How To Find The Best Mortgage Loan

How To Find The Best Mortgage Loan – Visiting showrooms and talking to real estate agents can make buying a home in Singapore a breeze. However, when you dig deeper, you will discover that there are more complex aspects going on.

For example, managing finances, paperwork, and navigating various decisions can add layers of complexity to the process.

How To Find The Best Mortgage Loan

There are some important things to consider such as: Are you planning to borrow from HDB or from a bank? How much is the down payment? What are LTV, MSR and TDSR?

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If you buy an HDB flat, you have two loan options – HDB loan or bank loan. To help you decide, consider the following factors:

To qualify for an HDB loan, your household’s monthly income must not exceed $14,000 ($7,000 for singles, $21,000 for extended families).

Additionally, you should not have owned any personal property in the past 30 months. If you do not meet these criteria, you may consider taking out a bank loan instead.

If you choose to borrow from HDB, you can borrow up to 80% of the house value. On the other hand, with a bank loan, you can only borrow up to 75%.

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If you choose to borrow from a bank, you need to pay 25% of the property’s selling price, with a minimum of 5% in cash.

With HDB loans, your mortgage interest rate is typically 2.6% per annum. (based on current CPF interest rate of 2.5% + 0.1%), unchanged over the years.

On the other hand, bank loans offer many different loan packages, each with its own interest rate. This diversity gives you more flexibility in choosing the right loan for your needs.

In general, fixed-rate mortgages provide predictability and stability in monthly payments because the interest rate is fixed for a fixed period of time (usually 2 to 5 years ). Fixed-rate loans are useful in high-interest rate environments because interest rates potentially increase over time.

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Variable-rate loans typically come with lower initial interest rates than fixed-rate mortgages. The interest rate is usually linked to the Singapore Overnight Average Rate (SORA) or Fixed Deposit Based Rate (FDR).

If interest rates stay the same or decrease over time, you may pay a lower interest rate than on a fixed-rate mortgage. Remember that the higher the interest rate, the higher the monthly payment.

A two-in-one home loan allows you to have part of your loan amount on a fixed rate plan for peace of mind and benefit from variable rate plan interest on the remainder of your loan amount.

In short, a bank loan may have a lower interest rate than an HDB loan. The main trade-off is that you need to keep an eye on your interest rate because it can change every 2 or 3 years. You may need to reprice your home loan (with the same bank) or refinance it (choose a different bank for your mortgage).

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There is always the option to refinance from an HDB loan to a bank loan at any time to enjoy lower interest rates. Note that refinancing has an appraisal fee and legal fees, so it’s a good idea to consider the entire package, not just the interest rate. The same goes for repricing.

The LTV ratio indicates the loan amount as a percentage of the property value. Or first home loan, 75% bank loan or 80% HDB loan. In some cases, you may not get the full 75% and 80% because when you apply for a home loan, the sponsor also takes into account your TDSR.

TDSR is the portion of your income that goes towards paying off all your debts like car and education loans. With a home loan, your TDSR cannot exceed 55% of your gross monthly income.

The MSR only applies if you buy an HDB or Condominium Condominium (EC) flat. This limits your monthly payments to 30% of your gross monthly income.

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Here’s an example of how TDSR and MSR affect your monthly debt payments (assuming you earn $5,500 in monthly income):

TDSR: Since TDSR is 55%, you can spend up to $3,025 per month to repay the loan (all types).

MSR: Since the MSR is 30%, you can spend up to $1,650 per month on an HDB/EC home loan. (This total loan budget of $1,650 per month is less than $3,025.)

If you take out an HDB loan, most of the money saved in your CPF Ordinary Account (OA) will be used for the down payment. Consider setting aside $20,000 in your CPF-OA as these funds provide a safety net for monthly installments in case of unforeseen circumstances such as temporary loss of income.

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If you want to leave your savings in CPF and have spare cash on hand, a bank loan allows you to pay the entire upfront payment in cash.

To understand the loan limits mentioned above, you can use a home loan calculator to estimate your monthly payments. Longer loan terms mean smaller and more manageable repayments.

You also have the option of using the savings in your CPF Ordinary Account (OA) to pay off your home loan installments.

Paying with CPF is certainly attractive if you need cash flow for everyday expenses and investments, but it means you have to give up the 2.5% risk-free interest rate on your CPF amount .

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In case of sale of the property, the CPF-OA amount that you have used will have to be repaid along with the accrued interest.

Paying the loan in cash allows you to leverage your CPF-OA savings at a 2.5% interest rate. You can keep the proceeds from the sale without needing to top up your CPF.

If you have the cash, you might consider paying off part of your home loan to save on interest. It’s worth noting that some banks charge a fee for partial refunds, so weigh up the pros and cons before moving forward.

If you’ve chosen to borrow from a bank, consider getting an in-principle approval (IPA) to better understand your creditworthiness to streamline the purchasing process.

Know Your Mortgage Options

This is a document from the bank that shows how much they are willing to lend you based on your TDSR, MSR, income, and credit score.

You need to secure your IPA before paying the option fee for your home. This is important because if you find that you cannot get enough credit for the property, you will not be refunded the option fee. In some cases, your real estate agent may request your IPA before proceeding with the transaction.

Having an IPA helps speed up the loan disbursement process. More importantly, knowing your maximum loan amount will keep you from getting emotionally attached to homes that are outside your budget. You can set realistic expectations and make informed decisions during your home search.

, you are sure of the amount you can borrow to buy a home, which will allow you to know your exact budget. Loan to value, transfer, property inspection and stamp duty are some of the terms that confuse first-time buyers. Fight through the arduous process of protecting your own home. Getting a mortgage is one of the biggest challenges a person will face in life. From financial stress to the sheer amount of paperwork involved in closing, the first-time homebuyer journey is nothing but heartwarming — until you take advantage of our services. of a mortgage broker.

How To Get The Best Mortgage Rates

The key advice they give explains why mortgage brokers have a mortgage market share of around 50%. In the absence of experience, a mortgage broker can help you navigate the process with ease and save you money in the process, and we look forward to helping you find the right one in the article. This.

Regulated by the Central Bank of Ireland, they are qualified to provide the best mortgage advice to first-time buyers, while aiming to secure the best deal from the lender best suited to their needs. specific circumstances and needs of customers.

In addition to providing step-by-step advice, they also oversee the completion of paperwork until the loan is withdrawn.

For first-time buyers entering the mortgage world, there are some questions that can help you weigh the pros and cons of working with a mortgage broker.

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A mortgage broker typically has access to multiple lenders so they can find the best value for their clients based on their individual needs and financial circumstances.

A mortgage advisor typically represents a specific lender and liaises between them and the client to negotiate a deal that is beneficial to both parties.

With interest rates rising in 2023, which will also increase monthly repayments for first-time buyers, it’s more important than ever to make sure you’re getting the best deal.

Mortgage brokers have access to seven leading lenders: the big four banks, plus broker-exclusive lenders Avent Money, Finance Ireland and ICS Mortgages.

Questions To Ask Your Mortgage Lender

So it certainly helps to have an objective and experienced broker who can examine the different prices and opportunities available to help you save big money in the long run.

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