Invest in Singapore properties: Housing loans Glossary

Invest in Singapore properties: Housing loans Glossary

Do you know that in Singapore, the home loans terminology differs from that of the US and elsewhere? Of course there will be common terms. In the US, there are Fico score, in Singapore there is none.

Approval-in-Principle

This process allows the bank to first assess your cash flow and your liabilities and determine how much they would be able to lend to you. Singapore Home loans mortgage consultants can help you to conduct Approval-in-Principle so that you can be assured of a home loan. Please do note that Approval-in-principle are simply that, “approval-in-principle”, while there is much more certainty that the banks can lend you, the bank’s credit department have the final say whether to lend or not after looking at your credit report. Some banks will assess the credit report for an Approval-In-Principle home loans while some banks do not assess the credit report for an Approval-in-Principle, therefore it is best to be honest about your financial situation so that you do not end up with an “approval-in-principle” only for the bank to reject it at the last minute after finding out past credit issues.

Approval-in-principle are only valid for about 1 month.

Amortization

The process of paying off a debt (often from a loan or mortgage) over time through regular payments. The monthly payment is broken down into interest payments and the remaining amount is for principal repayments. In the early years, payments consist largely of interest; as time goes on, principal repayments increases. At the end of the loan tenure, the entire debt will be repaid.

Amortization Schedule

This is basically your home loan repayment schedule showing you the repayment of your principle and your interest over the entire span of your loan amount.

Bridging Loan

The bridging loan is usually a temporary term loan used to pay for the down-payment or part of the down-payment of the new property purchase. The bridging loan is most often collaterised against a current property that the buyer owns, but is in the process of being sold. Or in some cases, the bridging loan is collaterised against a current property that is already sold, but whose sales proceeds have not arrived. Bridging loans are very tricky as timing of execution is of critical essence. Make sure to check with your bank to make doubly sure or else your will end up in a situation where you have no funds to execute a property transaction where you have already exercised the option and entered into a sale and purchase agreement.

Board Rate

Board rate or mortgage rates and many other terminologies were invented by banks to be used as a reference in which to peg their variable rates. For example, if the bank set their “board rate” to 4.25% and the variable rate you pay is 2%. That would mean it is (Board rate – 2.25%). In case the bank modifies the board rate, it would affect your interest rates.

Building Under Construction (BUC)

Building under construction are buildings which have the permit to launch for sale but are still being constructed. This applies mostly to new development such as Condominiums whose Temporary Occupation Permit (TOP) is still some time away. Banks treat BUC and completed properties differently.

Cancellation Fees

The penalty that banks charge, usually a percentage of the loan amount (or a percentage of an un-disbursed amount), if you were to cancel your housing loan after you have accepted the Letter of Offer but before the housing loan is disbursed or cancel the home loan after partial funds have been disbursed but the others are not.

If you re-finance your home loan when the funds have not been fully disbursed, it would be considered a cancellation and cancellation fees would apply.

Cashback or Cash incentive Housing Loan

The lender refunds a percentage of the housing loan the cashback and you are usually tied into the loan for a number of years in which a penalty is applicable if the loan is redeemed. This type of loans is also usually useful for home owners who are contemplating redeeming a loan which is still in penalty period.

Combo Housing Loan

A combo or hybrid housing loan can be sub-divided into different parts for a single property. Each part can be treated as a separate housing loan so you can choose a package for each division. In other words, if you borrow $1m for a Singapore property, you can opt to have $500,000 under a fixed rate regime and another $500,000 under a Sibor rate package. Both loans are collaterised against the same property.

Claw-back Period

If you are to fully redeem your mortgage within the claw-back period, the lender will reclaim most of the subsidies given to you. These would usually be the legal subsidy and may include valuation fees, fire insurance premiums, cash incentive, etc.

Certificate of Statutory Completion (CSC)

The Commissioner of Building Control will issue the Certificate of Statutory Completion to a building project when it is completed. The building can only be occupied when a Certificate of Statutory Completion (CSC) or Temporary Occupancy Permit (TOP) is granted.

Fixed Rate Housing Loan

Fixed rate housing loans provide you the stability and ease of planning your cash flow. However Fixed rate housing loans usually comes with a lock-in period which correspond to the duration where the loan is fixed.

Floating or Variable Rate Housing Loan

The interest rate can rise or fall throughout the tenure of the loan. Lenders usually give at least one months notice when adjustments are made to the interest rate. Most lenders allow partial prepayments for this type of loan, making this a good package if you intend to repay a significant portion of your housing loan in the initial few years.

Floating rate packages comes in 3 main forms: -

* Bank’s variable rate packages which are pegged to the bank’s internal reference.
* Sibor pegged housing loans.
* Sor pegged housing loans.

Full Redemption Penalty

The amount that banks charge, usually a percentage of the loan amount, if you were to fully repay your housing loan within a lock-in period.

Interest-offset housing loan features

This feature allows you to offset your housing loan interest with funds deposited into an account designated by the bank. For example, your housing loan may be $1m and you also have $300,000 cash which you do not intend to pay down the loan. You could put this $300,000 cash into the designated account to offset against housing loan interest payable, (i.e. your effective loan is ($1m - $300,000 = $700,000) and you will only interest on $700,000 rather than $1m in case this is a 1-for-1 interest offset. For example, if the interest cost is 3%, the bank will charge you interest of 3% on the $m and give you interest of 3% on $300,000. In case it is a 2/3 offset, for a 3% interest rates, the bank will charge you 3% for your $1m loan and give you 2% interest for your $300,000 cash.

Many business people like this package as it allows them the flexibility to incur less interest costs if they do not use their funds, while still giving them the choice to use the funds like a current account.

If the housing loan is paid down, then this option of using cash in case of an emergency would disappear.

Interest-only Housing Loan

Monthly payments consist entirely of the interest due on your loan so that the balance you owe is not reduced during the term.

Letter of Offer (LO)

A contract between the borrower(s) and the bank stating the terms of the housing loan package.

Loan Quantum

The loan quantum or principal is the amount of money that you borrow.

Loan Tenure

The period of time that you will take to fully repay your loan.

Loan to Value (LTV)

A percentage figure indicating the size of the housing loan on a property in relation to its value. Thus, a house worth S$500 000 with a mortgage of S$400 000 would have a loan to value of 80%. Most banks and financial institutions have better housing loan deals for LTV 80% and below. The maximum LTV that lenders can legally go to in Singapore is 90%. This is mandated by the Monetary Authority of Singapore (MAS).

Lock-in Period

The number of years that you are tied to your lender. If you fully redeem your loan within this period, there will be a full redemption penalty that is equal to a percentage of your loan quantum. Lenders may also charge a penalty for making partial payments within this period.

Option to Purchase - OTP

This is a contract which compels the property owner to sell you the property at an agreed price if you give a 1% deposit. The Option to Purchase (OTP) usually gives a 14 day period in which to exercise the option. The law society gives certain guides on how an Option to Purchase should be drafted. However we have also seen many Option to Purchase contracts which are drafted by the Seller’s Property agents or property agencies which are unfair to the Property Buyer.

It is therefore our advice that when a deal is imminent, ask the property agent to send you a draft of the Option to purchase for you to first go through with your lawyer. If you do not have a Lawyer and would like us to help you take a quick look, you can email us at loans@propertyBUYER.com.sg, either us or our panel of lawyers can take a quick look at it and give you some comments. But do not, although we are generally more conservative in our approach, we cannot guarantee to be able to spot all errors or omissions and you promise not to hold us accountable to it.

Partial Redemption Penalty

The amount that mortgage lenders charge, usually a percentage of the loan amount, if you were to prepay your housing loan within a lock-in period.

Payment Holiday Housing Loan

A relatively new type of mortgage in the Singapore market. You take a break towards paying of your interest or monthly installment at certain periods during your loan tenure. This takes many forms, there is also a beautiful Sunday package which gives the borrowing 1 day free interest rate, which amounts to 1/7 reduction in actual interest rates.

Prepayment

Payments that you make in addition to the monthly installments.

Refinancing

Switching from one housing loan package to another, usually to get better rates or terms and condition.

Re-pricing

Switching from one housing loan package to another deal with the same lender.

Singapore Inter-bank Offered Rate (SIBOR)

Singapore Inter-bank Offered Rate is published by the Association of Banks in Singapore. This market is almost equivalent to the Federal Reserve funds market. Banks lend excess funds to each other at the Association of Banks in Singapore. The rates will be determined by the demand of funds and the availability of funds. During times of extreme financial stress where banks view other banks with suspicion, funds become scarce and monetary authority of Singapore is known to intervene by pumping funds into this market.

Singapore Swap Offer Rate (SOR)

Swaps are a form of financial derivatives. Swaps in Singapore are contracts of US$ versus S$ contracts which banks use to avoid converting their currency so as to incur the losses from bid and spread. As banks trade these Swap contracts within the Association of Banks of Singapore (ABS), the rates move in tandem with supply and demand. Swap Offer Rate is the rate that the banks will lend to each other at a pre-determined rate.

Temporary Occupancy Permit (TOP)

The Commissioner of Building Control will issue the Temporary Occupation Permit to a building project when it is completed. The building can only be occupied when a Certificate of Statutory Completion (CSC) or TOP is granted. A TOP, unlike a CSC, is not compulsory, but is usually obtained before a CSC as requirements for a TOP is less stringent.

Term Loan (Cash out)

For properties which has equity a term loan is possible. A Term loan is usually more strict and is contingent on many things such as equity value, remainder lease on the land, CPF property withdrawal and accrued usage and cash flow.

Contact Property Buyer Mortgage Consultants at: -

(sms) +65 - 9782 - 8606

(email) loans@propertyBUYER.com.sg

Invest in Singapore Properties: But Novice Singapore Property investors beware of Singapore Property agents

Invest in Singapore Properties: Novice property investors beware of Property agents.

Singapore Property agents cheat HDB Home buyer
Today we watched in horror another Singapore property agent attempts to cheat hdb property buyer. He asked for deposit of $1000 as money for option to purchase but gives the home buyer only an empty option to purchase form that is unsigned. (source: tv channel 8 news, 12 Sep 2009)

Article contributed by www.PropertyBUYER.com.sg (Other authors, if you wish to contribute articles, please contact me)
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About Property Buyer Contact Property Buyer for Singapore housing loan

www.PropertyBUYER.com.sg

We are a Research-focused Singapore Mortgage Consultant which helps you compare Singapore Home loans either for new home loans or refinancing, we balance risks versus rewards for each home loan to match your risk profile and financing needs.

Buying property is a serious affair, we do NOT advocate a Greed based buying approach, we emphasize that you need to check your affordability and do your sums right. If you are unsure, we are happy to help you check.

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

loans@propertyBUYER.com.sg

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This is a time to be extremely careful, dishonest property agents in Singapore are out on the loose again. A hot property Market has the same effect as changi prison not locking opening it's gates. Yes, the effect is criminals running amok.

During a hot property market dishonest Singapore property agents run amok. They find many preys as people are generally guided by fear and greed.


FEAR AND GREED ARE DISHONEST PROPERTY AGENT’S BEST FRIEND



Fear that the Property market will run away with hefty price rises! This cuts short the thinking process, things are not thought through in detail.


Greed, in that they want to get in quickly as the market is rising, the can buy and sell at a higher price.



YET ANOTHER TRUE STORY OF DISHONEST SINGAPORE PROPERTY AGENT CHEATING HOME BUYER



Recently around late august, a novice Singapore property investor Miss Yuen came to us to get a Singapore home loan for her studio apartment. She (the property buyer, Miss Yuen) recounted her interesting encounter with a Dishonest Singapore property Agent.



Property Buyer Views clementi property Singapore


She was looking for a 2 bedroom property around 890 sq feet in Clementi. A very professional groomed and pleasant looking Singapore property agent brought her to see the studio. Miss Yuen was very keen with the property, but she had a budget of $580k. The asking price was $650k. The price is quite steep for such a small unit which also happens to be 99 years lease hold too.



Property agent assured investor that UOB can match home loan valuation



The Property agent assured Miss Yuen that banks can match $650k.



She ask us to check the valuation, we came back with a valuation of $550k and the highest valuation we got was $550k.



We told miss Yuen our customer that no matter how we push UOB wouldn't move the valuation more than $560k.



Property Investor doubts our mortgage consulting abilities



Miss Yuen started to doubt www.PropertyBUYER.com.sg Mortgage Consultant’s ability to get the best and highest valuation. She said the Property agent promised her to get bank loan for her to match $650k. Miss Yuen was very tempted to just go ahead to place the 1% deposit for the option to purchase.



Property Investor Miss Yuen gave www.PropertyBUYER.com.sg a chance to check



Miss Yuen was very busy but she still gave us a chance to respond by calling us to verify.



We told her to ask the agent to give the name of the banker who promised $650k valuation so that we can verify the information.


So miss yuen asked the property agent for the name and the contact of the banker. The property agent gave the name and number of the banker without hesitation.

She looked to real and genuine. Miss Yuen was so convinced. She even called us and she said, “I’ll have to go with the agent’s home loan suggestions, her banker can match the valuation.”


We told Miss Yuen, “Why don’t you let us check with the UOB banker to verify the information? And if possible ask the UOB banker to put the valuation confirmation in writing.”


Property buyer Miss Yuen reluctantly agreed to give us a chance to Verify

Miss Yuen was so convinced by the Property agent that she reluctantly let us go and verify it, because she didn't see a need to.

She gave us the number of the UOB banker to call, we called the banker and he told us the valuation was $540k, but that was 3 weeks ago.

We asked the UOB banker, “Didn’t you tell the Property Agent that it was $650k for that particular condominium unit?”


The UOB banker said, “Nope, I never said that. She asked me to match $650k but I told her, sorry, NO WAY! The valuers said NO. I only told her it was $540K.”

www.PropertyBUYER.com.sg, “But the property agent claimed you said, $650k valuation is matched!”



UOB Banker: “Sorry, I did not say that, I said it can match $540k, that is the maximum. I told her no way to match $650k property valuation very clearly.”



We told Miss Yuen that the Valuation cannot match $650k


She asked us, "Are you sure? Agent says her banker can match $650k property valuation."

We asked her to go verify with the banker. If he says can match at $650k, ask for an email to confirm that.

Miss Yuen checks with Dishonest Singapore Property Agent

After this encounter, we asked Miss Yuen to check with the the Singapore property agent how she had known the valuation was $650k?

Miss Yuen, “How did you know that the valuation was $650k? UOB says cannot match valuation.”

Dishonest Property agent: “Did I ever say UOB can match? Sorry I must have made a mistake, it was my colleague who told me.”


Could the Property Agent have made an Honest mistake?


How could she not know the valuation of the property she is marketing?

By now, Miss yuen was fuming. She questioned the property agent and wanted her to explain.

Before the property buyer Miss Yuen could finish, the agent quickly hung up the phone.

Miss Yuen tried to call the property agent back many times, the property agent refused to pick up the call.



Dishonest Singapore Property Agents are Armed with Bank’s application forms at Launches or show rooms



These days, some property agents are armed with the bank’s application forms at the launches. They will try to ask you to sign up and apply for a loan on the spot.

Sometimes, that bank is the only bank that can match an over-priced property, that means if you buy, you are forced to go with 1 package. In the worst case, for some re-sale properties, the prices being asked cannot be matched, that means you will have to pay a CASH-OVER-VALUATION (COV) like in HDB case. That is a lot of extra cash to cough out.

In case you did not budget for this, you will have to let your option to purchase lapse and lose your 1% deposit.



If the property is $600k, you will lose $6000 just like that.



Property agents don’t care, they will still get 50% of the forfeited deposit, plus they can market the property again. If their commission is 1%, selling the property 2 times gives them 1.5% of commission. This is a good deal. If they sell the property three times, they will get (0.5% + 0.5% and 1% on final successful sale). They will get 2 times.

For many dishonest property agents out there, they CHURN the buyers. This is because listings are hard to get, so they don’t care.

Novice property investor must be extra careful. Some Dishonest Singapore property agents look very honest and professional. Be careful of a beautiful or handsome face. And it is sometimes the more experienced property agents that are more dangerous and cunning to deal with. CEHA only does so much to certify them for knowledge, but CEHA cannot guarantee their integrity especially when the agents are engaged in conflicts of interests (both selling and buying activities).



Your loss is Dishonest Singapore property agent’s bonus.



About Property Buyer Contact Property Buyer for Singapore housing loan

www.PropertyBUYER.com.sg

We are a Research-focused Singapore Mortgage Consultant which helps you compare Singapore Home loans either for new home loans or refinancing, we balance risks versus rewards for each home loan to match your risk profile and financing needs.

Buying property is a serious affair, we do NOT advocate a Greed based buying approach, we emphasize that you need to check your affordability and do your sums right. If you are unsure, we are happy to help you check.

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

loans@propertyBUYER.com.sg