice for such large financial decisions.

So why would having an advisor benefit you when applying for your home loan?

Seasoned real estate investors would have had more experience with mortgage advisors and would therefore have a stronger understanding of their value when it comes to selecting the right mortgage.

We all know how banks have a tendency to lace their products with complicated jargon, fine print and terms that vary greatly from product to product. An experienced mortgage advisor would help you overcome all the paperwork, while highlighting any pitfalls that may be presented to you.

Ultimately, the right mortgage advisor should not be one that tries to simply sell you the mortgage. Instead, he/she is one who puts your goals first and recommends the best solution for your long-term success. In some cases, in a market of high interest rates, your mortgage advisor may recommend that you take a step back and explore the market a bit more.

Having a mortgage advisor, after all, is about gaining an experienced perspective, as opposed to our perspective as buyers, which may be affected by the biases that we have developed during our own research.

Conclusion

While online resources do provide a wealth of information, it is important that we stay wary of their credibility in light of recent bouts of misinformation.

Speaking with a mortgage advisor can help you understand the current market trends in greater detail, while gaining a credible perspective on your financing decisions.

We recommend that you speak with any one of our Redbrick Mortgage Advisors to gain a better appreciation for the home loan landscape in Singapore, and how you can posture for your next step in this real estate journey.

Davin Kong
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