4 Things to Consider When Taking Up a Home Loan

Posted by oscar123 on December 21st, 2016

Looking for the best housing loan in Singapore? Consider the following:

1. Affordability of the Loan 

The Total Debt Servicing Ratio (TDSR) is as a useful tool to determine the affordability of a home loan. TDSR is the proportion of one’s monthly gross income that is spent on settling debts.

In Singapore, borrowers are expected to keep their TDSR to less than 60%. For example, if one is earning a gross income of S,000 a month, then his or her total debt which includes home loans, credit card loans, car loans, and the like — should amount to only S,000 or less. 

Therefore, an affordable housing loan is one that allows the borrower to keep his or her TDSR within the specified percentage limit.  

2. Interest Rates 

Interest rates can come in the form of fixed rates or floating rates. When choosing the best type of interest rate, it is important to pay attention not only to the interest rate being advertised upfront, but also to the cumulative interest to be paid throughout the entire loan tenure.

3. Loan Conditions

Another important consideration when it comes to home loans are the terms and conditions that come with the loan. Are there processing fees and prepayment fees that need to be paid? Are there additional privileges being offered together with the loan such as a lower interest rate on a home renovation loan?

 4. Repayment Period

Typically, a longer loan tenure will result in a lower monthly instalment fee, while a shorter loan tenure will result in a higher monthly instalment fee.

Should one decide to go for a longer loan tenure, one needs to make sure that there are no major cash-flow fluctuations throughout the loan’s repayment period.

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