8 Quick Ways to Make Your Mortgage Work Harder For You

Learn the inside secrets about making your mortgage work for you.

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Do this and you could end up richer

“Why doesn’t my bank call me when my rates go up? Isn’t this just good customer service?” This is one of the most common comments I have heard from clients and friends over the years.. usually asked in very exasperated tones.   Unfortunately, most banks don’t do this. Why? The answer is simple; because this means a potential loss of existing customers, and loss of profits.   Mortgage loans are typically structured with teaser (lower) rates over the first 2 to 3 years, with rates moving up significantly in subsequent years  With the requirement for monthly repayments to be made via GIRO, it is easy for anyone to miss the changes with our very busy lives.   The reality is that this is more common than one realizes… cable, telephone, credit cards… the ease of internet and automated payments give us the convenience that we need, yet tend to blind us to any changes in our payment and consumption habits.   What can one do to see if there is anything you can do to see if you can save money?   Simple. Review your current situation and see how that fits with your current needs.  In the period that has elapsed since your loan has been taken, new loans, base rates and your personal circumstances would have changed.   There is simply nothing to lose from this approach. Find a better solution, and you will have a loan which better suits your needs.  If your current mortgage remains the best , you will rest easy from the knowledge that you’re already in the best possible position. At wiseloans.sg,...

Credit Bureau Report

One of the things I realise is that many clients have not come to grips with is their Credit Bureau Report, which is generated by Credit Bureau Singapore (www.creditbureau.com.sg) When I discuss their conduct on their credit facilities, many will tell me (sheepishly I might add) that they may be a little late on some of their payments.. but hey…. “the banks should be happy right?.. I mean they earn interest from me right?” I hate to break it to you… but such behaviour does not bode well for you in the longer term. One of the wisest men I know, and an astute analyst, once told me, many years ago, that in order to see where Singapore will be in the next 10-20 years in terms of the financial industry, all we had to do was look at the US. He is right about that. In the last 3 years, we have seen the CBS report play an increasingly important role.  From a mere reflection of repayment conduct, the report now assigns a score to each person (AA, BB, CC, etc).  These scores reflect the risk of default of loans taken out by these persons. While the current rules on Total Debt Serving Ratio (TDSR) ignores the repayment conduct on these credit facilities, the credit scores are affected by the timeliness of repayments, as well as the number of credit facilities. Looking at the US, they now have FICO scores and loads of advice and services provided for people to learn how they can manage their FICO scores. I think it is a matter of time when the CBS scores will translate...

“What is the best loan?”

In a recent dinner with my friends, I was sharing with them my decision to bring my mortgage experience private and work with clients directly. Invariably, the question came: “What is the best loan?”  This is a question I always get… but does not have a simple answer. What does “the best” mean anyway? Typically, when people talk about “the best”, what they mean to say is the “cheapest”. When the market talks about the lowest rates, there are certain assumptions that are not typically mentioned: The “cheapest” rates are only the cheapest rates NOW; this may change tomorrow, next week, next month or thereafter.   Variable interest rates are typically based on a base rate (either SIBOR or SOR) and once these rates move, their relative positions will change; “Cheap” rates are typically based on the 3 year average loan rates.  Many banks have a “step-up” approach to rates; and these typically increase from Year 4 of the loans. When I mention this to my clients, their strategy would be to refinance in Year 4… which brings me to… “Refinancing Risk”.  One of the (potentially expensive) assumptions is that one will be able to refinance one’s loan anytime the rates turn disadvantageous.  However, this is not always possible when: Regulatory Changes A very good example would be the June 2013 introduction of the Total Debt Servicing Ratio (TDSR) which had many bank clients “stuck”; Fluctuation in Property Prices / Lower Valuations I have seen situations in the past when clients were not able to renegotiate or move their loans when property prices fluctuate; Small loans When loans get too small (usually <...
 

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