Courtesy of www.PropertyBUYER.com.sg
In order to stress test whether you can afford this property, we have worked
out the Monthly installments for Tenure ranging from 10 to 35 years.
It is very easy to over-commit and end up buying a property you will have a
hard time to pay for in subsequent years.
Contact them
Tel: 6100 - 0608 sms: 9782 - 8606
Email: loans@propertyBUYER.com.sg
http://www.propertybuyer.com.sg/contactus.php
Retirement Age from 55 years to 65 years old leads to longer Home
loan tenure
In the past, retirement age is 55 years. That means that if you are 30 years
old, you can only borrow up to 25 years for your home loan.
Since some time ago, Singapore's retirement age has been raised to 65
years old. That makes 35 years tenure Singapore Home Loan possible.
But by having 30 years and 35 years home loan tenures, this also mean that
the monthly installment is reduced.
Easy Financing Inflates Property prices
This makes properties more affordable (From a purchasing stand-point), but
allows properties to become expensive. Property developers can then raise
prices because more people can afford the purchase.
Hence the main beneficiaries are the Property Developers and the
government. Why? Because more people can afford, the property
developers can raise prices. Because the prices are raised, the government
can earn more taxes from development charges and property taxes.
Home Buyers are the Biggest Losers
The biggest losers are home buyers! They can be expected to be CHAINED
to their properties or home loans for 35 years. Let's say this is modern day
slavery. But you have a choice not to be a big loser.
500k Home Loan Scenario
Property Price : $625,000
Interest rates Assumption : 3%
Salary requirement assumption : 2 x Monthly installment
35 years Tenure Home Loans
For a Singapore home loan of 500,000, at 35 years tenure, the monthly
installment is $1,925, this requires a salary of $3,850 to be able to sustain it.
30 Years Tenure Home Loans
For a Singapore Home loan o 500,000 at 30 years tenure, the monthly
installment is $2,110, this requires a salary of $4,220 to be able to sustain it.
Committing to an expensive Home loan Means No savings
As the salary requirement assumption is based on 2x installment, the debt
servicing ratio is already 50%. The other 50% is normally used for costs and
consumption, therefore it is expected that the person will have very little
savings.
A salary of $4,220 per month (single person) is about in line with Singapore
average salary. Assume a joint income of $5,000 per month (both person).
In case any one of the couple becomes unemployed, they will face hardship
in servicing the Home Loan.
There is no way to guarantee anyone stays gainfully employed until 65 years
old. In reality, due to a more dynamic economic environment and global
trade, we can expect to see 3 to 5 major recessions in our working lives.
What this means is that, the age of lifelong employment is no more. Many
people can expect to be retrenched within their working lives and the risks
becomes bigger for those who are in their 40s and 50s, who can become
semi-employed or outright unemployed for years.
What will happen to those people who has taken a 35 year loan when they
are 30 years old and become unemployed when they reach 50 years old?
They still have some 15 years of home loan to pay up.
CPF Withdrawal limit
Not only that, when they hit their CPF withdrawal limit for their properties,
they will need to fork out cash. That will cause more severe distress to
Home owners.
Singapore's mean wage is about $4,000 per month. Lower salaried jobs are
more easily found than certain higher salaried jobs, therefore the is a good
likelihood of finding another job.
800k Home Loan Scenario
Property Price : $1,000,000
Interest rates Assumption : 3%
Salary requirement assumption : 2 x Monthly installment
It is so easy to be emotionally drawn into buying your "DREAM" home. In
this case, you may only need an income of around $7,000. If this $7,000
consists of 2 x $3,500 income, it seems affordable, but a safer salary would
be around $7590 or $8880.
Understanding your Home Loan risks
A higher income and a higher priced property has more risks than a lower
income and lower priced property. The reason is because it is not as easy to
replace one high paying job with another high paying job in the event of a
loss of job.
Of course we are happy if more people come to us to look for home loans.
But we strongly urge you to consider not to buy a property that is more
expensive than what you can safely afford. We emphasize "safely afford",
not simply "afford". What that means is, borrow within your means and do
not get swayed by fanciful property agents or nice property brochures.
www.PropertyBUYER.com.sg is a research-focused mortgage Advisory, we do not emphasize cheap loans, but balances risks versus savings to structure the best fit home loan for individuals. We work with many banks, we receive a fee from the banks when you choose to deal through us, therefore we have decided not to charge for this service. Please the "about us" to know more about us.
Email: loans@propertyBUYER.com.sg
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