Do you need a Mortgage Adviser?
2 Now that you have an idea about what you can afford to pay as mortgage repayments, the next step is to decide how much your actual buying power is – how much are you realistically able to borrow from the banks to buy the house. It is way easier to get the services of a mortgage adviser during this phase to do the hard work.
If you are doing it yourself, here’s how it is done.
Things you need: your income, expenditure, assets and liabilities.
In simple terms, how much money comes in (e.g. salary, rental income, profits), how much of it do you spend (e.g. bill payments, groceries), what items of value do you possess (e.g. savings, gold, vehicles) and how much do you owe (e.g. loans, credit cards, hire purchases). You also need an amount of cash (Savings) that is readily available as your deposit. This will be the down payment for the property.
Once these are figured out, you need to go to lending institutes to find out how much you are eligible to borrow. Institutes can be banks (highly recommended) or other financial entities that are legally allowed to lend. They evaluate the values you put down plus some other numbers such as your credit rating and decide whether you can borrow money at all, and if so, how much.
Why doing it yourself is hard:
- Having to face rejections (multiple times)
- Hefty amount of communications and long waiting periods to get results
- Time consuming
- Emotionally draining
You may not get approved for finance right away (you are lucky if you do!). Even if you are successful in your first attempt, you may need to fish around to get a good deal. This process is not only time consuming but also emotionally draining at times especially if you get rejected by multiple banks. You also have to fill multiple applications that have different formats from one another. That is just the beginning! You also need to carry out regular communications with each party and wait a long period of time to hear back. With a day job and other personal responsibilities at hand, having to going through this repeatedly is not fun (trust me on this!). You will end up exhausted at this stage even before the good part begins.
Finding a competent mortgage adviser makes your life so much easier at this stage. The first good thing about a mortgage adviser is, their services are free to you. They get paid by the banks once a mortgage is finalised.
Secondly, they would be experienced enough to tell you how much your buying power is and what you could do to improve if needed, even before going to the bank.
Thirdly, with their experience, they know which banks have reserves to lend money at present. Which cuts down the urge to go to every bank possible.
Finally, they will do the leg work for you. They already have established relationships with banks which allow them to communicate much easier and quicker. They will be able to get you pre-approved for a mortgage which would be a plus point when making offers. With a mortgage adviser, you’ll get results much easier, especially when your offer is accepted and are ready to apply for the mortgage. At this stage, they can offer you advice on loan types and loan terms to consider.
Having said that, there are times when you feel it is better to have first-hand control of the process because you become reliant on a third party (adviser) for communications with the banks. Especially, when the mortgage applications are processing, banks take at least 5 working days to process. Then they communicate the results to the adviser, and you hear it from them. If there is anything to be negotiated, you need to go through the mortgage adviser to the bank which seems like an eternity to get results. Such waiting periods in between can agitate you if you are someone that is used to take control and steer things.
My recommendation is, do use a mortgage adviser, even if this is the case.
However, find one that is extremely competent, that does not need to be told what to do and one that is proactive. Talk to previous clients of mortgage advisers if possible to find out how they performed during the application process. Written reviews online might say they achieved the final goal – a mortgage, but the process of getting there may not have been smooth sailing. At the outset, explain to them you need regular communications during the process, even if the only update they have is ‘no updates from banks’. However, set a reasonable frequency for such communications that is agreeable to both parties.
Stay tuned for more tips on property searching!