Mortgages: Top 6 Questions to Ask before Applying for One

Are you planning to get a mortgage? It is actually one of the biggest decisions you’ll ever make, especially if you’re living in a foreign land such as Singapore. It is therefore essential before you go for it, you ask yourself the following questions:

Do I need to apply for a private home loan?

Are there instances when a private home loan is not really necessary? Yes, there is. For one, if you are able to save a lot of money prior to your relocation, it makes good sense if you will just buy the property in cash. This way, you no longer have to think about repayments. Private home loans may also be unnecessary if you are qualified to get an HDB flat. This type of property is regulated by the Housing and Development Board and is very cheap. You don’t apply for a private home loan but get a mortgage from HDB. You can also forego getting one if you’re still not eligible to own a property in Singapore.

What are the requirements for mortgages?

The requirements for getting a mortgage can vary from one lender to another. Thus, it’s recommended you research first of what they need before you submit your application. Normally, they will require your credit report. As long as they are an institution approved by the Monetary Authority of Singapore, they can make an inquiry into your account. If you have a good credit standing, you won’t have any problem getting a mortgage.

You also need to be at least 21 years old, the age considered to be the most legal in the country. It is also a great help if you’re already a permanent resident or a citizen of the country.

What types of properties can I own?

The types of properties you can purchase in Singapore are divided into two: non-restricted and restricted. The former are those that you can obtain without prior approval to the government, the second with approval. Non-restricted properties include non-condominium developments with no more than 6 levels. Restricted ones are vacant lands, landed properties such as bungalows and semi-detached houses, and HDB flats. You are subject to the Residential Property Act. 

You may ask, why is this implemented? Singapore is a small country, and the government would like to make sure that Singaporeans are properly taken care of. They don’t have to compete so much with the foreigners when it comes to owning homes right in their country of origin.

What does the property look like?

There are different kinds of properties available in Singapore. The most common are the HDB flats. They make up around 80 percent in the country. HDB flats can have one bedroom to 4 bedrooms. You can also get a mansionette and an executive flat. Then you have the landed properties, which are bungalows, semi-detached houses, detached houses, and terrace houses. A lot of foreigners would also like to own the black-and-white houses. These are the age-old properties, highly valued because of their history and excellent architectural style.

You can coordinate with your estate agent, so you can visit the properties you like prior to applying for a mortgage.

How much will be my interest?

Like any kind of mortgage, you will be required to pay for an interest. Interest rates (or the Singapore interbank offered rates) can also differ among lenders. There are also two kinds of interest rates: fixed interest rates and variable interest rates. The variable interest rate is usually associated with the fed rate and is therefore subject to fluctuations. The fixed interest rate doesn’t change for a number of years.

Which of the two is better depends on you. If you want to know how much to pay every year, you can settle for the fixed interest rate. If you want to take advantage of very low interest repayments, go for the variable interest rate. You can apply for refinancing as a way of reducing interest repayments.

Do I have the capacity to pay?

A debt needs to be paid, especially if we’re talking about mortgages. Defaults can happen if you don’t have the capacity to do so. If this occurs, then the lender has the option to repossess your property and sell it with the hope of profiting and recovering from your debt.

It is highly essential you have a job or a business when you’re in Singapore. Besides, the lender would ask for a copy of your employment pass when you apply for a mortgage. They would usually match how much you earn to how much you can borrow from them.

These are just basic questions about mortgaging. If you have more, go to your estate agent. He or she can guide you on the best steps to take, so you can obtain the loan you truly want. f

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