When it comes to home loans, there are several different mortgage loan types to choose from. Each loan type will have its own terms, limitations, and specific use. This article will look at several options available for those wishing to purchase or refinance a home in Singapore, including:
- HDB loans
- HDB refinancing loans
- Private property loans
- Private property refinancing loans
- Home equity loans
- IPA housing loans
A Look into HDB Bank Loans
An HDB bank loan is a loan offered by the Housing and Development Board to Singapore citizens who wish to purchase an HDB flat. For those wishing to purchase a home, refinance or a home, or learn more about home loans, DollarBack Mortgage is a great resource to utilize. This type of loan is for people ages 21 and older with a minimum income of $30,000.
The rate for this type of home loan can vary. Some banks may be able to get lower rates for customers based on special circumstances. A maximum amount can be borrowed with this type of bank loan, which is 75% of the home selling price. The home buyer will need to have at least five percent of the home price in cash. The only twenty percent needed can come from cash the buyer has on hand or Central Provident Fund (CPF).
Refinancing HBD Loans
Those who have a direct HBD loan or an HBD bank loan do have the option of refinancing. Refinancing is typically suggested for those who owe at least $250,000 on their HDB loan with a difference of at least 0.30% between the existing interest rate and the new refinancing rate. Keep in mind that interest rates offered by banks change frequently, and many banks may have special rates that they can offer to specific customers.
Those who want to save as much as possible on their loan interest should consider shortening their loan length when they refinance. As long as the buyer can afford the higher payments, the bank should approve the shorter loan term. The minimum length of this type of loan is typically five years, saving a lot of money versus taking thirty years to pay off the HBD loan.
Some people choose to refinance their loan that came straight from the HBD to an HBD loan from a bank. Once a person switches from a direct HBD loan to an HBD bank loan, they cannot switch back. Switching to an HBD bank loan can be smart for those who owe at least $250,000 on their loan.
Private Property Loans
A private property loan is great for those needing a Building Under Construction (BUC) property or a completed resale unit loan. How much can a person borrow using this type of loan? The maximum loan to value (LTV) is seventy-five percent in Singapore, with a maximum thirty-year tenure. Those needing a lower payment and thirty-five years to pay off the loan will have the LTV decrease to fifty-five percent.
Those planning to finance their private property bank loan for thirty years may borrow up to seventy-five percent of the home sales price. They will need to have a minimum of five percent in cash to put towards the purchase price. The other twenty percent can be paid with cash or with the buyer’s CPF.
Some people question if they can attain a private property bank loan without a source of income. There are some banks out there that can approve this type of loan for people with no income. The person will need to have a large amount of money in the bank and a record of the money being in the bank for at least four years. It may be required that the funds be locked into savings with the bank for several years.
Private Property Refinancing Loans
Just as an HBD loan can be refinanced, private property loans may also be refinanced. It is smart for people to refinance this type of loan two to three years into repayment. How long does it take to get approval for private property refinancing loans? Many times the approval process takes just a few days. It can take anywhere from a month to three months for the funds to become available.
Now is a great time to look into refinancing as rates are expected to drop. Refinancing while rates are low can mean huge savings on interest. This is a great way to save money and lower the payment amount.
Home Equity Loans
A home equity loan can also be referred to as cash out refinancing. This type of loan is available to Singapore residents with a fully paid-off private property. This type of loan cannot be taken out on an HDB property. A home equity loan may be refinanced and should be considered if interest loan rates drop.
The IPA Home Loan
An in-principal approval loan (IPA), also known as an approval in principle loan, is a loan that historically takes only a day for approval. A loan specialist will do a preliminary evaluation that calculates the total debt servicing ratio (TDSR) and the mortgage servicing ratio (MSR), mortgage broker. This will let them know if the loan will be approved or denied.
On top of TDSR and MSR, the person’s credit history, income, and ability to repay the loan will be considered. Having an IPA shows that the person interested in the home can pay for the house. A bank has found the potential buyer’s credit history worthy of a home loan and gives the person the green light on buying a home.
In conclusion, there are several different types of home loans available from banks for people in Singapore. After the home has been purchased and the person has been making their loan payments on time for a period of two or three years, the person should look into refinancing for a lower interest rate. This is especially true for people that are paying higher than average interest rates on their loans. A little research now can save lots of money in interest over the life of the loan.
Additional resources:
- Getting a home loan? The Home Loan Expert recommends you understand all your options
- What can else can you use a home loan for?
- How to select a home loan ?
