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Money Has Become A Commodity These Days

By on May 29, 2013

It can be incredibly frustrating when you know that you are this close to cutting a great deal and misses out. But the ultimate dealbreaker that will really dampen your spirits is when you managed to navigated your way strategically pass all obstacles and finally falls short of getting a mortgage approved. The skillful art of finding, evaluating and negotiating deals can be honed. Great investment opportunities actually show up more often than you might be aware of. The limitation stopping you from exploiting these opportunities is access to money. If you have access to unlimited funding to finance property deals, you can probably start looking forward to your retirement in about 3 days.

A generation ago, applying for a mortgage was a cumbersome task that even a devoted intern will have problems accomplishing. Those were the days when there were only a few lenders, with a backdrop of uncertainty on the property market, and police officers were parading in funky shorts. You will have to be at your best presentation to meet up with a mortgage banker as if interviewing for a job that your whole family depends on.

Bankers were so busy and put on pedestals that you cannot just walk in and expect to be attended to. You make an appointment a week in advance with an opportunity to impress them. It’s as if you are at the mercy of a self-appointed judge in a court hearing for doing absolutely nothing wrong. I won’t be surprised if these scenarios are still prevalent in third world countries where their economies are still in it’s infancy stage.

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Times have changed. People are more financially savvy. And everyone, even the aunty at the coffee house has come to realise that money is just a commodity used to fund investments. It’s is a bit like sugar. If there are 2 packets of sugar in equal size from the same production batch, and one sells for $1 while the other sells for $2, which packet will you buy? You only need them to make you coffee taste better. So unless you are a radical wacky coffee extremist, you are going to purchase the one with the lower price.

Money has become like a commodity

Money has become like a commodity

Years ago banks were well respected powerful organizations that can do no wrong. They can demand loyalty for giving you a  mortgage and require you to only use them for all your banking activities. Well we now know that they can be prone to huge mistakes that brings an entire economy down to it’s knees. It is a relief that lenders operating in Singapore are open to competition and will not demand an arm or leg to grant you a mortgage.

In the current market, bankers are willing to meet you at any place at any time to get your business or just have an opportunity to do so. They spend their weekends prospecting in new condominium showflats and meeting clients to finalize deals. In many occasions, a home buyer taking up mortgage do not even have to physically set foot in a bank. All these efforts are put in with the objective of acquiring you as a client. On top of that, with internet and mobile connectivity going main stream, it has become easier and easier for even the most outdated investor to source for mortgage funds like a savvy professional with a confident swagger.

But before you take investment advice from bankers, take note that they are generally not experts in real estate. If they are, they would not be working for a bank prospecting for clients everyday trying to hit a sales target. They would become property investors themselves with intimate first hand information on the latest bargains that have just entered the market. Their core objective is to acquire your business for the bank. And nobody can fault them for doing so. You need money to fund your investments, they have what you want.

Although money is now commonly viewed as a commodity, people are still willing to pay more interest for the same amount of funds for added value. These could be in for form of free insurance coverage, convenient locations, effortless online banking, cash back rebates for preferred retailers and restaurants, perception of a stable bank, etc. And as competition slowly makes these freebies and benefits an implicit expectation, we will end up back to the basics of borrowing money: Which lender offers the best interest rates? You are after all borrowing money for a specific reason. Not for the avalanche of marketing gimmicks. A bank can hardly market their money as a superior product than another bank’s money.

Banking is a highly regulated industry and you can expect the authorities to put them through a stringent screening process before granting them a license to operate here. So have peace of mind on choosing a bank because they are all credible. If you think a bank with low publicity is a risky one and can fail anytime, you can find solace when you read that even the biggest banks and corporations in the world can collapse at any time. These are things that common people like us have no control over.

Unless there is a personal reason why you only want to work with a specific bank, the smart thing to do when deciding on a mortgage is to take the one with the best rates. It feels a little weird that some people needs to be reminded of that. Common sense tells us to buy the pack of sugar that is cheaper from the previous example. However, it is very difficult to not have a preference for certain banks as we have grew up seeing their fancy marquees all over neighbourhoods, television, newpapers, and basically everything mass media.

So to truly make an objective decision based on the best mortgage package instead of the best perceived bank, try this. Get your partner to draw up the best 5 packages into a table. Then remove the names of the banks offering those packages. Take a look at the table and choose the best one suitable for you. Only then your partner will reveal the bank to you. This simple exercise will help you make an objective decision.



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