July 5, 2007

What to look out for in a housing loan?

Every Singaporean is in debt. Yes, you see it right, housing loan, credit card debt, car loan, renovation loan, and many others on hire purchase. However, it is without doubt that housing loan will be the biggest debt one has to take on. Therefore it is important to choose the correct loan package.

A typical loan will last for about 2-30 years, and below, I listed some consideration :

Interest rates

This is the most important consideration. Most banks offer “promotional” rates, but the reality is that the borrower do not get to enjoy it very much. This is because by the time the borrower starts to draw down the loan, the promotional rate will almost be coming to an end.

Most banks peg the housing loan rates at a discount off their bank lending rate (BLR) and for different period for the promotional rates. Therefore one has to consider and compare between different banks the rates both within the promotional rates period and beyond.

“Promotional Rate” starting date
This is where the bank starts to ripe the customers off. While they may say that there is a promotional rate for say a period of 3 years, for example. However, the starting date for the “promotional rate” may be the day the bank approved the loan.

Therefore if a buyer is buying a property that is under construction and the payment is a progressive or deferred payment scheme, by the time the buyer draw down the loan, a substantial part of the promotional period would have lapsed.

Early redemption penalty

Will the bank charge you a penalty for early redemption? The bank incurred much time and money to process the housing loan for the buyer, and it is understandable that there will impose a penalty for early redemption. Check the fine print for the amount of the penalty.

Legal Fee

Does the bank pay for your legal fee? The amount can be substantial.

Refinancing

If you wanted to refinance your housing loan, what sort of penalty is there? Can you refinance it with another bank at a cheaper rate without much cost?

Loan period adjustment

Can you prepay the bank partially without additional cost? This will help in reducing your interest cost should you have spare cash.

8 comments:

Prasad Ballari said...

I think, I stepped into right blog.. You understand finance & number really well.. :)

Hope to be in touch..

Your optins trading is good one.. I started learning options.. Probabaly will get help from you

-prasad

Prasad Ballari said...

I think, I stepped into right blog.. You understand finance & number really well.. :)

Hope to be in touch..

Your optins trading is good one..
-prasad

Prasad Ballari said...

Your options trading was good article..

I seem to have stubbled upon right interest.

Creative Blogger said...

also cool ;)

Té la mà Maria - Reus said...

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thank you

Alappuzhakaran said...

:)

Feyhan Sönmez said...

Hello,

Thnx for your comment for my receipt, creperié...

I work for a French Bank as an IT staff. In my spare time, I cook for relaxing.!!! and having fun...

Two days ago one of our collegue of Singapore branch came for a mission to Istanbul, Turkey and we talked about the life there. As far as I learnt from him, except buying a flat/house and a car, everything is cheap there. Especially he mentioned; apartment prices or conceptual buildings costs are very high.

This definetely validates your sentence; "Every Singaporean is in debt...:)))"

Even my blog is in Turkish, I ll be waiting for ur visits.

Have a nice day.....

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