What does a mortgage broker do in Singapore, and who pays for it?
A mortgage broker compares the housing loan packages of several banks for you, tells you which you qualify for under the Monetary Authority of Singapore's (MAS) rules, and handles the application up to the bank's letter of offer. Six of the seven brokers on this site's ranked list say the bank pays them and the seventh says it charges no fee, so the service costs the borrower nothing on their own account; the legal and valuation fees of a loan are the borrower's. MAS regulates the lenders, not the brokers: its directory lists no licence for mortgage broking, so the checks are the broker's company registration and the bank's own letter.
What a broker does
A broker's work falls into three parts. First the numbers: the loan-to-value limit, the 55 per cent total debt servicing ratio tested at a 4 per cent floor, and the 30 per cent mortgage servicing ratio for an HDB flat, applied to your income and debts before you make an offer, so that the in-principle approval you seek is realistic. Second the market: the packages the banks offer, fixed or floating, their lock-in periods, their thereafter rates and the subsidies they give and can claw back, compared side by side; for an existing loan, whether repricing with the current bank beats refinancing to another. Third the paperwork: the application, the documents, the valuation and the handover to the lawyer. The ranked list's answers describe these as the brokers on it state them.
Who pays the broker
On what the brokers on the ranked list say of themselves, the borrower pays nothing: six of the seven say the bank or lender pays them and the seventh says it charges no administrative fee. Where a broker is paid by the bank, it is the bank whose package you take that pays, which is worth knowing when a recommendation is made. The costs of the loan itself fall to the borrower: the ranked list's answer on cost gives one broker's figures for the legal and valuation fees of refinancing, about S$2,000 for an HDB flat and S$2,500 for a private home, and notes that banks give little or no legal subsidy on smaller balances.
What MAS regulates, and what it does not
MAS's housing loan rules apply to the financial institutions that lend: banks, finance companies and merchant banks. Its Financial Institutions Directory, read for the ranked list, lists about fifty licence types and none for mortgage brokers, and no public register of brokers was found; so a broker is not a regulated financial institution, and MoneySense's advice to deal only with persons regulated by MAS, checked in that directory, applies to the lender, not to the broker. MoneySense also says MAS regulates only entities with a presence in Singapore, and advises checking any firm's address, business registration number and track record, and whether complaints about it appear in the news or online.
What to check: the broker's company and the bank's letter
Check that the broker's company is on the Accounting and Corporate Regulatory Authority's register under the name it gives you; every entry on the ranked list shows the provider's Unique Entity Number, which BizFile looks up free. Then read the bank's letter of offer, which is the only document that binds: the rate for each year and the thereafter rate, which MAS defines as the highest rate the package charges after the introductory or lock-in period and requires the bank to tell you before you accept; the lock-in period and its penalty; any legal or valuation subsidy and the period in which the bank can take it back; and the fees for early repayment or refinancing. MoneySense adds that a floating rate loan should be budgeted for future rate rises, and that a longer tenure means more interest in all.