Posts Tagged ‘housing loan’

How Should Emigrants Apply for Housing Loan

December 10th, 2009

In Singapore, housing loan packages have two categories: fixed rates or floating (variable) rates.

Singapore fixed rate packages are usually offered for up to 3 years, but there are some lenders that extend up to 5 years fixed rates or even 10 years. In many Western countries, fixed rates can be made throughout the loan tenure.

Floating rates can be classified into published rates or board rates. Published rates are mainly rates that are released daily, case being the Singapore Interbank Offered Rate (SIBOR) or Singapore Swap Offer Rate (SOR), while board rates are decided by the individual bank or financial institution. Most lenders tie their board rates to certain financial benchmarks such as the SIBOR but the correct factors are often unclear and variations in board rates tend to be uncertain.

There are no limits for emigrants applying for housing loans. Still, the following constituents should be weighed.

Loan to Value

The maximum loan to value (LTV) in Singapore is 90% of the purchase price or valuation, whichever is lower. Some lenders do not give maximum LTV to emigrants, thus, housing loan packages for 90% financing are restricted. Loan approval for 90% funding is also stricter than for LTV 80% and below.

Income Proof

A letter of appointment from your local employer or your latest income tax assessment is needed for housing loan. Some local lenders do not respect tax assessments from other countries.

Landed Property

The commendation from Singapore Land Authority is mandatory before emigrants can purchase bounded properties such as vacant land or landed properties such as bungalows, semi-detached, and terrace houses.

In-principle Approval

You may also take an in-principle approval before purchasing. Consider to hire a honored and professional housing loan consultant. This may help you save time and money with your loan approval.

Find out more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.

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Refinancing Your Home In Singapore

December 10th, 2009

When it comes to mortgages, many people do not refinance. A substantial number are oblivious they have the option of switching their loan to different financier; others are simply apathetic. They stick with their very first lender and the “reward” for such loyalty tends to be higher interest rates. Due to the magnitude of housing loans and the tenure that the home loan is amortized over, the interest we are speaking about here can well extend from thousands to 100,000′s of dollars. Take a look at the following factors to see whether it’s time for you to consider refinancing.

Current Interest Rate

It is decidedly a good indication for you to explore refinancing when your current interest rate is higher than available home loan packages on the market. A first step to take is to go back to your existing bank or financial institution and ask them to revise your package, otherwise known as repricing. If your lender comes back with an offer, it will normally be better than your existing one. You can then compare this offer with offers from other lenders to see whether you should switch or stay put.

Lock-in and Clawback Periods

When you take up a mortgage, there may be a lock-in period where your housing lender will charge you a penalty fee, usually a percentage of your outstanding loan value, if you were to fully repay your loan. Almost all home loans also come with a clawback period where the lender will claim back “freebies”, such as legal subsidies, that they “gave” you when you take up your loan (Note: lock-in period is separate from clawback period). It may not be worthwhile for you to refinance due to such costs.

Loan Quantum

The larger your home loan amount, the larger your savings for the same reduction in interest rates. For example, 1% on a loan of S$100,000 is much less than 1% on a loan of S$500,000. However, fixed cost to refinancing, which comprises mainly of legal fees, do not vary much with loan quantum. The difference between your existing and refinancing interest rates, therefore, has to be bigger for a comparatively smaller home loan as fixed cost eats into a more fundamental share of your interest rate savings.

Perceived Interest Rate Movements

Your view on how interest rates is moving can be a factor when considering whether you should refinance. If you are presently on a fixed rate package and believe interest rates are dropping, you may want to refinance to a floating rate package. Conversely, if you are on floating rates and believe interest rates are rocketing, switching to fixed rates may be a positive choice.

Individual Financial Appraisal

If there is a change in your financial state, you may want to alter your package details via refinancing. For instance, you are starting your own business organization and do not want unpredictability in other areas. Give some thought to taking up a fixed rate package. Maybe you want cash to invest in another place. Consider increasing your loan quantum. Or your monthly income has increased and you want to reduce interest loan payments. Contemplate reducing your loan tenure.

Consider calling us today if you are looking for refinancing in Singapore. We can save you a lot of money plus give you the latest advice all for free.

Find out more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.

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Selecting Which Type Of Interest Rate To Use – Fixed Or Variable

December 10th, 2009

Once you decide to avail a housing loan, the next thing that tempests your brain is selecting between fixed and floating rate of interest. It is easy to get dumbfounded at this stage if you are not financially trained.

If the media and banks are exclaiming about increased interest rates you make feel pressed to go and rush into fixing your mortgage rates. Your bank or financial consultant may even advise this.

Now ideally as it should be, we assume that once you select fixed rate plan for yourself the rate of interest will remain unaltered for the entire period you have fixed the interest rate for irrespective of any subsequent increase in the same. But in reality this is not always the situation.

Here we demystify the nature of fixed interest rate housing loan transaction for you so that you can make an educated conclusion over the subject.

* Read the small print of your home loan document. You will find that the bank has the right to serve you thirty or sixty-days notice period that it intends to increase its interest rates.

* The bank’s first-year rates are binding on the bank only for that short period of 1 or 2 months. The 2nd-year home loan rates are not binding at all. Neither are the bank’s 3rd-year loan rates.

* Force Majeure Clause

So, while you read your home loan contract, you can spot clauses like this:

“Provided further that from time to time, the bank may in its sole discretion alter the rate of interest suitably and prospectively on account of change in the internal policies or if unforeseen or extraordinary changes in the money market conditions take place during the period of the agreement.”

This is called Force Majeure Clause that enables the bank to undertake appropriate adjustments in the interest rates on home loans they approve to their borrowers.

So remember to look at refinancing every couple of years so that you do not pay too much. If you select a good home loan company you can save a lot of money over the life of your housing loan and in most cases the consulting cost is free.

Find out more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.

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