Banks vs mortgage brokers: Which one should I use to refinance my home loan in Singapore?

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If only shopping for a home loan was as fun as shopping for bags — or video games or a smartphone. Finding those discounts and getting a great deal is worth a few hours, right?

But hunting for the right home loan takes a lot more time, effort, and industry-specific knowledge, especially when it comes to decoding jargon and comparing home loan packages.

To help you find your perfect home loan in Singapore, we break down the difference between mortgage bankers vs mortgage brokers, benefits of refinancing with a bank vs mortgage broker, and a free home loan comparison tool to compare the best rates in Singapore today.

Difference between mortgage broker vs mortgage banker

Think of a mortgage broker as the key between you and many potential banks. The mortgage broker compares interest rates from different financial institutions on your behalf and shortlists packages that fit your needs.

They also gather relevant documents from you, reference your credit history, verify your employment, income, and CPF statements, as well as apply for relevant home loans and also negotiate terms of the contract on your behalf.

Once you qualify for and accept a home loan package, your mortgage broker will continue to work with the bank and ensure that your transaction runs smoothly.

A mortgage banker, on the other hand, works under one bank and serves as their sales team. Mortgage bankers earn a monthly commission based on the home loan packages they’ve sold and terms may not always be negotiable.

The important aspect to note is that they only show you home loan options from the bank that they work for. A mortgage banker won’t tell you whether another bank is offering a better interest rate.

Pros & cons: Refinancing a home loan with a mortgage broker

If you’re in the process of applying for a mortgage loan in Singapore, here are a few reasons why you should (and shouldn’t) consider working with a mortgage broker.

Pros of getting a home loan with a mortgage broker in Singapore

  • They have access to home loans from many financial institutions. That means more options to choose from and a higher likelihood of finding a package that caters to your short-term and long-term financial goals.
  • They can negotiate with their bank partners on your behalf, helping you get a better deal in the end.
  • They save you time by taking care of the application process, from start to finish.
  • They have industry knowledge and can share advice based on previous experiences. For example, they might know which lenders are more flexible and which ones have tougher standards when it comes to approving applications.
  • Their services are often free.

Cons of getting a home loan with a mortgage broker in Singapore

  • They have less control over your home loan process because they don’t actually work for the financial lender. If the bank’s underwriter places your application on the back-burner, the best your broker can do is follow up.
  • They don’t work with all banks, only the financial lenders that their employer partners with.
  • Their interests may not align with your interests. Since their compensation comes from the lender for bringing in business, their goal is to get you to accept a mortgage that maximises their compensation.

Pros & cons: Refinancing a home loan with a bank

If you’d prefer to allocate more time to do your own research about mortgage rates and approach different banks individually, here are some pluses and drawbacks to consider.

Pros of getting a home loan with a bank

  • They work in-house and have more control over the application process. That means if your application is pending at a specific step, they know exactly which colleague to contact about the issue.
  • They can offer the best rate available within their bank.
  • If it’s a smaller lender, you may receive a more personalised experience.

Cons of getting a Home Loan with a Bank

  • They might not explain the fine-print and they certainly won’t share any loopholes, if they exist.
  • They have fewer mortgage packages to offer, so whether you’re looking for a new home loan or refinancing an existing home loan, considering only one bank limits your options.
  • It would be more challenging and time consuming to compare their home loan packages against interest rates from other banks.

Our recommended mortgage broker in Singapore

Having the right mortgage broker can make all the difference when it comes to securing the perfect home loan. Our team of finance research analysts have compared a variety of mortgage brokers in Singapore and here’s our our top pick for refinancing your home loan:

Redbrick Mortgage Advisory

Redbrick Mortgage Advisory is an independent advisory working with 16 banks and financial institutions in Singapore.

Reasons to choose Redbrick Mortgage Advisory over other mortgage advisors Leveraging their strong relationships with 16 lenders in Singapore, Redbrick Mortgage Advisory has achieved an excellent track record of financing:
  • More than 25,000 properties
  • More than S$20 billion in mortgages
  • Mortgages from S$80k to S$25 million
Highlights
  • Established advisory with integrity
  • One-stop streamlined service to ensure prompt and smooth application process
  • Low interest rates and competitive packages
  • Largest team of mortgage brokers
Services Residential Properties, Commercial Properties, Home Construction Loans, Bridging Loans, International Home Loans, and Equity Loans
Website https://www.redbrick.sg/
Contacts Details (65) 9169 9662 or [email protected]

Customer Reviews

Redbrick Mortgage Advisory has a 5 Star Google Review, based on 806 reviews. Here are a few reviews that caught our attention:

“The advisor, Wren, was not only professional, but also sincere in his work for us. Everything was made clear and things went smoothly as we had hoped for. It was such a pleasure to have him as our advisor in our transaction. We will definitely be engaging him in our future undertakings.” - Mohd Faizal

“Contacted Redbrick as my housing loan was due for refinancing. Was assigned to Ms Steffi Tam, who was extremely helpful in providing an easy-to-understand yet comprehensive summary of available plans. She patiently answered and explained whatever queries I had, as this was the first time I was doing refinancing. Managed to get a great deal, so I will definitely recommend this to my friends!”- Chen Zhenchang

“My husband and I were very lucky to be assigned to Debby as our mortgage advisor. She was extremely helpful throughout the process of purchasing our first home, and was always responsive and accessible. Purchasing a house in Singapore can be very stressful, especially for first time buyers like ourselves, and particularly so as a local-expat couple. Debby was able to not only make the experience less stressful, but also did it with kindness, humour and patience. We're extremely grateful to Debby for all her help and support.” - Sabrina Vu

Free home loan comparison tool in Singapore 2021

Home loan rates vary across banks, ranging from fixed rates, floating rates, and different lock-in periods. Your monthly repayment amount and interest rate can also change based on your home loan.

The below example illustrates how total interest cost differs if you were purchasing a (completed) HDB and needed a home loan of $500,000 for 25 years.

Compare mortgage rates in Singapore 2021

Bank Type First Year Monthly Repayment First Year Interest Rate Lock-in Period Total Interest Cost
HSBC Floating $1,953 1.30 per cent 2 years $85,900
HSBC Fixed $1,953 1.30 per cent 3 years $96,724
Bank of China Floating $1,920 1.16 per cent 2 years $90,628
Bank of China Fixed $1,941 1.25 per cent 2 years $91,684

Even a fraction of a decimal point can make a big difference on your home loan. Here’s an example:

Average Condo Cost Interest Rate (per cent) Interest Amount (S$) Loan Tenure Total Interest Paid
$1,780,051 1.05 per cent $18,690.5355 30 years $560,716.065
$1,780,051 1.06 per cent $18,868.5406 30 years $566,056.218

Based on the table above, despite a minor 0.01 per cent difference in interest rate the difference towards total interest paid is $5,340.153.

This article was first published in ValueChampion.