When it comes to taking a home loan, most property-seekers might focus on the mortgage with the lowest interest rates. As shared in one of our property guides, there are more considerations to getting the best home loan than just interest rates. Your client’s desire for a fixed monthly repayment or the propensity for risk would come into play as well.
For first-time clients applying for a home loan, they will likely be appreciative of your guidance in helping them understand what to look out for in a mortgage. Other than a whole list of mortgage jargon to grapple with, they could also have many other questions. Not only that, missing out on certain important clauses can lead to undesirable consequences later in the tenure. Here’s some helpful tips to guide your clients to better understand some common clauses in order to navigate the mortgage puzzle.
1. When can my client refinance or reprice his/her home loan?
When shopping for a home loan, it is common to see that some of these loans come with a “lock-in period”. This indicates a period where the borrower is obligated to stick with the same loan with a bank in order to enjoy a special promotional interest rate. This period can be anywhere between 1 to 5 years. They can use PropertyGuru’s Refinancing calculator to find out how much they stand to save by refinancing.
Should they decide to refinance or redeem the loan within the lock-in period for whichever reasons, the bank would usually levy a penalty of 1.5% on the loan amount redeemed.
2. Does my client have the flexibility to pay down part of his/her home loan?
Your client might have gained an unexpected windfall or had an exceptional bonus year and wish to pay down a part of his loan to reduce the overall interest payments. This is considered a partial repayment. In most cases, a partial repayment penalty of about 1.5% on the amount of mortgage prepaid will be levied. He’ll also need to serve a minimum one-month notice in writing before making a partial repayment.
3. Are there fees my client should be aware of?
There are many ways in which a bank can levy fees on a borrower. The key is to be aware of these clauses so that your clients can avoid the payment of these unnecessary charges. Common fees associated with home loans include:
Partial or full redemption fees: Generally, home loans that come with a lock-in period attract a penalty whenever one tries to redeem, whether in partial or full. This prepayment penalty is typically 1.5% on the loan amount redeemed. Thus, if they are considering a partial redemption, make sure the fee payments do not wipe out the interest savings.
Processing fees: Also known as a conversion fee, this is levied on the borrower during refinancing or repricing.
Another factor which is less significant to consider is the re-pricing admin fee. Some call this a conversion fee. Refinancing or repricing allows one to switch over to another loan package after the expiry of the lock-in period with the current loan. The difference is that repricing is done with the same bank instead of a different one. Do note that some banks may allow for a one-time repricing for free. Most banks charge somewhere between $300-500 for re-pricing and can go up to $800 for refinancing.
Legal and valuation fees: These are 2 other costs one will incur during refinancing. To attract borrowers to take up a loan with them, banks may give customers a subsidy in the form of cash rebates or a legal fee subsidy.
While most people will not say no to a subsidy, it also means that if your clients choose to move their loan within 3 years, they might face a clawback of these subsidies.
Legal fees typically cost anywhere from $1,800 to $3,000, and the valuation fee, which is paid to a professional for assessing the property’s market value, can range between $150 and $700. If your clients are keen to refinance, do read our ultimate refinancing checklist for reference!
Taking out a home loan can be a cumbersome process for your clients, especially if they are applying for the first time. It’s always best to work with our in-house loan specialists who can offer personalised and 100% unbiased advice to your clients and help them find the optimal home loan package according to their individual needs.
PropertyGuru does the legwork for you and send you real-time updates of your client’s loan status so that you can focus on scheduling and conducting home visits without compromising on your customer service standards. What’s more, every successful loan application will earn you bonus PropertyGuru Ad Credits that can help bring success to your other listings.
If your clients are ready to apply for a home loan, contact us via WhatsApp us at +65 8769 5300 and let us do all the legwork for you!
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