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Frequently Asked Questions (FAQ)

Posted by condolaunchsg on May 23rd, 2020

1. How do I know if I am ready to buy a property?

The idea of making a large ticket purchase as a first time home buyer can be daunting. This checklist allows you to self-evaluate whether you are prepared to make a home purchase:

  • Do you have a stable paycheque?
  • Do you have a good credit score?
  • What is a sustainable budget plan for you in the long term, such that you will be able to save up for down-payment?
  • Clear as much of your outstanding debts as possible to improve your Total Debt Servicing Ratio
  • Understand what you need VS what you want. Decide whether you have the financial capability to finance your wants.
  • Based on your finances, decide on the type of home you wish to purchase
  • Decide your location preferences and research for future developments in these districts.

 2. I am ready to make my home purchase, and I wish to sign a bank loan that helps me finance my home purchase. What affects my maximum loan amount and loan tenure?

There are two factors that affect loan amount and loan tenure: Age and Financial Commitment.

Age

Generally, the younger you are, the longer your maximum loan tenure possible. Maximum loan tenures are capped at 30 years for HDB flats and 35 years for private properties.

For loan tenure exceeding 25 years for Penrose condo, or 30 years for private properties, the maximum loan amount could be reduced to 55% of the property purchase price as well.

Therefore, it is important to consider and budget prudently for long-term instalment payments to get the best loan most suited for your needs.

Financial Commitment

To calculate your maximum home loan amount, banks will take into account the ratio of your debt to your income. This is called the Total Debt Servicing Ratio (TDSR), which is capped at 60% of all borrowers’ gross monthly income. This means that the total amount of your debt (including home loans, study loans) cannot exceed 60% of your gross monthly income.

Forest Woods - condo for sale in Singapore | Greyloft

Therefore, it is crucial to clear off as many outstanding debts as possible within your means and consider what other loans you might wish to take (for instance, car loans).

If you are seeking to upgrade your home, you are exempted from TDSR requirements if:

  • You will sell their existing property
  • You own no other properties
  • You hold no other property loans
  • You meet your financial institution’s credit assessment criteria

If you are purchasing a HDB flat or Executive Condominium, banks also have to calculate your Mortgage Servicing Ratio (MSR) based on loan amount and combined monthly gross income. This is capped at 30% of all borrowers’ gross monthly income, which means that mortgage repayments must not exceed 30 per cent of a borrower’s gross monthly income, even if you have no other debt obligations.

3. Can I use CPF to finance my home loan?

Yes! You can use the funds in your Ordinary Account to:

  • Pay for down-payment of your new home
  • Repay your monthly housing loan instalments
  • Pay for stamp duty fees and legal fees.

 4. What should I know about property loan refinancing?

Refinancing means replacing your current home loan package with a new one from another bank, usually with improved terms to lower your mortgage payments.

However, take note of the following:

  • Legal fees incurred will usually amount up to 00-00. If the refinancing package saves you less than that, reconsider.
  • Make sure the lock-in period for your original loan is over; otherwise, you will incur a penalty fee

As an alternative to refinancing, consider repricing your home loan with your existing bank.

Readmore: Things You’re Paying For When You Buy Your Home

 
Also See: Maximum Loan, Loan Tenure, Home Purchase, Ticket Purchase, Loan, Home, Purchase

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