“Can you share some tips for choosing a mortgage loan?”
“Which home loan is the best currently?”
The questions above could sound quite familiar to you. While recommending your client a suitable home loan isn’t quite the main job of a property agent, being knowledgeable about the different types of mortgages available can help you to successfully close the deal, and make you appear more professional and knowledgeable in the industry. In turn, this will earn you credibility and gain trust from your clients, who could refer their friends and family to you in the future.
3 Differentiating Factors of Home Loans
The various types of home loans available in Singapore can be rather daunting for a first-time property buyer and as a real estate professional, your advice can be golden. Home loans can be differentiated by 3 different factors:
1. HDB or Bank Loans
There are differences between a HDB housing loan and a bank mortgage loan. These include eligibility for loan, the amount of downpayment you’d need to fork out in cash, interest rates and the loan-to-value ratio. Each has its own pros and cons and would require a look at your client’s financial situation to determine the loan that best serves their interest.
2. Fixed or Floating Rate
A mortgage loan with a fixed rate means the interest rate pegged to the loan is fixed for a certain period, usually for 2 or 3 years. After the fixed interest rate period is over, the interest rate for the loan will be pegged to SIBOR/SORA, Fixed Deposit Rate (FDR) or other reference rates determined by the bank.
On the other hand, a floating rate loan means the interest rate pegged to the loan is based on a variable rate – when the interest rate changes, your monthly instalments vary as well.
3. Different Types of Interests
You might have heard of SIBOR, SOR, FDR and SORA. They may not be easy to explain to the layman, but just note that Singapore is phasing out SOR and SIBOR to be replaced by SORA – Singapore Overnight Rate Average – in the next 3 to 4 years.
Certain mortgages may also peg their rates to a 6-month or 12-month SIBOR – the underlying implication is that shorter-term rates are usually more volatile than longer term ones.
Knowing Your Client’s Persona
Finding a loan with the lowest interest rate doesn’t mean it necessarily suits your client. Similar to matchmaking, there are mountains of considerations to be mindful of, as every individual is different.
You’ll soon know that individuals at various stages of the property-financing journey will have their unique set of considerations to take note of.
As such, it might be useful to understand the persona that is the most similar to your client – so you can get that much closer to giving them the customised advice they need from you.
Couple Buying a Resale HDB
For couples who do not want to get a BTO, a resale HDB could be an alternative. For first-time home buyers, your role as an agent could be pivotal in helping them choose a suitable home loan.
If they can afford the higher downpayment of 25% of purchase price (with 5% in cash, remaining 20% can be taken from CPF OA), a bank loan might be a better option since it is usually lower in interest rate compared to HDB housing loan’s 2.6% interest.
If saving money on interest is a huge priority, you could also advise them to use cash to service their monthly repayments so they can avoid the accrued interest if using CPF to pay for their instalments.
Private Property Buyers
For those looking to purchase private properties such as a condominium, a defining factor for their loan type would be whether the property is a Building Under Construction (BUC) or has already been built.
For the former, buyers will need to take out a BUC loan – the loan disbursement will follow what is known as a Progressive Payment Scheme (PPS) where the monthly repayments will be paid on a staggered basis in tandem with the property’s construction progress. This type of loan will typically be based on a floating rate.
Property Investors Buying a Second Property
For investors looking at using their second property for rental income, the key here is to try to have the rent cover their monthly mortgage. In such cases, getting a fixed rate loan could provide stability and make the tracking of their return on investments (ROI) a simpler process.
All these can be complicated and honestly, there is no such thing as “the best mortgage”.
There is only “the best mortgage for your client”.
And to achieve that, you need to be familiar with the latest bank rates and updates as well as your client’s financial situation.
All these can be tiring and time-consuming, and distracts you from focusing on your other property listings, which is why PropertyGuru Finance offers every Agent Partner your own Personal Home Loan Assistant to support your clients with the most suitable home loan recommendations while keeping you updated every step of the way.
Contact your Personal Home Loan Assistant today and get started on matching your clients to the most suitable mortgage!
Being a better partner for you,