In this article, I will share how you can avoid these traps when applying for a home loan and the solutions when facing one.
At the start of this week, one topic keeps surfacing on my social media – Got cheated when applying for home loans.
And this makes me sad and furious.
I know, in Malaysia, there are not many platforms to educate us when applying for a home loan.
And I think maybe I could do some good here by sharing my experience so that you will not fall into this trap.
You know, in my years of experience in this line, I have seen a lot.
When it comes to buying a house and applying for a home loan, people reach out to a third party. These third parties may be property agents, middlemen, mortgage consultants or advisors, insurance agents, etc.
And sometimes, while helping, the third party might take advantage of the situation and sell something you don’t need or even manoeuvre the whole situation to their advantage.
And one of the reasons they manage to get away is because most of us are not equipped with the knowledge, or we are lazy to do more research.
“An Investment in Knowledge pays the best interest.”
So, in this article, I will share a few scenarios of how people fall into the trap and how you can avoid it.
But before that, there are a few things you need to understand.
One of them is a collaboration between financial institutions and insurance companies.
If you notice, the insurance companies and financial institutions have many collaborations, including insurance products like fire insurance, car insurance, Mortgage Reducing Term Insurance (MRTA), Mortgage Level Term Insurance (MLTA), etc.
When a bank sells their product, they cross-sell the insurance product to the borrower.
So, when you apply for a home loan, the bank will cross-sell the MRTA. It used to be MRTA only, but some banks sell MLTA to their client in recent years.
This is a legitimate collaboration between the insurance company and financial institution. And this collaboration happens between big bosses; usually, the head of a department, with the Senior general manager or even CEO are involved.
If the bank asks you to buy an MRTA/MLTA due to a better interest rate, you can choose to do one of these.
- Accept the MRTA/MLTA and get a better interest rate. OR
- Turn down to buy MRTA/MLTA and get a higher interest rate. In this case, you’ll need to do your calculations, which gives you more advantages. OR
- Compare other bank offers.
It’s all up to you. You are the BOSS!
THE NOT “SO-LEGITIMATE” COLLABORATION
This not-so-legitimate collaboration usually happens when the banker himself sells another insurance policy, i.e., MLTA, to the borrower without his current bank knowing.
The banker may be an insurance agent himself or collaborate with someone in the insurance industry to sell additional insurance policies to the client.
Ms A applies for a home loan with Banker X.
Her loan was approved, and she is required to take MRTA with the bank.
In place of a better interest rate, Ms A agreed on that.
However, Banker X is also pushing another MLTA policy to Ms A, claiming it is a bank’s requirement.
This is when Banker X is trying to sell another insurance to Ms A.
Banker X will emphasise is the bank requirement, when it actually is not.
The banker will push Ms A further by asking for a payment during signing of bank letter offer.
So, what should you do in this situation?
When a borrower takes a loan from a bank, all the terms and conditions will be clearly stated on a letter offer.
If the borrower requires to buys an MRTA or MLTA, the letter offer will be mentioned and state. If it isn’t stated on the letter offer, you can assume it is not part of the bank offer.
Raise this issue with the banker.
You can raise the discomfort and ask for proof for buying the additional MLTA with the banker. Remember to record all the voice calls, conversations, and written WhatsApp. As in the next step, you might need it.
Raise the issue to a higher level.
Find out the branch and the Manager’s name and call them. Raise your concern to them. They should be able to solve it. If this doesn’t work too, you will need to go to the next steps. Usually, in most cases, it will be solved at this level.
Bank Negara requires every bank to set up a channel to receive a complaint from the client. You can write in and attach all the proof and cc the letter to Bank Negara too. Once it cc’s to Bank Negara, typically Bank Negara will assist in your case.
If this doesn’t work too, I’d suggest changing to another bank. The simple truth is you shouldn’t make people buy something they don’t want.
And for the record, not all bankers are like this. You will find some that are still responsible and honest.
Other than the banker scenario, sometimes you’ll be caught in the situation when buying a house through a property agent.
Usually, it happens when the buyer allows the property agent to handle all the home loan applications.
The buyer/borrower passes his document to the property agent, who will help him apply for a home loan.
Other than property agent, mortgage consultant or advisor sometimes also pushes MLTA to the client.
They usually will control all the applications and maybe manipulate you to accept one of their preferred banks.
In addition, you will need to buy additional MLTA. According, to them it is the bank requirement. Which sometimes is not.
So, what should you do in this situation?
Prevention is better than cure.
I always believe prevention is better than cure. Always avoid being putting in a difficult situation.
In the future, handle the home loan application yourself.
Submit your documents directly to the bankers, not through the property agent, mortgage advisor, or consultant.
You can get a banker recommendation from a property agent, mortgage advisor, or consultant, but don’t pass the documents directly to them.
Handle the application yourself.
Suppose they hold your bank letter offer “hostage” and insist you buy the MLTA. What should you do?
You can ask to look at the bank letter offer and check on the branch that approved your loan.
After that, the same thing as my earlier suggestion, talk to the banker, manager, write to the bank and Bank Negara. Just use the same chronology order as per scenario 1.
Hopefully, someone will respond to you soon.
But, remember, if you’re buying a house, you might have less time. Because within 14 or 21 days, you’ll need to sign the SPA.
This is where the tricky part.
Some clients will give up and just accept the bank offer and MLTA. And believe me, when I said, they are counting, you will surrender because of the time limitation.
If you are buying a leasehold with individual or strata title property, you might have more time. This is because a leasehold property requires state consent and state consent will need two to three months to get before the 3+1 period started. If that is the case, you have more time to sort out your home loan application.
But if you are buying a freehold with individual or strata title property, your 3+1 will start after signing the SPA. So, you’ll have less time and you might need a very experienced banker and lawyer to help out in order to speed up the thing.
If possible, try to ask your lawyer to find a way or excuse to buy you some time before signing the SPA.
That’s why I will always think my first advice is the best: prevention is better than cure. Avoid at all costs.
You might think, “ Hey, you guys are mortgage consultants too, right?”
Yes, we do.
But we do it differently, sincerely and openly.
First and foremost, we provide a FREE consultation to the customer. Anything about home loans, refinancing, buying a house, and any topic related to it.
Secondly, we do not take your documents. We will recommend some bankers or lawyers, and you can directly talk to them. And you shall pass the documents directly to the banker.
Most importantly, we don’t force clients to buy MLTA or any insurance.
If you have to buy MRTA or MLTA, it is all because of the bank’s requirement. In addition, all our bankers are not selling outside MRTA or MLTA.
Unless if a customer needs it, then we will recommend the insurance agent to them.
Remember, we don’t sell anything to our clients other than what they need.
We’re an open book
Honestly, we are pretty open with our clients; they can use the recommended banker and lawyer if they feel comfortable.
And it was pretty sickening when I saw people were pushed and manipulated to buy something they don’t want.
We do believe in MLTA for some people; MLTA is an insurance product, and it is good to have one if you can afford it.
By all means, if you need it. Get one!
But, we shouldn’t push people who don’t need it or believe it. People should be allowed to make their own choices.
Just my two cents.
Okay, we have reached the end of this article – AVOID THESE TRAPS WHEN APPLYING FOR A HOME LOAN. I hope you will enjoy reading this.
As usual, if you have any questions pertaining to a home loan, refinancing, property transfer, buying a house or any topic related to it.
You can reach us at +6012-6946746. (talk to Mr David)
Before you go, check out this article. You might enjoy reading this.