Should You Avoid Frivolous And Multiple AIP Home Loan Applications?

Gone are the days when applying for a bank loan is a breeze, thanks
to the MAS rules regarding Total Debt Servicing Ratio (TDSR) and
stricter lending criteria, especially that clause pertaining to “Proof of
Debt”.


What Do You Mean With “Proof Of Debt”?
With TDSR set at 60%, which includes housing loan servicing as well
as that of other debt, banks are required to enforce these rules set
out by MAS.


The burden of proof of debt is on the banks to make sure that they
impose these “Proof of Debt” on potential borrowers.

SO
If your credit report shows that you have several credit cards and if
one of the cards shows that payment is not made in full, banks will
then require you to print out your credit card statements to
ascertain the outstanding loan amount.


Then
The banks will use this amount to impute the minimum sum
required by the credit card companies to work out the required
monthly servicing amount.
This monthly servicing amount affects your TDSR score, and, hence,
your total borrowing amount.


How To Make Sure I Have A Property Loan At Hand?
If you are buying a new property, you have to make sure that you
have a home loan or commercial loan in hand prior to purchase, just
before you make your property buying decisions.
This is all the more important especially under the TDSR criteria as
many people may not be aware of their financial commitments.
These property buyers could easily pay their 1% Option to Purchase
(OTP) and then fail to obtain a property loan.

Should You Apply For An Approval-in-principle?
Home loan or commercial loan approval-in-principle (AIP) or
some call it In-Principle-Approvals (IPA) are a necessary safe
guard prior to committing to a property purchase.
They are by no means 100% guaranteed, but they do provide a
good indication of borrowing ability.


Why Do Bad Mortgage Brokers Encourage You To
Apply For Multiple Loan Applications?
Some mortgage brokers suggest that you should apply for one AIP
from one bank first. And sometimes even to many banks at the
same time.
Generally up to three is considered okay. Anything beyond that is
bad in our opinion.
These brokers then suggest that once you have the AIP in hand, you
can then try to apply for another few bank loans when you make
the property buying decision.

This, on the surface, sounds like a fair statement to protect
the consumers.
But Is It Really So?

BAD Mortgage brokers use this technique to lock you into the
home loan or commercial loan to protect their interests. We
will tell you why this is bad for you.


What Will Abuse Of The Approval-in-principle
Process Lead To?
Let’s put it bluntly, AIP takes away valuable resources from the
banks as it involves huge amount of paperwork.
By applying for multiple AIPs, this piles on extra workload on
bankers, banks, and, especially more so, credit officers in the banks.

Credit officers hold a thankless job, which is both stressful and
time-pressing.
They are also on the receiving-end of abuses and curses from
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cases, are not even allowed to meet with front-end bankers).

They are also on the receiving-end of abuses and curses from
customers (even though they do not meet them, and, in most
cases, are not even allowed to meet with front-end bankers).
By abusing the system created to give you some form of safety by
wantonly applying to as many banks as possible for AIP, and
subsequently not take up loans from the banks is not simply a
matter of fairness.


This abuse has led banks to reduce or scrap AIP outright. Some
banks have even imposed or considered imposing a fee for AIP.
Credit officers are overworked and hold a thankless job and the
bank cannot easily find sufficient credit officers to do all the extra
workload.
In the end, such irresponsible behavior will lead to

Higher Cost For Consumers

What Do Multiple And Excessive AIP And Home Loan
Applications Lead To?
When you make multiple and excessive AIP or home loan
applications, each of these applications invoke a “Credit Enquiry”.
According to credit bureau, “Too Many Enquiries” leads to
“Marginally Increases Risk” and degrade your credit score.


In Summary
A bad mortgage broker invokes your greediness to take advantage
of the system to protect their own commission. They abuse the
goodwill of banks, leading to increased costs for consumers.
And worst still, by blatantly making “Too Many Enquiries”, bad
mortgage brokers make your credit score worse, demonstrating
complete ignorance of credit risks and disregard for your wellbeing.

You should only apply for an AIP to the top one or two banks that
you intend to take up a home loan with after a TDSR analysis.

About Property Buyer Mortgage Consultants
Property Buyer Mortgage Consultants is a research focused independent mortgage broker. We
emphasize a consultative approach where we match our client’s financial situation with the best
fit mortgage loan, not simply a cheap loan.
We also help property buyers in their buying process helping them avoid pitfalls from
unscrupulous property agents. (We are not property agents, therefore there is no conflict of
interests.)
We also developed our proprietary home loan reporting tool which provides amongst other
things, 23 years Sibor history as well as 6 years worth of SOR.
Our service is free to you as banks pay us a commission on loan deals completed. Banks in turn
save on staffing cost as we are not on their payroll.
www.PropertyBuyer.com.sg/mortgage
www.SingaporeHomeLoan.net
www.iCompareLoan.com/consultant/

Should You Avoid Frivolous And Multiple AIP Home Loan Applications?

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Should You Avoid Frivolous And Multiple AIP Home Loan Applications?