Last week, I wrote about my encounter with a bank for failing to increase my credit card limit without even an explanation. Come to think of it, the issue is so trivial comparing to property loans.
Many people mistakenly think that they can easily get credit from their bank to purchase their property. Worse, they think their own bank or their own agent will offer them the best deal as the “market is so competitive”.
You see, property is probably the biggest purchase to most people; and yet many spent less time researching property loan than the time used to decide which new smart phone to buy. As Alfred Chia put in his book “Mortgage and Grow Rich”
Mortgage is a double-edged sword. How you handle your mortgage can make you a millionaire, or a pauper. It is an instrument that can help you own and make millions from real estate, or it can be a leaking water pot that drains away all your cash till you have nothing left.
In the course of my work, we have subscribed probably Singapore’s Most Advanced Loan Analysis System iCompareLoan.
Today I have the privilege to interview Paul Ho, the chief mortgage consultant of iCompareLoan. What he said is so insightful and I think it will benefit all my readers of this blog.
As chief mortgage consultant of iCompareLoan, can you share with me who are the people that need your company’s services the most?
Most busy professionals will need our services. As we are an independent mortgage advisor equipped with Singapore’s One and Only Home Loan Report ™ analysis platform, we can shortlist the best fit packages for customers, saving them TIME and MONEY.
High net worth individuals will find our services the most beneficial as they tend to have more complicated requirements. Our consultants gather the related information and advice on the best approach to find the best fit loan, not simply the cheapest. We also have access to mezzanine funds for SME business lending which can help a business owner source the cheapest and most appropriate business expansion loans.
What problems are these people facing?
People are facing a situation of elevated property prices and high rental cost which directly contributes to overall business operations cost.
Do you think Singaporeans generally understand the value and importance of your services? If not, how can this situation be improved?
We are starting to see people realizing the importance of our services on the one hand and on the other hand, people tend to belittle this service, saying, “Give me the cheapest rate!”. And there are a lot of portals out there doing simply that with little knowledge on finance, rendering their clients vulnerable. And one such portal even advocated applying to as many bank loans as possible, at the detriment to the owner’s own credit bureau report. This goes to show how little they know about finance and yet try to talk as if they know finance.
We don’t really think the situation will easily be improved. Based on the 80-20 rule, if the majority of the people think it’s the right thing to do, right investment to invest in, then why are these 80% of the people not controlling 90+% of the economic wealth? Instead, what we see is, perhaps 20% of the people controlling easily 80-90% of total wealth. What this tells you is, those who know, will continue to know. Those who do not and continue to think that they know, they will continue to be ignorant. And it will not be easy to turn them around.
People generally do not value internet related services and believe that they should be free. But good advice is not free, the consultants need to feed their families, as much as you do not do free work for your employers. Hence we are most likely to turn away enquiries and sell our advice by the hour if people continue to treat this frivolously to sieve out the serious people from the time-wasters.
Can you share a real story about how you help a client significantly and what we can learn from this story?
Once we helped a client to de-couple their property. Both are high earners. The wife transferred her share of her private property to his husband. So the husband owns 100% of their matrimonial home. This frees up the wife to purchase her own private property without having to pay Additional Buyer Stamp Duty (ABSD), which costs her 7% of property price.
What are some of the common misconceptions people have about mortgage?
Most people think that they have a lot of assets and hence the bank will want to lend them. They said, “Don’t worry, I’ve a lot of properties. If I don’t pay, banks can take my property” In fact most banks are afraid of concentrated risks. And banks are in the business of lending, so banks are really not interested in taking away your property. There is a lot of trouble and hassle to seize a property. Banks only have the option of taking away your property so as to reduce their lending risks.
What are some of the common mistakes people make when they apply mortgage loans?
They believe the 1st thing that property agents tell them. And most of these property agents do not even have an independent tool like www.iCompareLoan.com/
consultant subscription. They will simply refer you to bankers and you will end up talking to many bankers and waste time. In fact, we will still not likely get the best packages as sometimes bankers are so busy taking in deals that the prevailing best packages from certain banks may be so swamped that you won’t even get through or get a response. With us, we have some business volumes with banks and hence is able to get through slightly easier. (Imagine this being at a stock market, where you want to buy a share because it’s good, you call a broker, but his line is busy, and the share price has already risen after you got through. But if you have his personal mobile number, that is different. You can get through easier.)
Can you share a real story about how a person suffers due to ignorance in his personal financial matters?
Once a person who has applied for an approval-in-principle for a HDB home loan. After he got it approved, he went to buy a car. One month later when he has to get the letter of offer from the bank, the bank refused to lend him. At the point of an actual approval, the bank’s credit department check this individual’s credit again and found out he has incurred extra debt. So this person has to forego his deposit. Luckily HDB Option-to-purchase is not 1% of purchase price.
What are some trends you are observing about property market especially in terms of financing?
People are resorting to borrowing cash from their relatives to pledge cash in order to bump up their earnings to qualify for higher loan. Property agents are increasingly referring businesses to us as customers get more knowledgeable about financing while they are stretched. And many agents are now starting to use Home Loan Report ™ to help their own customers with home loans analysis.
Robert Kiyosaki often talks about Other People’s Money (OPM), do you think his method can be implemented in Singapore?
Other People’s Money (OPM) can be used in any context. Many Multi-level marketing practices OPM. So yes, OPM can be implemented in Singapore as long as the people who structure these OPM is fair and not too greedy.
How successful property investors do differently from amateur investors? Can you give an example?
Successful property investors go for good properties and are unemotional with their own individual housing preferences. For example, a house is simply an asset that yields a return, it does not matter that it’s dirty or ugly or by the road side. Any property is a good property, it depends on what price and what returns.
Amateur investors tend to choose smaller price quantum properties, simply because it’s cheaper in price range. And many times, they will come with emotional baggage like, “I don’t like this kitchen, I don’t like this facing, I don’t like the decoration.”
What successful investors tend to ask, “Will buyer like this type of design?”, “Will renters like this type of decorations?”, “Is it in a location near to potential renter’s work place or leisure place?” See, they don’t care about their own preferences.
If you could say one thing to the readers of this book, what would it be?
Think Different. Ask agents for Home Loan Report ™ analysis when you talk to brokers or agents. If they cannot provide what we at iCompareLoan can provide, at least something similar, so that you know that you are talking to someone who knows their stuff.