Best Home Mortgage Loan Provider Summary

Best Home Mortgage Loan Providers Summary from Property Buyer Singapore

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TDSR Causes Home Loan Refinancing Hardships

TDSR Causes Home Loan Refinancing Hardships from Property Buyer Singapore

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Basic Mortgage Loan Facts You Must Know

Basic Mortgage Loan Facts You Must Know from Property Buyer Singapore

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How A Mortgage Broker Can Help You?

How A Mortgage Broker Can Help You? from Property Buyer Singapore

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The Drawbacks of HDB Loans

The Drawbacks of HDB Loans from Property Buyer Singapore

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Explaining the Advantages of HDB Loans versus Bank Loans

Explaining The Advantages of HDB Loans Versus Bank Loans from Property Buyer Singapore

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A Quick Guide to Being a Guarantor for a Home Loan

A Quick Guide to Being a Guarantor for a Home Loan from Property Buyer Singapore

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Fixed Rate Versus Floating Rate Home Loan Packages In Singapore: Which One Is Right For You?

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All About Using Home Loan Consultancy Sites

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A Quick Guide to Approval-in-Principle (AIP) for Home Mortgages

By SUSAN TEO

Approval-in-principle (AIP) for home loans, or mortgage prequalification, are conditional approval. AIP can be sought for loans of private residential properties or HDB flats. Such loans are known as pre-approved loans. The time between submitting an application for an AIP and knowing the outcome can be as fast as 15 to 60 minutes. The validity period of the AIP varies between 14 to 30 days. During this period, financial documents have to be submitted to obtain a formal offer. After which, a Letter of Offer will be issued if the loan is approved. If the required documents are not submitted within this period, you can still re-apply for the AIP.

Having an AIP lets you know the loan quantum you are eligible for and the monthly repayment amount.

An AIP is non-binding for both the applicant and the financier; therefore you are allowed to change financiers even after obtaining an approval-in-principle loan from the financier. You may even change loan package with the same financier that you have obtained the AIP from.

If you are confused about AIP, you can have a FREE discussion with a Singapore home loan consultant.

Why you should have an AIP?

 

Narrow down the property search

Having an AIP lets you zero in on the property you know you can afford to buy. Thus you will not be wasting time viewing properties that you later find to be out of your budget when you apply for that loan. This also explains why some property agents only work with buyers who already obtained an AIP.

Fast commitment

Being certain that you can afford that property allows you to commit immediately when you have found your ideal property. There is no waste in time between obtaining the loan and closing the transaction. Indeed during that interval, some other buyers may beat you in buying the property.

Forfeit of booking fee

To prevent other buyers from buying, you may choose to sign the option to purchase (OTP)
and lay down the booking fee, before you have obtained the loan.

But this may not be the best course of action as you may not be able to obtain an ideal loan with a favourable rate, or even if you do it may be with a lower loan quantum. In the latter case, the deal may fall through if you do not have sufficient cash or CPF fund to top up the shortfall.

Should the deal fall through, you will have to forfeit part or all of the booking fee (The booking fee and forfeit amount will depend on whether it is a private house or HDB flat and if it new or resale).

In another scenario, you may be able to obtain the maximum loan-to-value ratio (LTV), but the valuation of the property has fallen during the interval in which you had signed the option and obtained the loan.

For example, the purchase price you agreed on is $1.5m, but when you have obtained the loan the valuation of the property has dropped to $1.2m. Assuming that you are eligible for a 80% LTV, you thought you could obtain financing up to $1.2m, but because of the lower valuation you can only secure $960,000. If you do not have the means to make up for the $240,000 difference, you cannot seal the transaction. However, such situations are extremely rare and only happen during financial crises.

Things to be cautious about

As an AIP is provisional, the bank still can reject the application if there are any changes to your financial status. So avoid taking other loans or changing jobs before the Letter of Offer is issued.

Just because an AIP is provisional does not mean you should randomly select a bank from which to obtain an AIP, thinking you can secure the same loan quantum from other banks later. That particular bank may be offering uncompetitive rates and loan features. And you may later discover that you are not eligible for the same quantum from other banks.



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Tips for Interest Saving on Your Home Loan

by SUSAN TEO

This article highlights some ways to lower the interest payable on your loan.

Loan quantum or loan tenure

The most straightforward way to save on interest payment is to opt for a loan with a lower loan quantum or a shorter loan tenure. The downside is that there will be greater financial outlay (either CPF or cash).

Because with a lower loan quantum, you will have to make greater upfront payment. Whereas with a shorter loan tenure you will have to incur higher monthly installment payment.

The logic is simple. For a lower principal, the interest chargeable falls because it is a percentage of the former, and a higher monthly installment payment will reduce the principal faster.

Partial prepayment

You can make prepayment above the monthly agreed amount. This will effectively lower the principal, and hence interest payable. But many loans come with a lock-in period (aka. reimbursement period), typically the first 2 to 5 years of the loan tenure, during which partial or full repayment could involve a penalty of usually at most 1.5% of the re-payed amount. However, some loans do not have a lock-in period or its penalty only applies to full repayment.

(Note: For the aforementioned points, it will involve greater cash outlay; hence if there are other investments you can make with the monies you should weigh carefully if the potential gains can exceed the interest savings from paying off your mortgage faster or opting for a lower loan amount.)

Loan type

HDB or bank loan

Keep abreast of interest rate conditions and the economic policies of Singapore's major trading partners. These will affect the interest rates of loans.

As a rule of thumb:

During a low interest rate environment, it might be best to select a bank loan rather than a HDB loan if it happens that you are purchasing public housing. A bank loan will normally offer lower interest rate compared to a HDB loan in a low interest rate climate. But besides the interest payment, there are other deciding factors in taking a loan. For a more detailed comparison between the two, read these:“Explaining the Advantages of HDB Loans versus Bank Loans” and “A Quick Look at the Drawbacks of HDB Loans”.

Bank loans

For private properties, you can only finance them with bank loans.

With bank loans, you can choose from a selection of loan types. The most common being the fixed rate loan and floating (variable) rate loan.

In general, the rates on a floating (variable) rate loan is lower than for a fixed-rate loan because bankers need to hedge against the risks of keeping rates unchanged. However, during a high interest rate environment, it is possible than the upswings in rates for a floating (variable) rate loan result in greater interest payable compared to a fixed-rate loan. To decide between the two types of loans, you may want to read “Fixed-Rate Versus Floating Rate Home Loan Packages in Singapore: Which is Right for You?”.

Specifically, for a floating (variable) rate loan, to lower interest rate, you can consider a shorter tenure SIBOR or SOR. As shorter tenure usually has lower rates than the longer tenure ones.

However, shorter tenure comes with faster changes to the rates. For example, for a 1-month SIBOR, banks revise it at 1-month or 3-month interval. Whereas for a 12-month tenure, it is only revised every 12 months.

So when interest rates start to climb, you can end up with higher rate for the 1-month SIBOR. Below illustrates this

Initially:
1-month SIBOR = 0.31%
12-month SIBOR = 0.57%

3 months later:
1-month SIBOR = 0.80%
12-month SIBOR = 0.57%

But, at the end of the day, which will cost you more in interest payment will also depend on the spread. Because the interest rate always has a margin added to the SIBOR or SOR. The interest rate payable then is actually X-tenure SIBOR + spread, or X-tenure SOR + spread.

Another way to reduce interest payment is to select an interest offset loan. This is suitable for people with a large amount of idle cash in the bank. A portion of this deposited sum will earn a special interest rate that exceeds what is normally offered for bank deposits. The earned interest can then be used to offset the interest payable on the housing loan.

Loan features

Some floating (variable) rate loans have special features like an interest rate cap. This will translate into cost saving in case of an interest spike.

Refinancing or repricing

If you currently already have a housing loan, you can always terminate the existing loan and apply for a new one. The aforementioned points can serve as guidelines in your new loan selection.

An ideal time to switch loan package is after the lock-in period, as you will not have to incur a penalty. Your current financier may offer a free one-time conversion (i.e. repricing) to a package you are eligible for. Or they may charge a conversion fee.

Conversely, you can refinance, which means changing into a mortgage with a different financier.

For a detailed discussion of what to look out for in refinancing, check out our other article: “A Guide to Housing Refinancing in Singapore”. This article also illustrates the cost saving you can enjoy with refinancing, even during the penalty period.



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A Quick Look at the Drawbacks of HDB Loans

by SUSAN TEO

In the last article, I discussed about the pros of using a HDB loan. Here, we look at the opposite instead.

1. No saving left in your CPF (Central Provident Fund) Ordinary Account 

Before you are allowed to take a HDB loan, it is mandatory that all the balance (after setting aside an amount for the miscellaneous fees of the flat purchase) in your CPF Ordinary Account up to the valuation limit (the lower of the purchase price or valuation at the time of purchase) if applicable, be utilised first. After that, HDB will decide on the loan quantum based on the outstanding amount to be paid for the flat.

As the savings in the CPF Ordinary Account generate an interest, which has remained at 2.5% p.a. since July 1999, you lose this interest earning when you use the savings to pay for the flat.

However, you save on the interest payable for the HDB loan which is 0.1% above the interest rate for the Ordinary Account. In other words, the loan rate is 2.5% + 0.1% = 2.6% p.a..

Had you not utilised the savings in the CPF Ordinary Account, you would have to use the loan. The below illustrates the loss:

• CPF Ordinary Account Saving = S$50,000

• Interest earned at 2.5% p.a.= S$1,250

• Interest payable on loan at 2.6% p.a.= S$1,300

• Loss = S$1,300 – S$1,250 = S$50

Nevertheless, it is still possible than you would have been better off if the saving had remained in the Ordinary Account. Because the first S$60,000 in all the 3 CPF accounts (Ordinary, Special and Medisave) earns an additional 1% interest, with up to S$20,000 from the Ordinary account. So if you need to rely on the balances in your Ordinary account to make up the S$60,000, you forfeit this additional 1% of interest. The below is a simple illustration using the maximum amount of S$20,000 that can earns the additiona1 interest in the Ordinary account.

Loss from using your CPF balances instead of the HDB loan:

• Interest Rate Loss

= 3.5% (interest in CPF Ordinary Account) - 2.6% (interest on HDB loan) = 0.9% p.a.

• Annual Loss

= 0.9% x S$20,000 = S$180

Further, when the flat is sold, all CPF saving used and interest that would have been accrued if the sum had remained in the account, will be deducted from the sales proceeds, and refunded to the Ordinary Account. This will reduce the cash proceeds which you may need for other purposes. Anyhow, if you had financed the flat with a loan (bank or HDB), you would still need to repay the outstanding loan amount from the sales proceeds.

Another drawback of depleting your CPF Ordinary Account savings is that in the event of a job loss there might not be adequate balance to service the monthly home loan repayment; hence you may be required to service it with cash.

A way to circumvent having to use the CPF Ordinary Account balances to pay for the flat is to invest it before you make the flat purchase. You can do so for the savings in excess of S$20,000 under the CPF Investment Scheme - Ordinary Account. Or instead you can transfer the monies in your Ordinary Account to the Special Account which interest rate has remained at 4% p.a from 2000 till now. This transfer is irreversible and there is a limit to it - the balance in the account (inclusive of the amount withdrawn under the CPF Investment Scheme for the Special Account) after the transfer cannot exceed the prevailing Minimum Sum. Once the monies are in the Special Account, you cannot utilise it for your housing purchases anymore.

2. Possibly relatively higher interest and opportunity cost 

During a high interest-rate environment, a financing institution will, in all likelihood, offers a loan with a lower interest rate as compared to a HDB loan.

So the opportunity cost (best foregone alternative) for not using a private loan becomes higher. In addition, you also lose the 1% of additional interest on the savings (capped at S$20,000) in your CPF Ordinary account.

Whether you decide on a HDB loan or a bank loan, do bear in mind that you are not allowed to refinance to a HDB loan once you have taken a bank loan.  

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Explaining the Advantages of HDB Loans versus Bank Loans

by SUSAN TEO

Before 1 January 2003, people buying a HDB (Housing Development Board) flat have to finance it either with a HDB Concessionary Rate Loan or a HDB market rate loan. But since then the HDB market rate loan was replaced by home mortgage from financing institutions, which are gazetted by the Monetary Authority of Singapore.

HDB Concessionary Rate Loan 

Compared to a home loan from a financing institution, a HDB loan has more stringent eligibility requirements. The below covers most of them.   

Eligibility Criteria:

• For HDB flats only (resale or direct purchase from HDB)

• At least one buyer must be a Singapore citizen

• Must have a gross monthly income not exceeding $10,000 (or $15,000 for extended families)

• For DBSS flat the income ceiling is $8,000 (or $10,000 for extended families)

• For applicants under the Single Singapore Citizen (SSC) scheme, the income ceiling is $5,000

• Must not own any private residence (in Singapore or abroad), including HUDC and executive condominium

• Must not have sold a private residential property within 30 months and taken a HDB loan before

• Must not have previously obtained a HDB loan within 30 months

• Must not have taken more than two previous HDB loans

• Must not own more any market / hawker stalls or commercial / industrial property (Except if you operate the business yourself, have no other source of income, and only own one market / hawker stall or commercial / industrial property)

From July 2013, HDB loan will not be granted for flats with less than 20 years of lease. In addition, for flats with lease between 20 and 59 years, loan approval and tenure will be subjected to certain conditions.

Given the many restrictions of a HDB loan, why then do Singaporeans still want to take one? We delve further into the pros of this loan in the following sections.

1. Higher CPF (Central Provident Fund) withdrawal limit 

For financing by bank loans, the CPF Ordinary Account withdrawal cap is up to 100% of the valuation limit (VL), which is the lower of the purchase price or valuation at the time of purchase. If the loan is still outstanding when this limit is breached, the housing withdrawal limit can be increased to 120% VL provided that half (entire) of the prevailing Minimum Sum is set aside for borrowers below 55 (55 and above). This housing withdrawal limit varies with the purchase date of the flat, for purchases from 2008 onwards it is 120%.

With a HDB concessionary loan, however, you can enjoy a higher withdrawal limit.

For direct purchase from HDB, there is no limit to the saving in the Ordinary Account you can use.

For resale HDB flats, there is no limit to the saving in the Ordinary Account you can use, after you have set aside half of the prevailing Minimum Sum.

But from July 2013 onwards, for flats with leases between 30 and 59 years the use of CPF fund is allowed only if the remaining lease covers the buyer till at least 80. For such flats, the withdrawal limit will be computed based on the below formula:

Withdrawal Limit
 = (The remaining lease of flat or property when the youngest owner is 55 years old / The lease of the flat or property at the point of purchase) x VL

For example, at the point of purchase the buyer is 38 years old and the lease is 40 years. When the buyer turns 55, the remaining lease will be 23 years. Hence

Withdrawal Limit = 23/ 40 x VL

Table 1 further illustrates what is VL.

Table 1: VL

	Flat A	Flat B
Purchase Price (S$)	400,000	370,000
Valuation (S$)	350,000	420,000
VL (S$)	350,000	370,000

For flats with under 30 years of lease, use of CPF fund is prohibited. In other words, buyers will to cough up cash for the down-payment, monthly repayment of the loan, stamp duties and other miscellaneous fees.

2. No cash component required for the down-payment 

A key advantage of a HDB loan is that you do not have to stump up any portion of the down-payment in cash. You are allowed to use the balance in your CPF (Central Provident Fund) Ordinary Account to pay for it completely.

Whereas with a bank loan, you will have to pay at least 5% of the Valuation Limit (VL) in cash. If the loan tenure exceeds 30 years or extends past the age of 65, the minimum amount jumps to 10%.

3. Higher loan quantum 

For the first HDB Concessionary Rate Loan you are taking, the loan quantum is as high as 90% VL. In contrast, for bank loans, the quantum is capped at 80% LTV (loan-to-value ratio). It dips to 60% if the loan tenure exceeds 30 years or extends past age 65. Table 2 compares the down-payment components and loan ceilings for HDB and bank loans.

Table 2: Payment Structure for a HDB Flat

	Down-payment
	Cash Component	CPF Component	Maximum Loan Quantum
HDB Loan	≥ 0% of VL	First 10% or more of VL*	≤ 90% of VL**
Private Loan without*** Outstanding Mortgage AND• Loan tenure does not exceed 30 years; and • Sum of loan tenure and age of borrower at the time of applying for the loan does not extend beyond retirement age of 65 years.	≥ 5% of VL	Next 15% or more of VL*	≤ 80% LTV
Private Loan without Outstanding Mortgage AND• Loan tenure exceeds 30 years; or • Sum of loan tenure and age of borrower at the time of applying for the loan extends beyond retirement age of 65 years.	≥ 10% of VL	Next 30% or more of VL*	≤ 60% LTV

Source: HDB (http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/HLHDBWhat?OpenDocument) Monetary Authority of Singapore (http://www.mas.gov.sg/~/media/resource/news_room/press_releases2013/Annex%20II.pdf) MoneySENSE (http://www.moneysense.gov.sg/en/Life-Events/Buying-a-Home.aspx)

*Do note that there is a limit to the CPF amount you can use for mortgage financing, as discussed earlier in the article.
** This loan quantum only applies to the first HDB Concessionary Rate Loan. The loan quantum for the second HDB loan will be reduced by the full CPF proceeds and part of the cash proceeds made from the sales of the previous flat.
*** Since buyers are not allowed to own more than 1 HDB flat concurrently and must dispose of their private residential properties within 6 months after buying a HDB flat, technically there shan't be a case with an outstanding mortgage.

New regulations, that have kicked in from 12 January 2013, dictate that the mortgage servicing ratio (MSR) for private loans must not exceed 30% of the gross monthly income of the borrower and 35% for HDB loans. So do note that to be eligible for the maximum loan limits stated in Table 2, you also have to meet the MSR cap.

Effectively, this can translate into a lower loan quantum for a bank loan compared to a HDB loan. For example, for a 30-year loan with a 80% quantum for a S$800,000 HDB flat, at an interest rate of 1.5% p.a., the monthly repayment amount will be S$1,932.67. In order to be eligible for a

• HDB loan: Gross monthly income ≥ S$5,521.92

• Private loan: Gross monthly income ≥ S$6,442.24

Thus, if your income is below S$6,442.24, you will not be eligible for a private loan of 80% LTV. If you extend the loan tenure, current rules mandate that you can only take up to 60% LTV.

Therefore, a HDB loan will allow a higher loan quantum.

4. HDB is more lenient 

As a Government agency which main goals are to provide affordable quality housing and encourage home-ownership, HDB tends to be more tolerant of delinquent borrowers.

But for a loan from a financing institution, you are always required to pay the monthly stipulated amount even if you have suffered a pay cut.

Further, HDB usually grants deferment of monthly installment payment if you have fallen into financial hardship. The banks, on the other hand, will likely be hot on your heels if you defer payment even for a day!

5. No penalty for partial or full repayment of loan, interest rebate given instead  

Of note, is that HDB imposes zero penalty for partial or full repayment of its loan.

Most mortgages of financial institutions, however, come with a lock-in period (aka commitment period) typically of 3-5 years. During this period, any repayment above the prior agreed amount will result in a penalty - usually at most 1.5% of the repayment amount. Financial institutions profit from the interest incurred on the loan, any partial or full repayment of the loan means a loss on interest earnings. Hence, the penalty helps to compensate for this loss.

In fact, HDB even reward you for making capital repayment. Interest rebates will be given on any amount of capital repayment made by flat owner from the next following day after payment is received. The rebate is calculated based on the below formula:

Interest Rebate = (Amount Repaid x Interest Rate) / 12 x 1/ No of Days in the Month x (No of Days in the Month – Day in which Amount is Repaid)

To illustrate

• HDB Interest Rate = 2.6% 
• Capital Repayment = $1,000 on 20th Mar 2013 
• No of Days in March = 31 

Interest Rebate = (1000 x 2.6% ) /12 x 1/ 31 x (31 – 20) = $0.77

6. Stability in interest rate 

Since revision to the interest rate of a HDB loan is made quarterly in tandem with changes to the CPF rate, which has been the same for over 10 years. The interest rate has, likewise, remained stagnant. A HDB loan, thus, offers relatively more stability than even a fixed-rate mortgage which rate is only fixed for 3- 5 years. This is not saying that there have been no fluctuations in HDB interest rates. For instance, in the 1990s rates demonstrated more volatility (Source: CPF, “Historical HDB Concessionary Interest Rate”).  

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What Are Home Loan Consultancy Sites All About?

by SUSAN TEO

This article introduces the benefits of using home loan consultancy sites. If you are planning to take a mortgage at some point in your life, you can benefit from reading this.

How online home loan consultancy work in Singapore? 

1. Mortgage consultants or brokers 

Basically, home loan consultancy or mortgage consultancy websites act as middlemen connecting borrowers to the financing institutions.

These sites have professional mortgage consultants who are aware of all the different home loans offered by every Singapore's bank. They will first assess the your financial risk profile and advise on the type of loan you should take. The consultant will then refer you to the financier providing the best loan.

This advisory service is completely free to you as the financing institutions will pay the mortgage consultants a commission upon successful disbursement of loan.

The financing institutions are willing to incur this cost as it saves them on front-end staffing.

2. Online home loan packages comparison 

Apart from free mortgage advisory services, some home loan consultancy sites also have tools to allow you to compare loan packages across different banks. For example, the online home loan comparison system at www.iCompareLoan.com do that in 4 simple steps. You only have to input a few pieces of information, such as the loan quantum, duration, type (fixed or floating rate), and the system will display all the available loans that meet the search query. Figure 1 and 2 illustrate this system.

Figure 1: Step 1 of Loan Comparison System  

Source: www.iCompareLoan.com/new_loan 

Figure 2: Step 4 of Loan Comparison System 

Source: www.iCompareLoan.com/new_loan 

3. Home Loan Reports 

A handful of these mortgage consultancy sites may even provide more sophisticated home loan reports, which are available for free or a small fee. www.iCompareLoan.com offers a loan analysis system, which coincidentally is Singapore's most advanced. They give out one-time complimentary reports from this system. Various types of reports that compare loan packages can be generated from the system including interest cost savings from refinancing or new loans, building-under-construction loans, amortisation tables, and more. Figure 3 shows the log-in page.

Figure 3: Loan Analysis System 

 Source: www.iCompareLoan.com/consultant/ 

Usefulness of home loan consultancy sites

1. Save time and effort 

There are about 16 banks in Singapore offering over 50 types of mortgages. If you were to do the research yourself, you would have to trawl through numerous banks' websites to learn about the loans they provide. But more often than not, the websites will not even state basic information about the loans, like whether there is a lock-in period and clawback period or the interest rates payable.

Instead the websites will encourage you to contact them for more details. You would have to speak to over 10 bank officers if you were to conduct a thorough search. As a home loan is a major financial commitment, it will be wise to have comprehensive information before selecting a loan package. And a home loan consultancy site will make this task a whole lot simpler.

At the most basic level, the free DIY loan comparison tools offered by the consultancy sites allow you to compare loans in only a few steps, with the results displayed in easy-to-read table forms.

If you are in need of more comprehensive advice, you can contact the mortgage consultants.

Loan features can also change every now and then. It may be difficult for a novice to keep abreast of all the latest loan information. Mortgage consultants, on the other hand, are in the know so they are well-positioned to advise you accordingly.

2. Unbiased loan advice 

Because the mortgage consultants are not direct staff of the banks, they will give you unbiased loan recommendations and comparison across different banks. Conversely, if you were to turn a bank directly, the officer will naturally try to sell their loan packages. The officer is also unable to advise you about packages offered by other banks.

Mortgage consultants, however, have knowledge of packages across different banks and are not beholden to any.

3. Extra assistance 

Besides dispensing loan recommendation, most mortgage consultants are also happy to help out in the application process. Paperwork can be time-consuming, so the consultants can assist you by ensuring all the required documents are in order. Otherwise, your loan application can be delayed.

In some cases, the mortgage consultants may even be able to negotiate for a better rate, or facilitate the approval process, if the loan amount is above S$2 million.  

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WILL MONEY VELOCITY FURTHER SLOW DOWN DUE TO PROPERTY REGULATION IN SINGAPORE

WILL MONEY VELOCITY FURTHER SLOW DOWN DUE TO PROPERTY REGULATION IN SINGAPORE

Let’s just say the risk is not about whether it will Cool inflation, but rather whether it will totally put out the fire and Freeze the property market in Singapore.

Inflation is influenced by the following equation.
{MV = PQ} = (by Irving Fisher, 1911)

Where

• M is the total dollars in a Nation’s money supply (generally the M3 or M2)
• V is the number of times per year each dollar is spent (Velocity of money)
• P is the avg. price of all the goods and services sold during the year.
• Q is the quantity of Assets, goods and services sold during the year.

When M2 or M3 increase, where V and Quantity stays the same, then P increase. The rate of P’s increase is inflation.

Right now, we are seeing M2 or M3 increasing faster than GDP in many nations, while prices are fairly stable at ~5.4% (in 2011) in Singapore and production (Quantity) is rather stable, this means that V, the velocity of money has yet to pick up. In other words, people are not yet spending.

Once Velocity of money V picks up, in order to control price rise, Quantity will have to pick up dramatically as well. Not all quantity can be ramped up quickly enough.

[M2 or M3 increase] x [V] = [P] x [Q]

So by taking out Foreign M2, M3 as well as M2 in Singapore attributed to foreign ownership by imposing a 10% Additional buyer stamp duty, Singapore has effectively reduced the M2, M3 money supply from the property market.

In short, this policy may somewhat reduce inflation attributed from Housing. However it may not stop these money from being channeled to other parts of the economy, especially commercial properties.

USA M2 Money Supply


(Source: Wikipedia)


European M2 Money Supply



Australian M2 Money Supply



Singapore’s M2 Money Supply

S$ MILLION
END OF PERIOD M2
2010
Nov 401,429.3
Dec 403,078.2
2011
Jan 406,246.8
Feb 406,280.0
Mar 413,255.5
Apr 422,475.6
May 422,716.1
Jun 423,516.7
Jul 431,311.5
Aug 431,253.4
Sep 434,818.4
Oct 439,817.4
Nov P 442,144.4

AS you can see, M2 from Dec 2010 up till Nov 2011, has grown by 10%, this exceeds the GPD growth figures.

As there are ample funds in Singapore, interest rates can stay low, due to low velocity of money, once there is signs of up-trend, then we expect markets to rally very quickly and these money will be drawn down. And cost of funds will consequently go up.

Call Property Buyer Mortgage Consultants at 9782-8606 or email
loans@propertybuyer.com.sg to assess your Home Loan Financing Needs.

BUYING A HDB SHOPHOUSE WITH RESIDENTIAL QUARTERS TO STAY IN?

With so many new regulations coming up in short spans of time, many people are confused.

You would normally associate HDB with residential flats. However HDB also has shophouse units which are considered commercial properties. These commercial properties are normally located with town councils or town centres near hawker centres.

Some Of These HDB Shophouses Contains Residential Quarters.

Due to these residential quarters within the HDB shophouses, this has caused a lot of confusion as to where they are considered HDB flats or partial HDB flats (apportioned by the size of the unit).

What if you already own a private property, can you buy a HDB shophouse commercial unit that also happens to have a residential dwelling?

Apparent if we go by the HDB rules that applies on HDB flats, then you cannot buy a HDB shophouse if you already own a Private property.

Say for example the HDB shophouse is 1600 sq feet made up of 2 floors.
— 800 Sq feet on 1st floor and
— 800 sq feet of residential unit on the second floor.

If you have NO outstanding housing loan, then the bank will consider to lend you 80% of the valuation for the property. However, if you have any existing home loan, some banks are considering: -

— Lending you 80% on the commercial portion of the HDB shophouse of 800 sq feet
— Lending you 60% on the residential portion of the HDB shophouse of 800 sq feet

Apparently some Singapore banks are still checking with MAS with regards to the treatment and classification of such property. As these properties typically have quite a number of regulations attached to it’s ownership and business use, they can be risky both for the property buyer as well as the banks who lends money out on these type of properties.

So we decided to check with HDB on how they Classify HDB shophouses

—————————- Original Message —————————-
Subject: ENQUIRY ON PURCHASE OF COMMERCIAL PROPERTIES
From: ”Yit Hah LEE” >xxxxx@hdb.gov.sg>
Date: Fri, October 21, 2011 6:40 pm
To: Property Buyer Mortgage Consultant
————————————————————————–

HOUSING DEVELOPMENT BOARD

Your Ref :
Our Ref :
Date : 21 Oct 2011
TEL : 1800-8663073
FAX : 63972477/8
EMAIL : pldmail@hdb.gov.sg

xxxxxx
(Email: admin@propertybuyer.com.sg)

Dear xxxxx,

ENQUIRY ON PURCHASE OF COMMERCIAL PROPERTIES

We refer to your email of 19 Oct 2011.

2 Please be informed that although some HDB commercial
properties have living quarters attached to them, these properties are
sold or tenanted out as a commercial property under a single title and
deemed as non-residential. The prevailing policy that persons who buy
non-subsidized flats are not allowed to concurrently own an HDB flat and
private property within the minimum occupation period is applicable only
to private residential property.

3 We have also no restriction for foreigner/ Singapore
Permanent Resident to purchase HDB commercial shops (i.e. shop with living
quarters at 2nd storey or shop without living quarters) provided the
individual(s) are above 21 years of age and is not an undischarged
bankrupt

4 You may visit our website at http://www.hdb.gov.sg>
Commercial Tenants & Lessees > Managing your sold premises. There is
more general information on the procedure; policies for Resale/
Transfer of Shop. Alternatively, you can call our toll-free enquiry
hotline at 1800-8663073

Yours faithfully

LEE YIT HAH (Miss)
SENIOR ADMIN EXECUTIVE
for HEAD, TENANCY; LEASE MANAGEMENT UNIT
PROPERTIES; LAND DEPARTMENT

CLARIFICATION FROM HDB REGARDING HDB SHOPHOUSE

We are thankful to Ms. Lee of HDB for her fast response to clarify the issue of HDB shophouses.

Even though this property is treated as Commercial, many of these properties have maybe between 40 plus years to 70 plus years of remaining leases as most HDB shophouses were older designs built in the 1970s onwards.

Will There Be Racial Quota?

We can’t help but wonder what would be the racial quota of these shophouses on the residential units?
How many people can stay in it?

Banks are generally only lending to HDB shophouses with a minimum of 60 years of remaining lease. The maximum tenor of the loan is capped by (Remaining lease – 30 years). This is not a rule set in concrete or by regulation, but a rule that banks normally apply.

Property Buyer’s Advice

If for any reason HDB shophouses come in at the cheaper range of the price range, this can best be explained by the possible ambiguity of investing in such category of properties. Investors fear uncertainty and generally apply a discount to uncertainty. Banks similarly may impose either a longer processing time or some conditions on lending on such property, or stay away completely.

The value of this investment will very much depend on the Singapore regulatory environment governing this type of housing as well as credit availability or restrictions at the point of sale. Else this asset will be purely a yield play without too much excitement on capital gains.

As trading volume is rather thin, you could very easily pick a gem as well as a lemon.

Invest in Sentosa Cove - Oceanfront pool area

The pool area of Oceanfront looks and feel so good. The place is so breezy, so beautiful. You don't feel like you are in Singapore at all. Time seems to slow down, people seemed happy, the life seems beautiful. How can a place feel so different between mainland Singapore and Sentosa cove?

On both sides of the condominium, you see the sea and is surrounded by it. Sometimes you feel so small, and are awed by the natural setting.

Prices start from 3 million onwards. So if you want to finance your sentosa property, feel free to get in touch with us Property Buyer Mortgage consultants.

Why use a Mortgage broker?

Why use a mortgage broker?

Singapore Property Buyer mortgage and Home loan Broker

View more presentations from Property Buyer Singapore

If you are buying a property in Singapore, you need to have a very balanced emotion state. And Property Buyer Advisors can help you to maintain that state and guide you through the buying process. Apart from that, Property Buyer Mortgage Consultants can also do home loans selection either for refinancing or new home loans.

Singapore SIBOR Home loan mortgage

Courtesy of www.PropertyBUYER.com.sg

Singapore Interbank Borrowing Rate is commonly referred to as SIBOR.

Sibor is traded amongst banks at the Association of

Banks Singapore (ABS)


Contact us

Tel: 6100 - 0608 sms: 9782 - 8606

Email: loans@propertyBUYER.com.sg

http://www.propertybuyer.com.sg/contactus.php


The Singapore economy is still hurting, however the absolute worst may be over.

Given that the economy has stabilized, the Sibor and SOR tends to stay low

in a weak economy.

Reduced Risk of Major melt down.

So in short, the major risks of credit crisis or financial meltdown is much

reduced. Sibor and SOR should not hike due to panic.

Risk of Inflation

Each medicine comes at a price. The price is a hang-over or side-effects lasting

several years.

Obama's massive fiscal stimulus and that of many countries are going to hit

the fan soon.

Is the USA printing money

You cannot create something out of nothing. What the USA did by pumping

the economy is similar to creating 1+ Trillion dollars out of thin air.

The only reason why it is not a PURE "PRINTING money" exercise is

because the "Printing" is financed through debt.

The extra + 1 Trillion is created, but debt is created to finance it, so there is

minus - 1 Trillion. So +1 trillion - 1 trillion in debt = 0 (not printing).

But when you add 1 trillion to a 14 trillion dollars economy, that is something

like 7% of US GDP. Surely after some of the deflationary pressures are

sorted out, if the US do not pull this money out, a serious inflation may

appear.

So far, the US government have reiterated that they have plans in place to suck up the

excess liquidity. We think that would be tough. Take it away too soon, economy falls

back into recession.


SOR and SIBOR is quite directly affected by US Fed funds rates and policies.

If the US suffers from inflation, the world's economy may suffer as well. And

Sibor and SOR may shoot up too. We cannot rule out this possibility.


Get Home Loan or Refinance Home loan with www.PropertyBUYER.com.sg

We never emphasize cheap loans, we never emphasize we are the best

home loan company.


What we do is a research focused approach to help

busy home owners sort out the home loans and refinance home loans

balancing risk and rewards for each possible option they choose.


ABOUT US Contact us

Tel: 6100 - 0608 sms: 9782 - 8606

Email: loans@propertyBUYER.com.sg

Contact us

Download FREE Property Checklist / Guide (Kiasu Property Checklist)

Singapore mortgage refinance update 2009

Singapore Mortgage refinance update June 2009

Courtesy of www.PropertyBUYER.com.sg

Tel: 6100 - 0608 sms: 9782 - 8606

Email: loans@propertyBUYER.com.sg

http://www.propertybuyer.com.sg/contactus.php

SIbor and SOR rate was all the rage in 2008

Around 2008, Sibor and SOR based home loan rates were all the rage.

Interest rates were SKY HIGH as recent as April to June in 2008. Many

people got their hands burnt by bank's variable rate packages.

As a result of that, many people switched to Sibor or SOR based home loan

rates as it is more transparent.


Many people were Burnt by Variable rate home loan or refinance packages

Variable rates are pegged to the bank's internal reference and typically the

way in which the banks raise rates are somewhat arbitrary. Banks have also

created many reference pegs such as, "mortgage rates", Home loan rate",

board rate; you name it...


SIBOR is transparent, but also Volatile

Sibor on the other hand is very transparent, but it is also volatile, as it can

swing wildly in times of crisis.


Banks Keep raising rates... Until...

Before Sep to Oct 2008, some of the best packages are Sibor + 0.6% to

0.7%. This means that bank's gross lending margin is only 0.6% to 0.7%.


By Oct 2008, some banks have raised their Sibor based lending from Sibor

+ 0.7% to Sibor + 1.25%.

In short, banks have decided that the credit crisis is so bad, if they are going

to lend you at all, they want an arm and a leg to compensate them for the

risks.

We warned in FEB 2009 that Banks will yet again raise rates

For those who remember, we have warned people around Feb 2009 that in

Mar 2009, banks will raise rates again. True enough, most banks raised their

SIBOR or SOR based lending rate from Sibor + 1.25% to around Sibor +

1.75%.


Strangely the banks are not really competing in Mar 2009, many banks soon

fall in line.


Maybank fired the first warning shot by dropping rates

Then suddenly Maybank fired a warning shot by dropping their first year

rates to 1.6% in March 2009.


However it was very targeted at higher credit quality customers with loan to

valuation of only 70%.

We were expecting many banks to change course can start competing to

give consumer a better benefits. That did not materialized in March.


Another foreign bank try to steal Maybank's thunder.

Later in March, another foreign bank kept pace with Maybank by matching

their rates, although the terms were different.


During this time, the local banks did not bite, instead preferring to keep their

rates high. At this time, it was mainly the foreign banks that are lending,

although the processing time has increased from 2 to 3 days to as long as 7

days in some cases.


During this time, some banks launched their relationship based lending

rates.


The local banks did not jump in to compete for a long time and sat at the

sidelines watching.


People expect that Maybank will soon terminate their package and rates will

rise.

Many people expected that the Foreign banks will soon terminate their

promotional packages. By this time, June 2009, a local bank has woken up

from it's 6 months slumber and jumped into the fray to compete having been

dormant for almost 6 months. This will probably kick off a price war with

other local banks jumping in.


EVALUATE REFINANCING YOUR HOME LOAN

The rates are a 1.9% for 3 years fixed.

The rate is pretty good. Do give us a call at 6100-0608 or sms us at

9782-8606.

We do NOT charge a fee as banks pay us separately. Meanwhile,you can

just sit back and relax while we submit your application, follow-up on

approval, update you the progress, check the letter of offer

legal contract for major omissions. So would you rather do the work all my

yourself or would you rather sit back and relax and let us do the work for

you, for free?

loans@propertybuyer.com.sg

Will other banks now jump in to compete?

We think that the rates on offer is quite attractive considering that there

could be some risk of inflation given the massive fiscal stimulus in many

countries, locking-in for 3 years at low rates makes sense.


We don't know if other banks will jump in, but it is likely that other banks will

match or tweak it in a different way with some terms and conditions.


www.PropertyBUYER.com.sg is research-focused mortgage consultant. We do not emphasize Cheap loans, but help property buyers refinance home loans to get the best deal or get new home loans.


ABOUT www.PropertyBUYER.com.sg

Tel: 6100 - 0608 sms: 9782 - 8606

Email: loans@propertyBUYER.com.sg

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