Singapore’s properties are very costly, and free land is very scarce. Yet, the homeownership rate is above 90%. Everyone wants a property there because of the low crime, high income, high employment, and good infrastructure it provides (along with other benefits). Most people choose mortgage loans to secure the property. Here are a few things a borrower must know before choosing a mortgage loan.
Mortgage Loan Conditions
A borrower should be aware of all the rules and conditions of the lender. Usually, the borrower overlooks the details and signs the papers straight away. This ignorance can prove to be a mistake that can cause trouble in the future. In many instances, banks lure the borrowers with some lovely baits- free insurance, subsidies for legal fees, etc. – so that they overlook tactical clauses. Various online mortgage advisors such as https://www.avantmortgage.sg/ provide conditions of different banks for the borrower to compare them and make the right decision.
Mortgage Loan Interest Rates
The interest rate is a powerful thing to consider while choosing a home loan. Different banks offer home loans or mortgage loans at different interest rates and conditions. Hence, don’t settle with the very first loan package that you encounter. Many websites provide a comprehensive list of interest rates from different banks for comparison.
Mortgage Loan Tenure
Mortgage loan tenure or loan term is the pre-agreed period in which the borrower repays the lender with the lent money amount along with the interest amount. A borrower can choose the tenure himself/herself. In Singapore, maximum tenure for a home loan is 30 years and 35 years for HDB and no-HDB flats, respectively. Longer loan tenure means lesser EMI. But it is best to choose the shortest affordable tenure because long-term loans have high-interest expenses.
Fixed-Rate v/s Floating Rate
In Singapore, there are two options in mortgage loan interest rates- fixed rate and floating rate. The fixed-rate is the rate that remains fixed in the entire loan term. Floating rates are the rates that fluctuate over the tenure course. This rate goes up when SIBOR (Singapore Interbank Offered Rate) and SOR (Swap Offer Rate) go up. It is smart to check these rates and think long-term before making a choice.
Loan-to-value (LTV) ratio is simply the maximum amount that a person can borrow from a bank in Singapore. The maximum LTV is 75% for most of the banks. It means a client can borrow a maximum of 75% of the property price from a bank. LTV depends on the borrower’s age, tenure, credit score, and property location.