Home Finance 3 Things You Need to Know Before Taking a Home Loan

3 Things You Need to Know Before Taking a Home Loan

by Paul Watsdon

ingapore’s housing market made some restrictions which affect home loans due to the latest MAS measures in 2018. Before taking a home loan, you need to comply with the following:

  • The second and third-time buyers will get the reduced loan quantum to 40% and 35%.
  • The year limit for loan tenure is 30-35 years, which includes the refinancing.
  • Depending on the residency, the buyer comes with additional Buyer Stamp Duties up to 20%.

These restrictions affect the rise of interest rates as there was a compensation bank made for the decline in the volume of home loans.

It is essential to receive the housing measure updates from the government when you intend to take a home loan. That will give ideas when planning to buy a home.

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1.Consider Your Outstanding Loan and Credit Standing

The Singapore banks started to calculate the ratio of how much loan you can take to purchase a property. That is a new TDSR regulation they have to comply. The bank needs to look through your existing loans, such as credit card debt, business loans, personal loans, and car loans. Before making the purchase, you have to address and pay off whatever you can for them to consider your application.

You need to know how much banks can approve before shelling out for a down payment. When you plan to take a home loan, know what banks consider and look through your current state of finances by applying for In-Principle Approvals.

2.Go with The Fixed-Rate Home Loan, If Possible.

Home buyers did not approve fixed-rate loans due to the higher cost than the floating rates. However, paying in a fixed rate for 2-3 years is the same as the amount you have to pay for the floating rate caused by the latest MAS measures.

Fixed-rate home loan means you can budget everything consistently without worrying about the fluctuating interest monthly.

3.Beware of Other Loan Packages Offered to You

Before getting bewitched with the enticing offers shown to you, it is essential to know what offers they make.

  • The Offset Loans

Offset loans sound effective as it uses the interest from your existing bank account to cover up with the home loan interest rate.

  • Internal Board Rates

Banks are the one identifying internal board rates rather than the transparent indexes like SIBOR.

These offers seem compelling, but there are things to consider before jumping into conclusion. It can be relevant if you have a maintaining large sum in your bank account. If not, it is best to stick with the primary loan packages.

When a bank offers internal board rates, it has to compete with the SIBOR with the banks spread or margin. Low spreads could be more beneficial to banks, and it takes years and might rise after the third year of the loan.

You can opt with refinancing, but the options could be different in 2-3years time with higher market rates.

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