Most if not all home buyers and property investors will take up a mortgage. You should decide whether it is a property you can afford in the long run. Find out some quick pointers to note before applying a home loan in Singapore.
Make sure you are aware of the type of loan interest, shop around to make comparisons and get the mortgage suitable for your needs from banks in Singapore. The lowest mortgage interest rates might not be the best for you.
Assess your debt service ratio, which is the percentage of monthly income required for paying your liabilities before getting a loan. It is currently capped at 60% according to TDSR guidelines. If you already have lots of debt to repay, it’s better to pay off this debt first before getting another loan.
Look at the loan tenure as longer tenures means smaller monthly repayments and shorter ones, larger repayment amounts. It’s thus better to consider the loan tenure based on your monthly commitments and your income. Of course, a shorter tenure also means lesser total interest incurred.
As not all lenders let you settle your loan early, read your loan terms before signing for a loan. Some lenders also charge fees like early settlement fees, penalty fees and loan cancellation fees for early loan closure.
As most lenders charge late payment fees above the interest charged for late payment, make sure you understand the terms and conditions of the loan before signing for it. You can avoid late payment fees by keeping track of payment dates and by being punctual in your payments. Late in payment will also affect your credit rating and future applications for home loans, credit cards, personal loans, etc.
As you never know what may happen to you financially during the loan tenure, it’s prudent to take up a mortgage insurance. You can choose one that will pay off the loan amount, leaving your family mortgage debt-free in the worst case scenario. You should speak to a professional independent insurance adviser.
Understand all the loan terms and conditions so that you know what happens when you take a loan. If you are guarantor to a loan, be clear of its terms and conditions, especially those related to you as a guarantor. To most lenders, the guarantor is equally liable to the loan as the borrower.So you should become a guarantor only if you can repay the loan if the borrower fails to do so to avoid being made a bankrupt by the lender. Being a guarantor also may mean the loan to value ratio (LTV) of your next property loan might be reduced, as the bank may consider you already having an outstanding home loan.
Lastly, the surest way to find out your eligibility is to apply for approval in-principle with the banks. It’s the same application process except it’s no-obligation and no-fees.
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