A Very Strong, Truly Unbiased article on why you should never DIY your mortgage

Updated: Sep 28

Not a lot of people know this, but I went to Poly and my background was not in Finance.


It was in Creative Writing for TV and New Media (Singapore Polytechnic) and…I basically forgot everything. They taught me website design, how to write well on a new media medium (still not quite there yet) …


But most of all, they taught me how to do objective writing.


If you’ve been on Money Maverick long enough, you know that I promptly took 3 years of learning this and tossed it out the window.


I promote myself and what I sell every appropriate, and occasionally inappropriate, chance I get.



For example, this 24.2% fund that I offer net of expense ratio.

In my course, you quickly learn that objectivity, or unbiasedness, is a total lie.


I went into a course thinking I’d learn to be objective, and it took 3 years to learn that proclaiming ‘unbiased’ is for idealistic children.


It’s why I love money and the study of money – Money teaches you where your heart really lies.


And ‘Unbiased’, is a lie.


…Or so I thought.


Mortgage


A person’s mortgage is one of the largest purchases, if not the largest, that they will make in their lifetime.


Close to 80% of the population own the HDB that they live in, or over 96% of people who live in HDBs are paying a mortgage on it. The statistics are likely similar for private properties.


Like insurance, what happens with a purchase that seems inevitable is that many people will try to figure out how to maximize their value for dollar.


Typically for something like interior design, for purchasing property, for buying insurance – most people would consider a licensed professional for advice and recommendations.


Others would consider DIY – in order to save costs.


So we break it down into two primary options:

Consultant vs DIY. Ish.

I’m sure there will be some debate on this, but DIY advantages basically boil down to a potentially higher objectivity (since you tend to know what you want better) and a lower cost.


But what if had a licensed professional which provided both the objectivity AND the lower cost?


What if someone were truly unbiased because the most incentives were provided for them to be as much?


A Truly Unbiased Professional


A Mortgage Specialist is an intermediary between a lender and a borrower who needs a mortgage loan. To operate in Singapore, they are licensed under MAS (Monetary Authority of Singapore).


Basically, they do for you what you were going to do anyway – source out the best private loan for you (unless you were going to do HDB loan already) to help you lower the cost of interest over that loan.


For a huge purchase like a home, a favorable interest rate is extremely important.


Take a typically scenario for the average Singaporean - A $500,000 loan over 25 years at a 2.6% interest rate (your CPF loan rate) will result in you paying a grand total of $180,505 in interest.



By dropping your interest rate down by a mere 0.4% (2.2%), your total interest over 25 years is reduced to $150,487 – or over $30,000 in savings.



If you invest that amount with me across the same period – about $1200 a year for 25 years – at a 7% annualized rate, you could have over $81,000 instead.



We haven’t even looked at larger loans, or interest rates that are lower than that – which are certainly difficult, no doubt, but not impossible.


For context, the benchmark interest rate was last recorded at 1.88%, and even lower at 1.66% across the last 30 years.*


After all, that is why you’re reading this article – you’re at least a LITTLE interested in figuring out how to save that money.


I don’t know about you, but I would love to have that $30,000.


Here’s why you should use a Mortgage Broker instead of DIY.


1) Truly Objective


Unlike yours truly or a banker, a Mortgage Specialist gets paid according to the size of the loan.


This means that the broker has no incentive to offer you any particular bank from the 16 banks that offer mortgage loans.


In fact, because they want your business again when you have your inevitable refinancing, they would be truly incentivized to offer you the best deals they have available.


They are also unable to take incentives from banks or bank representatives.


2) No (Additional) Cost


Your next concern might be the fact that you’re utilizing a licensed professional, it would cost you extra – not unlike if you were paying my fee or a real estate agent’s.


This is subverted by the fact that a Mortgage Specialist’s cut is from the bank that you have selected.


In other words, it literally costs you nothing more to utilize their service than what you were prepared to pay anyway if you decided to DIY.


3) Higher Quality Service and Advice


This is my favorite part – because as a generalist in this area, I can see how a specialist operates.


Let’s look at this particular case study.


Mr Lim has a $450,000 outstanding loan, and he wants to refinance with a bank instead of continuing his CPF loan (2.6%).


He does a DIY comparison online for what kind of ‘fixed’ refinancing rate he can get. Immediately, this pops up on the screen:


1) Bank C: 2.13%

2) Bank H: 2.18%

3) Bank S: 2.23%


I have marked the lowest interest rate to the highest interest rate in order.


A DIY person might take the interest rates at face value. Since Bank C is clearly competitive, I’d thank the software and snatch up the loan.


However, a Mortgage Specialist is trained and licensed to dish out professional advice on these matters, such as other considerations you might have missed out. Let’s look at what happens when he does a holistic comparison:


Bank C:


Difference in Interest: 2.6% – 2.13% = 0.47% (difference in interest)


Gross Savings Per Year: 0.47% x $450,000 = $2115


Total Gross Savings: $2115 x 2 = $4230 (Gross Savings for 2 years, based on 2 years as loan package has a lock in period of 2 years)


Total Net Savings: $4,230 – $2,000 (Legal fee without subsidy) - $500 (Valuation Fee) = $1,730 (Nett Savings for 2 years, $865 per year)


Bank H:


Difference in Interest: 2.6% - 2.18% = 0.42%