What are Housing Loans?

Mortgages are secured loans. Your property is the collateral in this loan transaction. These loans are normally used to finance purchase of HDB flat and private residential property. In Singapore, financial institutions can lend up to 90% of the value of the property, inclusive of CPF contributions, for owner occupied property. The balance of 10%, 5% must be paid in cash and 5% can be in CPF. Before the loan is approved, the bank will get an independent valuer to value your property. This property value is used to determine your loan amount.

For investment properties, the financing offered may vary from bank to bank.

Financial institutions normally approve loan amounts with instalment repayments that are not more than half of your monthly income. This amount will include any other outstanding instalment repayments such as car loans, and other financial commitments.

Currently, there are loan packages which provide fixed rates of up to a few years while others offer floating rates that are pegged against the bank's board rates.

Interest calculations: Currently, there are two methods of interest rate calculation:

Monthly Rest: The interest calculations are computed on a fixed date each month. If you repay your installment earlier than this date, you do not benefit from any interest savings.

Daily Rest: The interest calculations are computed daily. This provides an incentive for you to pay promptly as any reduction in the outstanding balance results in a reduction in interest charge almost instantly. The advantage of daily rest over monthly rest is therefore a slightly more rapidly declining interest expense.

Bridging loans: Most banks will provide a bridging loan for any mismatch in timing during the process of selling an existing property and buying a new property. This is to tie you over the gap period. However, to qualify for a bridging loan the bank will want assurances that you have sold your existing property. The interest rate for bridging loans is calculated on a daily basis and payable every month. Upon completion of the sale of the property, the bridging loan has to be repaid in full subject to a maximum period of six months.

Default: Mortgage payments that have been delayed for more than three months will be considered a default and usually the bank will step in and try to resolve the problem for instance, by restructuring your loan repayments for you. The bank would only see forced sale of property as the last resort. In any case if you plan your finances properly, forced sale of property is unlikely to happen.

When shopping for the right mortgage loan, keep these tips in mind:

Match duration: Check the maximum loan term that you can get. The normal loan term is 30 to 35 years, or up to when you are 65 years old, whichever is lower.

Monthly payment projections: Compare the monthly repayment (based on different interest rate scenarios) from various providers to see if you are comfortable with the amount.

Interest rate Comparison: Check to see if the bank offers fixed rate loans and how long the fixed rate period will be, especially if you anticipate interest rates going up.

Fees: Check to see if the bank charges a processing fee, pre-payment fee, or third-party fee (such as a legal fee, valuation fee or insurance premium)

Extras: Check to see if the bank gives free fire insurance and free valuation on your property. Banks may also give legal subsidies. byhousinloansg

Do you have the loan packages currently offer by the banks and which one is the best loan you could recommend?

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