Things To Think About Before Choosing Your Housing Loan Singapore
As you meet a Singapore mortgage banker or a mortgage broker, there are certain things that you are always asked about.
The most common questions you can expect from them are
“What is you preferred tenure?”
“Do you prefer SIBOR or SWAP for your mortgage?”
“How much financing are you looking for?”
“Are you comfortable with lock-in periods?”
These questions presumes that you already know what you want and is only looking for the lender that provides you with what you want.
However, before being able to answer these questions in a way that you clearly have an idea of what you are looking for in a housing loan, there are certain things that you have to ask yourself or decide for your family in order to identify the most suitable mortgages for you.
Here are some questions that you have to work out.
1) Will I be living in the house of the long term, or am I going to sell/rent it off in the near future?
When you know that you have found a dream house to retire in, you may have already decided that you are going to be living in that particular house for as long as you can think.
In this case, whether any lock-in period is structured into your home loan may not matter to you.
In the same way, home loans with fixed rates may be more favourable to you than floating rates since it gives you greater certainty about the future.
However, your decision on the type of home loan can be greatly affected if you are going to relocate in the near future.
Especially if you are relocating overseas.
In this case, you’d want low interest rates in the early years of the loan, and without early redemption penalties.
Floating rate loans tend to have low teaser rates during the initial years of the loan
2) Will my children be living with me in the long term? And will they be taking over the payment of the Singapore home loan?
If your children are fully expected to take over the payments for your housing loan in the future, it makes sense to include them in the mortgage application.
This can stretch out the tenure length of the mortgage and your children’s current income can also be taken into account during application for a higher loan amount as increased total income can make the mortgage lender more comfortable with your mortgage.
Use a home mortgage calculator to help you.
Do be mindful that the more borrowers there are, the credit score used would be an aggregate of all borrowers.
This can either boost credit score or pull it downwards.
3) Will I be starting my own business in the near future?
The issue is that we are taking a monthly paycheck as a salaried employee and sometimes lose track of monitoring our CPF accounts.
Not many people can give an accurate immediate answer when asked about their CPF account balances.
If you become self-employed, you may stop contributing to your own CPF account.
And if you initially took up a housing loan in view of using your CPF to pay off the house, you may have a problem in future if you become self employed.
As money stops getting deposited into the CPF account, the account would slow dry up. Resulting in the need to use cash for payments towards the monthly housing debt obligation.
Another thing is that your income can become unstable when you become self-employed.
Some months you could be doing very well, while other months you will be barely scraping though.
A miscalculation on your part can result in cash flow problems and default on payments.
So bare these in mind if you are considering to start your own business in the near future.
Learn as much as you can about your Singapore housing loan budget and the market for home loans in Singapore.
Be prepared for the fact that a mortgage loan is not created for only you.
There are terms that you have to compromise.
If you ask yourself questions that matter to you, you have a very good chance to end up with a good deal that suits your needs. Contact us via our home page for a FREE housing loan analysis.
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