A home loan might sound complicated to some that is why a lot of Singaporeans would stick to renting a house rather than applying for a home loan and get their dream house but if you are going to research thoroughly about home loans, you would realize that applying for a home loan isn’t that hard if you just have the necessary information and details.
Types of Home Loan
When applying for a home loan, it has two parts which are the loans principal or the amount you are going to borrow from the lender and the interest or the amount you pays the lender for letting you have the loan.
There are also two types of home loans, and these types will determine how you would like to structure your loan especially the interest payments for you to have any adjustments and you won’t encounter any difficulties with the repayment terms.
● Fixed-rate Mortgage
With a fixed-rate mortgage, your monthly repayment doesn’t change, but your interest rate is higher compared to an adjustable-rate mortgage.
● Adjustable-rate Mortgage
The initial interest rate for this type of home loan is lower but your monthly may either be higher or lower depending on the annual adjustments of the interest rate in the country.
It is really exciting to purchase a property that’s why there are some who would eventually look for a house even though they haven’t checked yet if they are surely qualified for a home loan. A home loan would need a big amount of money from a borrower for both the down payment and the monthly repayment.
Before looking for a property, you should check first your monthly income and how much can you allot from your salary for the loan repayment terms. Most licensed moneylenders and banks in Singapore will require 25% to 30% of your monthly income to be paid to your home loan and with these numbers, you can already determine if the remaining money would be enough for your expenses and other debts.
After determining the budget of the house you can afford with your income, you can now look for a real estate agent, and they will help you find a house that would fit your budget and needs. A real estate agent could also help you with some tips and advice on how you can get a home loan approval fast especially that they know a lot of licensed moneylenders..
A repayment term refers to the years you are going to pay your home loan. Repayment terms depend on several factors such as the price of the house and your monthly income. If you are going to repay your loan longer, you would expect for a lesser monthly repayment, but the disadvantage of having a long repayment term is that you’ll be paying bigger because of the interest rate.
If you would choose a shorter repayment term, you’ll be paying the lender a larger amount every month, but you can also save from the interest. Either of the two repayment terms, the lender will also check whether you can afford their terms and some licensed money lender can adjust as well if they can see that you will have a hard time with their repayment terms.
The interest rate refers to the monthly mortgage payment you will be paying the lender for your home loan. If you have a higher interest rate, you will be paying bigger every month and vice versa. If you can choose the fixed-rate mortgage, your interest rate will not change even if it is a long term loan.
Annual Percentage Rate
Every property that is being sold in Singapore has an Annual Percentage Rate or the APR. Through an APR, you can compute how much is the estimated overall costs of your home loan; thus you can determine earlier whether it is the right deal for you.
When looking for a house to purchase, it is best that you are going to check the property’s APR first so that you can compare the APRs of all the properties you have checked and determine which one is cheaper and suits your budget.
One way to get a great deal when purchasing a house is through availing discount points. A discount point is what you can pay your lender to give you a lower interest rate. In every point you are going to avail, you can reduce your interest rate with 0.25% which is big already especially that home loan tenures would reach 25 to 30 years.
Monthly Mortgage Repayment
Your monthly mortgage repayment depends on your loan tenure and the overall amount of your loan plus the interest rate. The lender may also pay insurance and other taxes of your house on your behalf and would inform you of your next repayment so you can pay them for these extra expenses.
Home Loan Servicer or Home Loan Originator
You might be wondering that after your home loan closes, another home loan servicer manages your loan. It is because home loan originator only handles the process of your loan application and after that, they are going to pass your loan to the home loan servicer.