Friday, August 19

6 Key Home Loan Elements to Consider When Buying Property in Singapore

When Buying Real Estate In Singapore, There Are Six Important Factors To Take Into Account.

Singapore is consistently ranked as one of the best cities in the world. It is cosmopolitan, clean,
vivacious and fashionable for all of these reasons, the real estate and property buying sector in
Singapore is extremely attractive and competitive. Buying a house or a condo in Singapore makes a lot of sense. It makes financial sense since property rates usually appreciate over time and the demand is consistent.Singapore is a tiny island country, and therefore the land is always at a premium. So, you need to Prepare in advance and be thorough when you’re thinking of applying for a home loan to buy real estate.

Interest Rates
The interest rate on the loan is one of the most important aspects of choosing a home loan. In
Singapore, home loans are generally based on a few key types of benchmark interest rates. One of
the most popular benchmark rates is the Singapore Interbank Offered Rate (SIBOR). 

SIBOR is a daily reference rate that is based on interest rates with which banks lend unsecured funds to other banks. To know more about labour rates and other types of interest rates, visit the Singaporeanproperty website PropertyGuru.com.sg. PropertyGuru offers a platform to learn more about Singaporean real estate and home financing, and also has portal listings of the most popular condominiums, apartment
complexes, houses, and HDB flats in Singapore.

Before you begin looking for properties to purchase, make sure you meet the eligibility criteria for
getting a home loan from a bank. These parameters include your income, credit score, and age. Your
information is verified during a background check. The Total Debt Servicing Ratio (TDSR) is also taken into consideration. The TDSR looks into your total debt and seeks to ensure that your monthly debt and income ratio do not exceed 60 per cent. The TDSR is an important measure that prevents
borrowers from being overleveraged.

Loan Set-Up
Singaporean banks generally offer loans for up to 3/4th of the property value for new buyers. The
final amount usually depends on the bank's judgment of your ability to pay back the loan amount.
Buyers, in turn, should be careful about the stipulations attached to the home financing to avoid
surprises later. The stipulations and conditions of the home loan can have far-reaching effects on
parameters such as the cost of refinancing the loan should you so desire in the future, and your cost
savings. Therefore, check all your loan conditions such as the lock-in period. If you wish to refinance
your loan and you're still within your lock-in period, then you could end up paying hefty prepayment penalty charges. Also, make sure you read the fine print to check if the perks offered on your mortgage loan, including subsidies, free insurance etc., get returned to the bank if you happen to refinance during the lock-in period. Additionally, also look into the most appropriate loan term for your needs. A loan term can stretch to up to 35 years. Remember, the longer the term, the higher your total amount of interest paid, but also, the smaller the monthly payment.

Loan Insurance
Home loan insurance, called Mortgage Reducing Term Assurance (MRTA) in Singapore, isn't a
necessity but can be useful in protecting you if you pay more than half of the mortgage by yourself.
MRTA offers coverage from the outstanding debt in case the borrower becomes disabled, is unable
to pay due to ill-health, or in the event of the borrower passing.

Subsidies and Other Offers
Some banks offer an interest offset opportunity. If you have deposits at the bank, then that amount
can be used to offset against the loan such that you end up paying interest only on the difference.
Moreover, home loans usually come with built-in subsidies such as valuation, legal, and
insurance fees. So, at the time of comparing loans from different banks, make sure you take these
subsidies and discounts into consideration.

Loans from a Bank vs. HDB
Banks offer mortgage financing for private accommodations, HDB flats, and executive condos. HDB,
on the other hand, offers loans only for HDB flats, and not for private or executive real estate.
Moreover, even when opting for an HDB flat, some buyers might not qualify for the HDB loan. To
qualify for an HDB loan on an HDB flat, at least one of the co-borrowers needs to be a Singaporean
citizen. There are also other eligibility factors such as income and ownership of other properties.
Usually, HDB loans allow borrowing of up to 90% of the property cost, 15% higher than a bank loan.
HDB interest rates also tend to be more stable than bank rates.

Singapore is an exciting country to buy a house in! Use the above guide to plan when
you’re thinking of purchasing your condo. Happy house hunting!
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