Discover why it is better to work with brokers!
Singapore Residential Property Financing
Many people are surprised when they realise – for the same home loan packages at the same interest rate from banks, they could get it through a broker and it comes with additional perks like gift cards, special rate for legal fees, etc.
In Singapore, mortgage brokerage has been around for more than a decade but is slowly gaining traction with comparison sites and knowledge and digital economy.
Whether it’s getting an approval-in-principle (AIP) from one of the local banks before you make an offer for a residential unit in Singapore, or to compare rates before you decide to reprice with your existing bank, be sure to speak to us first so that you can reap maximum savings over the longer term.
1. What are some things I need to know for a new purchase loan?
For first-time buyers, the entire loan process can be a bit daunting. After much energy is expended looking for the ideal place and negotiating for a close, the last thing you need is to be pushed a banker, or a few bankers, who all try to convince you they have the best rates and financing structure for you. Really?
It depends, for under-construction properties take note you are really locked in with the bank for the duration of the construction and even all the way one year past T.O.P. For completed property, take note you can actually get a longer tenure after purchase to bring down your monthly commitment, for those who like to stretch a little for bigger space.
Those who are buying a second property ought to explore decoupling as ABSD (additional buyer’s stamp duty) is here to stay.
2. What are some things I need to know about refinancing?
Refinancing or repricing – that’s the question. In Singapore, almost everyone reviews their mortgages every 2-3 years when the lock-in period is over. Those who do not find themselves taken for a ride (usually) as often the spreads on their loan reverts to a higher rate after the initial few years.
To refinance out requires giving your existing bank a notice period of 3 months. To reprice needs only 1 month to take effect but you might be forced to be lock-in for 2 more years at a less than ideal rate from what you can get out there. Also many forget they have a legal fee clawback period of 3 years which means they cannot refinance out with no costs yet even though they have finished serving a 2-year lock-in.
3. What are the types of home loans out there for residential properties?
Just like most countries, Singapore homeowners can opt for fixed or tracker rate (often called floating rate here) home loans. But unlike in many places, fixed rate mortgages are only fixed for relatively short periods of time, usually 1-3 years. There are not many lenders offering more than 3 years fixed and certainly not 15 years like in the U.S.
Interestingly, besides tracking the usual banks’ internal BOARD rates, and the benchmark interest rate in Singapore (ie. 1-month or 3-month SIBOR), there are also floating rate home loans which are pegged to fixed deposit rates – an innovation which is likely first-of-its-kind.
Choosing between fixed versus floating and the kind of mortgage pegs to select requires some thinking and it is best to speak to a mortgage professional who has a good overview of things.
4. Can you summarise the benefit of going through you for my mortgage?
Just like working with an insurance agent or FA (financial advisor) for your financial planning needs, many may have overlooked the need for a mortgage consultant when it comes to managing the costs of borrowings.
A good mortgage broker will be able to guide you along for those buying a Singapore residential property for the first-time, sidestepping all the unnecessary issues in conveyancing. He or she would also provide in-depth advice on the mortgage structure, accurate rates, good comparison and analysis for interest rate trends, etc.
Most importantly, working with a mortgage consultant, you will never be late to do your mortgage review every 2-3 years and would have helped yourself save thousands of dollars in unnecessary interest costs as a result of serving a 3-month notice to your existing bank!
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