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Showing posts with label Credit Bureau (Singapore). Show all posts
Showing posts with label Credit Bureau (Singapore). Show all posts
Tuesday, May 7, 2013
Thursday, April 11, 2013
A Quick Guide to Being a Guarantor for a Home Loan
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Sunday, January 27, 2013
If Your Home Loan is Turned Down, ...
By SUSAN TEO
In this article, you will find some common problems that may cause financiers to reject your home mortgage application and suggestions to resolve these issues. But this is not an exhaustive guide of the factors for non-approval nor does it promise sure-work solutions that will improve your chances of getting a home loan. Thus you may prefer some professional advice from a mortgage consultant to assess your financial condition.
Most financiers will suss out the credit history of borrowers before granting a home mortgage. Do note that the repayment history, like default and late repayment, on most of your credit facilities are recorded by the Credit Bureau (Singapore), and released to credit providers on the Bureau.
Even records for closed accounts are kept. Any closed account, with defaults in payment, that comes with the status of full or negotiated settlement will be shown in your credit report for 3 years from the date of settlement.
Financiers consider your past repayment history as an indicator of future behaviour. If you have a poor credit score, financiers will be more cautious in lending. Even if they do lend, the loan quantum may be smaller.
2. High DSR (debt-to-service ratio)
DSR = Monthly Debt Service / Monthly Gross Household Income
Before loan approval, the financing institution will study your total outstanding financial liabilities and income level, to see if you have the means to service all your debts.
An excessively high DSR will almost certainly lead to rejection.
With the latest cooling measures on 12 January 2013, the mortgage serving ratio (MSR) is capped at 30% of a borrower's gross monthly income for loans by private banks, and 35% for HDB concessionary loans. Previously for HDB concessionary loans, the MSR was 40%, and for private loans there were no cap.
3. Employment history
If you are a fresh graduate who has only started work for a short time, you can be rejected because you have not demonstrated stable income-generating ability. Financiers take long-term stable employment, usually two years, as proof of payment ability.
4. Short reminding lease
A mortgage loan is secured against the property. The property is the collateral, whereby in the event of a default, the financiers will foreclose the mortgage. If the property you wish to purchase has a short reminding lease, it cannot be sold for much hence the financing institutions may not be able to recover all the loan disbursed.
5. Low valuation
Any factors that will seriously depreciate the valuation of your property can result in loan rejection. The house could be sitting on an undesirable location, in a dilapidated building, or in a location affected by future planning.
Pay off any defaults and make prompt payments from now on. This will help to pull up your credit score. To read more about credit score, you can browse “Tips to Make Your Mortgage Financing a Breeze”.
2. Longer loan tenure and lower loan quantum
Stretch your loan tenure and reduce the borrowing amount, this will reduce the monthly installment repayments, and lower the DSR.
3. Use a different lender
Some lenders may have more lenient borrowing requirements.
4. Get a guarantor
In the event of a default, the financing institution can hold the guarantor accountable for the loan repayment.
5. Combine incomes
Apply for the loan with someone who is working and drawing a salary. For instance, your spouse or a close relative. The financier will have greater confidence of loan repayment as there is now a higher income.
Whatever the factors affecting loan approval, remember that at the end of the day, the financiers just want to ascertain that you have the ability to make prompt repayments.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
In this article, you will find some common problems that may cause financiers to reject your home mortgage application and suggestions to resolve these issues. But this is not an exhaustive guide of the factors for non-approval nor does it promise sure-work solutions that will improve your chances of getting a home loan. Thus you may prefer some professional advice from a mortgage consultant to assess your financial condition.
Reasons for rejection
1. Poor credit standingMost financiers will suss out the credit history of borrowers before granting a home mortgage. Do note that the repayment history, like default and late repayment, on most of your credit facilities are recorded by the Credit Bureau (Singapore), and released to credit providers on the Bureau.
Even records for closed accounts are kept. Any closed account, with defaults in payment, that comes with the status of full or negotiated settlement will be shown in your credit report for 3 years from the date of settlement.
Financiers consider your past repayment history as an indicator of future behaviour. If you have a poor credit score, financiers will be more cautious in lending. Even if they do lend, the loan quantum may be smaller.
2. High DSR (debt-to-service ratio)
DSR = Monthly Debt Service / Monthly Gross Household Income
Before loan approval, the financing institution will study your total outstanding financial liabilities and income level, to see if you have the means to service all your debts.
An excessively high DSR will almost certainly lead to rejection.
With the latest cooling measures on 12 January 2013, the mortgage serving ratio (MSR) is capped at 30% of a borrower's gross monthly income for loans by private banks, and 35% for HDB concessionary loans. Previously for HDB concessionary loans, the MSR was 40%, and for private loans there were no cap.
3. Employment history
If you are a fresh graduate who has only started work for a short time, you can be rejected because you have not demonstrated stable income-generating ability. Financiers take long-term stable employment, usually two years, as proof of payment ability.
4. Short reminding lease
A mortgage loan is secured against the property. The property is the collateral, whereby in the event of a default, the financiers will foreclose the mortgage. If the property you wish to purchase has a short reminding lease, it cannot be sold for much hence the financing institutions may not be able to recover all the loan disbursed.
5. Low valuation
Any factors that will seriously depreciate the valuation of your property can result in loan rejection. The house could be sitting on an undesirable location, in a dilapidated building, or in a location affected by future planning.
How to obtain an approval?
1. Improve credit standingPay off any defaults and make prompt payments from now on. This will help to pull up your credit score. To read more about credit score, you can browse “Tips to Make Your Mortgage Financing a Breeze”.
2. Longer loan tenure and lower loan quantum
Stretch your loan tenure and reduce the borrowing amount, this will reduce the monthly installment repayments, and lower the DSR.
3. Use a different lender
Some lenders may have more lenient borrowing requirements.
4. Get a guarantor
In the event of a default, the financing institution can hold the guarantor accountable for the loan repayment.
5. Combine incomes
Apply for the loan with someone who is working and drawing a salary. For instance, your spouse or a close relative. The financier will have greater confidence of loan repayment as there is now a higher income.
Whatever the factors affecting loan approval, remember that at the end of the day, the financiers just want to ascertain that you have the ability to make prompt repayments.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
Friday, January 25, 2013
A Quick Guide to Being a Guarantor for a Home Loan
By SUSAN TEO
A guarantor or co-signer to a loan is a third party in a loan contract. In the event of a default by the borrower the co-signer is legally obliged to repay the loan. Thus, the decision to be a co-signer shall not be taken lightly.
More often than not, you might feel compelled to sign on the dotted line out of a sense of helpfulness or loyalty. However, when it comes to such a major financial undertaking, you will have to adopt an impersonal stance.
You must find out why the borrower needs a co-signer. If it is because he has a poor credit history, you should be wary about co-signing because if he is delinquent in his payment you will be liable for it.
2. Understand the responsibilities and terms of a co-signer as it is stated in the loan contract.
You should scrutinise the contract and understand the legal jargon.
As the person who asks you to co-sign is often a close friend or relative you trust, you may believe that he will make his repayment on time so you have no worries. Consequently, you gloss over difficult to understand terms in the contract, please do not run this risk. There are many home loan specialists, who will be happy to explain the terms of the contract to you for free. Try the professional and friendly mortgage consultants at www.iCompareLoan.com or Property Buyer.
Although you are not required to make any repayment on the loan unless the borrower defaults, financing institutions will still consider it as a financial liability when you apply for a loan yourself. Financing institutions may require you to declare if you are a guarantor.
Thus, the loan you are co-signing will add to your DSR and you may face difficulties in obtaining a loan. Or if you do obtain one, you may have to be contented with a lower loan quantum or higher interest rates (since banks with the best rates may not want to lend to you).
2. Added Financial Payments
If the borrower runs away, become insolvent or is not prompt in his monthly payment, the financier will turn to you to service his debt.
Do note that being a guarantor will not be reflected in the credit report of the Credit Bureau (Singapore). So even if the borrower defaults or makes late payments, it will not have any bearing on your credit score.
3. Removal of co-signer's status
Unfortunately, being a co-signatory is almost cast in stone. It is impossible to remove yourself from the contract without the permission of both the borrower and the bank. Further, there are legal fees involved for removal.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
A guarantor or co-signer to a loan is a third party in a loan contract. In the event of a default by the borrower the co-signer is legally obliged to repay the loan. Thus, the decision to be a co-signer shall not be taken lightly.
Things to take note of
1. Why does the borrower need a co-signer?More often than not, you might feel compelled to sign on the dotted line out of a sense of helpfulness or loyalty. However, when it comes to such a major financial undertaking, you will have to adopt an impersonal stance.
You must find out why the borrower needs a co-signer. If it is because he has a poor credit history, you should be wary about co-signing because if he is delinquent in his payment you will be liable for it.
2. Understand the responsibilities and terms of a co-signer as it is stated in the loan contract.
You should scrutinise the contract and understand the legal jargon.
As the person who asks you to co-sign is often a close friend or relative you trust, you may believe that he will make his repayment on time so you have no worries. Consequently, you gloss over difficult to understand terms in the contract, please do not run this risk. There are many home loan specialists, who will be happy to explain the terms of the contract to you for free. Try the professional and friendly mortgage consultants at www.iCompareLoan.com or Property Buyer.
Ramifications of co-signing
1. Affect your debt-to-service ratio (DSR)Although you are not required to make any repayment on the loan unless the borrower defaults, financing institutions will still consider it as a financial liability when you apply for a loan yourself. Financing institutions may require you to declare if you are a guarantor.
Thus, the loan you are co-signing will add to your DSR and you may face difficulties in obtaining a loan. Or if you do obtain one, you may have to be contented with a lower loan quantum or higher interest rates (since banks with the best rates may not want to lend to you).
2. Added Financial Payments
If the borrower runs away, become insolvent or is not prompt in his monthly payment, the financier will turn to you to service his debt.
Do note that being a guarantor will not be reflected in the credit report of the Credit Bureau (Singapore). So even if the borrower defaults or makes late payments, it will not have any bearing on your credit score.
3. Removal of co-signer's status
Unfortunately, being a co-signatory is almost cast in stone. It is impossible to remove yourself from the contract without the permission of both the borrower and the bank. Further, there are legal fees involved for removal.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
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