Housing loans are loans you take up to purchase your house. The home loan is secured against the house that you are buying. In financial jargon, housing loans can be referred to as mortgages. Your house, condominium, HDB flat, landed property, etc, is the collateral used in the loan transaction. The loan quantum is determined by the bank. Most commonly, the quantum will be a percentage of the property value or purchase price, whichever is lower. The market value of the property will be determined by an independent valuer appointed by the bank.
How big a quantum amount a bank can afford to offer you depends on the bank’s own internal assessment criteria. Usually your monthly income will play a major role in determining the level of amount that a bank will be willing to offer you. Your income and personal financial obligations affects the monthly installments, and the monthly installments affect the loan quantum, etc.
There are loan packages in the market that offer fixed rates of up to a few initial years. There are also packages that are pegged to the bank’s board rate or SIBOR/SOR.
How to choose a housing loan in Singapore?
Most home buyer are looking for the best housing loan. However, if you are seeking a one, it is better to seek out “which is the best package for YOU”.
There are a number of different mortgage packages in Singapore. And each one is conceptualized by the mortgage lender to serve a particular customer profile that they have identified. As different people have different needs, each package attends to a particular customer profile.
Here are some important factors to consider for yourself
It is a common practice for home buyers to decide on a property and find a property loan for it later. If you are unable to obtain a loan for your purchase later, you may have to forfeit the money you put down. The best thing to do is in fact to get a pre-approved property loan from the bank before looking for your property.
Loan tenure duration
The loan tenure can stretch all the way till you reach the age of 65 or 70 years old.
You will want to pay off the loan sooner if you have a high income so that you don’t have to worry about it when you reach retirement age.
Floating interest rates or fixed interest rates:
If you are more of a risk-taker, you might want to get a housing loan with floating interest rates. Not that they are risky, but it being less stable compared to fixed rate mortgages. Floating rates follow the market’s direction. So if market rates go down in the future, you will likely benefit from it.
However, if you are risk-adverse and want to have more stability, you can choose a fixed interest rate package. You can refinance you house with another mortgage after the period of fixed interest rates.
When you have the intention to pay off your housing loan in the very near future, you will want to find one that will allow you to pay it off in 1 lump sum without penalty. Penalty fee can go up to 1.5% of the partial or full redemption amount.
Interest rates transparency
A popular housing loan package these days are those that have interest rates pegged to the SIBOR or SOR. The information of these rates are available to the public. Banks will charge you a certain premium on top of the prevalent SIBOR or SOR rates.
If you want to consistently understand what you are paying, you can consider taking up a package pegged to the SIBOR or SOR.
Because home loans are pretty sought after for both purchasing and refinancing of properties, banks often offer special promotional packages to better serve home buyers. So get up to date on the latest available promotions by contacting us from the home page of housing loan Singapore.
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