Home Loan, Housing Loan, Commercial Property Loan,
and Mortgage Refinancing
A home loan or mortgage is a loan from a lender to purchase property or real estate.
- Good credit score
- Good financial strength
Disclaimer: These are general qualifications. Other information might be considered during your application.
Home loans or property loans in Singapore are generally applied through the banks as they have the lowest rates. However, there are a number of alternative lenders that cater to different types of property financing.
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Home Loans at a Glance
Getting a grasp of your home loan can sometimes be complicated. It is often loaded with complex terms and acronyms such as SIBOR, FDR, MSR, TDSR, SOR and etc. You don’t have to burden yourself with all these technicalities.
Our mortgage specialist will assist and break it down simply for you to grasp the crux of a home loan.
You Get Better Deals With a Larger Array of Choices
If you are attempting to get a home loan by yourself or through a referral from a property agent, chances are that you are not getting the best deal you can actually qualify for.
Our Capable specialists will gain access to the home loans deals that all the major banks in Singapore are offering.
We Deal with the Hassle
A home loan process from the start to the end can be quite tiresome. There is a lot of paperwork, appointments with the bankers and moving around.
Our Capable associates will assist you with all the comparison of loan deals, documentation as well as the negotiation with the bankers before your home loan is decided.
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Did We Mention That Our Service is FREE?
There is no hidden fees nor tricks. The service we provide is at no cost to you as we get our commission from the banks if you manage to get a home loan from either of the banks.
The home loan deal you get from the bank will not get affected by the commission we get from the banks.
The banks get many referrals from mortgage brokers like us. The banks benefit from mortgage brokers as we bring them business, therefore we can provide the best and most competitive deals to you.
What Documents Do I Need to Apply?
Income Tax Returns
Identification Card (NRIC) / Copy of Passport
Latest 3 months payslips
“There’s always a mortgage product to meet all your home and property needs.”
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Mortgage Products for All Your Purposes
Products range from mortgages for first-time home owners to various refinancing programs to secured lines of credit for your property purchases, there are many options offered by financial institutions that enables you to:
• Purchase property with low down payments
• Convert home equity to cash
• Purchase properties for rental
• Refinance properties with better interest rates
• Renovate your properties
Preparing for Your Mortgage Loan Applications
After making the decision to take up a mortgage loan, the very first thing you should do is to compare different mortgage products offered by financial institutions. It is important that you get proper, comparable information from each financial institution, such as effective interest rates, loan tenure, processing fees, prepayment penalties, stamp duty, other 3rd party charges and insurance fees.
It is recommended that you start obtaining the information concurrently, so that you can compare your options without worrying about changing interest rates or other additional fees that were added after you have made the enquiry.
Trying to request and collate all of the information from financial institutions can be a daunting and confusing task, not to mention extremely time-consuming.
However here at Capable Loans we have already done all of that work for you, and we are constantly updating our database of mortgage information in order to provide objective, un-biased advice for clients who wish to secure the best mortgage loan with lowest interest rates.
Refinancing a mortgage means that you apply for another loan to replace your old mortgage loan, to better suit your needs. Property owners refinance their mortgages for a variety of reasons, such as better interest rates, to shorten or lengthen the loan tenure, or to get a cash-out from the value of the property.
Due to the large number of factors that you need to take into account when refinancing your mortgage, it can be a laborious task to find the best refinancing option that exactly fits all your requirements.
At Capable Loans, by being up-to-date with all refinancing products and their conditions, we work in our clients’ best interests to source the best suited mortgage refinancing option for you.
You will be able to enjoy the lowest interest rates, better repayment terms and ultimately save costs by refinancing your home or other properties.
Cash Out Refinancing vs Traditional Refinancing
When looking for refinancing options, you can either refinance your current mortgage loan and replace it with a new loan with better rates and terms (traditional refinancing), or you can use the property as a collateral to take out cash, commonly known as cash out refinancing.
With the low interest rates that you get from a cash out refinancing, it is a great option to secure funds for your business venture, or to make use of the cash for personal purposes such as investments, motor vehicle purchases, or to pay off other high-interest debts.
On the other hand, with traditional refinancing you will be able cut down on your monthly payments by opting for a new loan with lower interest rates and more preferable payment terms.
What Are the Costs of Refinancing a Mortgage?
Since you are taking on a new loan to replace your current mortgage loan, you will incur costs such as application/processing fees, appraisal fees and other charges.
You will need to take into account all of such fees together with the loan terms to definitively calculate if you will be making savings over the period of the new loan.
While there several tools and calculator online that you can use, it is usually best to let professionals do the work for you.
Home Purchase Loans
What is a Mortgage?
A mortgage is a type of loan where you, as the borrower, gets money from a lender to purchase property / real-estate in exchange for interest.
It is a secured loan with the property being used as collateral, which means that when you fail to pay back and default on the loan, the lender is able to sell off the property in order to repay the loan.
How Do I Choose the Right Mortgage?
Purchasing property is probably the biggest financial decision you can make and trying to find the right mortgage of home loan can be stressful, due to the shear amount of mortgage loans offered by different financial institutions.
Before you start making applications, you will want to have all bases covered and be able to weigh all your options, especially if it is your first purchase.
How Much Can You Afford?
You need to take into account your income, existing debt, total debt servicing ratio (TDSR), down payments and interest rates to determine which property is comfortably within your budget.
Additionally, you need to account for any repairs or long-term maintenance costs that comes with the property as well as the resale value before making the decision.
How to Qualify
If you have a good credit profile and income, it is possible that the banks will offer lower interest rates and better terms, which would mean lesser down payments and lower monthly payments. Some financial institutions will have more lenient eligibility criteria but charge a higher interest rate in return. It is always smart to review your own profile so that you do not get hit with unexpected rejections or get put in a position where you can only take a mortgage with higher-than-average interest rates.
The 5 most important factors you need to consider are:
• Household income
• Employment/Business information
• Credit score (CBS report grading)
• Any savings in your bank accounts
• Down payment
Home Equity Loans
A home equity loan works very similar to cash out refinancing, but home equity loans are usually meant for properties that have been fully paid out.
By using the property as a collateral, it enables you to get a loan with much lower interest rates than the usual personal loans, with better terms and a loan quantum of up to 80% of your property’s market value.
Why get a Home Equity Loan?
The main reason for getting a home equity loan is the lower interest rates, one of the lowest rates you find on any loans.
Whether you want to use the money to fund your business or to pay off other debts or renovating your home, due to the lower costs and longer repayment terms it can be advantageous to opt for a home equity instead of getting the funds from other term loan products.
Downsides and Risks Involved
Do note that your property will be put up as a collateral, which means that it can be repossessed by the bank if you fail to meet the repayment terms. Take caution to not take out a loan that you cannot afford, especially if it is your only property.
Another potential risk is that the banks might issue a margin call to top up the loan, when the market value of the property drops below the remaining balance of the loan. Another issue is the time and costs involved.
You will be paying for appraisal fees and processing fees, and applications for home equity loans can take months.
In light of this, it is important to be cautious about the total loan amount as well as the current market value of your property.
Things To Take Note Before a Home Loan Application
1. TDSR (Total Debt Service Ratio)
Your Total Debt Servicing Ration (TDSR) cannot be more than 60% of your total income. This is part of the latest government regulation in Singapore.
This also implies that if you have any current loans such as an unsecured credit loan or a car loan, you may risk exceeding the 60% limit.
2. Get an Approval in Principle (AIP)
In the event where you want to get a new house or property, it is always recommended to get an AIP from the bank which you wish to apply from. The process of the application can be rather arduous as it requires a lot of documents and paperwork.
This is because the banks are required to review your credit score before approving AIP. When you have acquired the AIP, you get around 1 to 3 months to purchase your new home with assurance that you can get a loan from the bank.
3. Look for Other Deals
For instance, if you get an AIP with a specific bank, it is not required for you to apply for a home loan with that bank that granted you the AIP.
It is also recommended to get other in principle approvals from different banks so you are open to more options.
The total sum that you can borrow is generally around the same throughout the different banks.
Not Eligible for a Home Loan?
In the event where you get rejected for an AIP, most often, the reason is due to your credit score or that you have too many outstanding loans. The banks are not assured that you can pay the loan.
Poor Credit Score
If the appeal fails, it means you have to work on improving your credit score before you can get any financing from the banks.
If you have declared bankrupt before, it takes around 5-7 years before the banks are agreeable to grant you a loan.
Legal financial institutions can also be an option if you are unable to wait for that duration.
The limit for the TDSR is 60% which is a government regulation. If you have many outstanding loans such as personal loans, car loans or credit card debts, your AIP will likely be rejected by the banks.
The way to solve it is to reduce your loan amount, extending your outstanding loan tenure or simply find a less expensive home.
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Home Loans with Fixed Rate & Floating Rate
To choose between Fixed or Floating rate is one of the crucial decisions that you have to make when you opt for a home loan. There is no better or worse between the two, it actually hinges on your risk tolerance.
Fixed Interest Rates for Housing Loans
The interest rate for a fixed rate home loan stays the same during the lock-in duration of 1-5 years, despite good or bad market circumstances, after the lock-in period the interest rate will then switch to a floating rate.
Do take note that there may be penalties if you intend to refinance your loan during the lock-in period.
Fixed rate housing loans are typically more expensive; however, you can avoid the risk of rising interest rates and to plan your finances better.
Floating Interest Rates for Housing Loans
The interest rates for a Floating rate home loan fluctuates daily, the interest rates are generally pegged to the SIBOR and SOR rates. You have the option to take the home loan with or without a lock-in period.
If you opt for a floating rate home loan, your monthly repayment will actually fluctuate, and brace yourself in the event of a rise in interest rates.
If you are able to monitor SIBOR and SOR rates consistently, you can also opt to refinance if you foresee a rise in interest rates.
Alternative Home Loans
There are other kinds of home loans besides fixed and floating rate loans. Banks provide home loans that are pegged to their Fixed Deposit rate (FDR) and to their own bank’s internal board rate.
Do take note that the bank can increase their FDR or internal board rate to their own discretion.
Frequently Asked Questions (FAQ)
Can I use my CPF Ordinary Account (OA) for down payment?
For instance, if you qualify to get a loan of 80% of the value of the property, you are required to pay the remaining 20%. 5% has to be in cash and the outstanding 15% can also be cash or from your CPF OA.
Can I use CPF OA for the monthly repayments?
Technically yes, you can actually use your CPF OA for the monthly instalments. However, there are some conditions.
For instance, if you are using your CPF to pay for a HDB resale flat, there are some regulations with the valuation limit and withdrawal limit.
What is LTV (Loan-to-Value) ?
Simply put, an LTV ratio is the ratio between the amount which the financiers can loan out to you and the evaluated value of the property.
Are local banks better than foreign banks for housing loans?
The housing loan framework for local banks and foreign banks are very much alike, there is pretty much no variation in how it is structured other than the interest rates that they offer.
Some banks might be more lenient in approving the loan, however there is no concrete indication of this.
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