What is A Mortgage Loan? And Where and Who Do I Get It From?
What is a Mortgage Loan?
A mortgage loan (or often just known as “mortgage”) is a loan used to buy property. In a mortgage loan, you (the borrower) give the lender (often a bank) rights to a property until you completely pay off the required payments along with interest.
To put it in simple words, when you use a mortgage to buy a house, you are taking out a loan to buy the house. This loan is however secured by the same house, in simple words the same property is used as a guarantee for your loan. If you fall back on your monthly payment, then the lender has the right to take back your house.
Most people rely on a mortgage loan to purchase a property (very few people can afford to buy a property outright with cash).
Where to Apply for a Mortgage?
If you are planning on purchasing a property, there are numerous ways to obtain a mortgage. For example you could get mortgage loans through mortgage brokers, banks and Housing development board (HDB). The key differences between these sources lie in the loan amount, the interest rate and the maturity period of these loans. Let’s discuss the details:
Obtaining a Mortgage from Banks
Dealing with the banks is probably the most preferred option for most. Generally, a loan officer assists you in the mortgage application process and procedures.
When you decide to apply for a mortgage directly from the banks, there are generally less added fees or commissions as there are no intermediaries working between you and the bank (the cost reduces for the bank and the bank staff has less incentive to charge you extra, as they are often salaried staff who earn little or no commissions from having your loans approved).
Therefore, if you have a good credit history, a job with stable income and some financial assets, banks will generally have no problems in giving out mortgage loans.
Obtaining a Mortgage from HDB
In Singapore, you can obtain a home loan from the Housing development Board (HDB).
HDB loans are available only for HDB properties and have a couple of restrictions attached. They include that at least one buyer must be a Singapore citizen, buyers’ monthly income must not exceed $10,000, buyers must not own any private residence (in Singapore or overseas) and buyers must not have taken more than two previous HDB loans
Obtaining a Mortgage with the Help of a Mortgage Broker
Mortgage brokers play the role of a “middle man” in a mortgage transaction and advise you on the best loan product for you. Actually they don’t lend you the money directly, but help you choose from a variety of lenders. Hence, a mortgage broker essentially helps you to compare and select a mortgages offered by different banks that are best suited for your needs and therefore they are different from a mortgage lender such as a bank or HDB.
It is also important that you check for experience and track record of a mortgage broker. Good mortgage brokers are often those with knowledge about the industry and are familiar with different types of mortgage loans. Finding a good mortgage broker can be really helpful for you to understand the best deal based on your financial situation and credit history.
A mortgage broker can also assist you in the application process – it is sometimes easier to apply for a mortgage through a broker since brokers often have better network and relationships with mortgage lenders and banks. This is particularly so if your income is unstable or if you have a poor credit history, as mortgage brokers can sometimes help you obtain a loan even when the banks have turned down your application. But make sure to keep in mind that loans in such cases usually have higher interest rates. Click on the comparison website to find the best mortgage deals in Singapore .