#cheapest home loan
Best Home Loans
What Is A Home Loan?
A home loan is financing service offered by a bank or credit union for the purpose of purchasing or building a property. Such loans are secured against the said property in that the bank holds the title of the house until the mortgage is in effect and reserves the right to sell the property if the borrower fails to make payments.
Careful consideration of loan size, maturity period, interest rate, and monthly installments should be taken into account by the borrower before taking up a new home loan.
If you already have an existing home loan and wish to switch to another home loan or lender without moving home, you may consider the option of refinancing.
How Do Home Loans In Singapore Work?
Banks in Singapore offer two types of home loans; namely fixed interest rate home loan and floating interest rate home loan. Fixed Interest Rate Home Loan:
A fixed interest rate home loan has a predictable monthly repayment schedule throughout the loan tenure as rates are not affected by fluctuations in Board Rates or SIBOR. Interest rates are calculated based on the cost of acquiring the funds to lend to plus an interest premium imposed by the bank.
Floating Interest Rate Home Loan
There are two variants of floating interest rate home loans offered by banks in Singapore; the first being a variable interest rate home loan whereby interest rates are calculated based on the bank’s Board Rate minus a discount stipulated in the Letter of Offer.
The second variant of floating interest rate home loan is one with an interest rate that fluctuates in tandem to changes to the Singapore Interbank Offered Rate (SIBOR). These loans uses a 1 month or 3 months SIBOR rate as a benchmark to determine the final interest rate charged to customers.
Floating interest rate packages are suitable for buyers who want to capitalize on the current low interest rates but also open themselves to the risk that market interest rates may increase in the future.
How To Use A Housing Loan Calculator?
Visit our website at iMoney Singapore and use our home loan calculator to find and compare the best rates for the loan amount you want. Simply enter your desired loan amount and loan tenure and the calculator will furnish you with the best rates in the market, lock-in period, and a breakdown of monthly payments for the first year and following rates in the respected bank pages. With these information, you can make decision as to which bank(s) to apply to as well as adjusting your budget.
What Is The Loan Application Process?
The first step to apply for a home loan in Singapore is to approach a bank to perform your Loan Eligibility Check (AIP) which will give you a clearer idea as to whether you are eligible for a loan.
Upon application, the bank will perform the following due diligence which will determine whether your loan application is approved or rejected:
• Credit assessment check using proof of regular income (can be in the form of Income Tax Notice of Assessment, a latest computerized payslip,or a12-month CPF contribution statement)
• Credit Bureau(Singapore) check. The objective of this check is to determine whether you have a history of good credit card payments, any existing loans, and if you are a discharged bankrupt.
How Do Banks Assess My Eligibility?
In the process to determine whether to approve or reject your loan application, the bank will perform assessments using the following two criteria:
1. Financial Commitment to Income ratio
This ratio is used to evaluate your ability to repay debt obligations by dividing your total monthly debt obligation with your total monthly gross income. As a general rule, your total financial commitment per month must not exceed 60% of your total household income.
2. Loan-to-Value(LTV) ratio
This ratio expresses the ratio of a loan to the value of the property purchased in the form of a percentage. It is affected by several factors such as the loan tenure, age of borrower, and the existence of other outstanding housing loans in the name of the borrower. Generally to the bank, the higher the LTV ratio the riskier it is to lend money to the borrower. In Singapore, the maximum LTV ratio a borrower can possess before his or her loan application is rejected is 80%.
What Else Should I Know about Home Loans?
1. Monthly Installment As a general rule, your monthly long-term repayment commitment must not exceed 40% of your monthly income. 2. Disbursement of Loan
• For completed properties: The loan will generally be disbursed in one lump sum when you take over the property.
• For uncompleted properties: The loan is disbursed in stages depending upon the stage of construction of the property.
3. Loan Tenure Banks usually grant loans up to a maximum tenure of 35 years subject to the condition that you must not exceed the age of 70 years old at the end of the loan tenure. 4. Interest Rate Interest rate on loans vary according to the type of property and the type of home loan package a borrower takes up.
Should I Opt For Refinancing?
Refinancing your home is a good option when interest rates favour the home buyer. By refinancing, you as a borrower can redeem your existing home loan by taking up a new home loan at a lower interest rate.
Before you decide to refinance, it is important to weigh the costs of exiting your existing home loan against the potential benefits of your new loan. Do expect to incur these following fees and penalties when you go for refinancing:
• Prepayment Penalty: A penalty imposed by the bank for settling your home loan in full before the stipulated contract period (i.e. loan tenure).
• Legal Fee: The cost for legal services to draw up property purchase and mortgage documentation.
• Availed Cash Rebate: Recovery of any cash rebates that has granted to you upon taking up your existing home loan.
• Property Valuation Fee: The costs to evaluate the current value of your property to determine the maximum amount you can borrow from refinancing.
• Loan Cancellation Fee: Also known as an exit fee that is imposed by your current bank when you redeem your existing home loan.
• Fire Insurance Policy: When you refinance, you are required to terminate your existing fire insurance policy that is tied to your current home loan and will have to take up a new one with the bank that is providing you with a new home loan.
• The Interest Cost of Refinancing: You are required to give your current bank three months written notice of your intention to fully settle your existing home loan or pay a sum equivalent to three months interest in lieu of such notice.