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What You Should Know About Housing Loans

Your home will likely be the most expensive purchase that you ever make. For most people, buying a home requires a long-term commitment. If you’re purchasing a home to rent out, you must consider the financial burden even more carefully.
You will need to communicate clearly with your bank to ensure that you both understand the terms of your housing loan and can meet those terms.

Basic Considerations
     Can you afford the monthly instalments suggested by your bank and the terms of your loan? If you’re not sure what those instalments might be, contact the bank and request an Approval-in-Principle (AIP). This will let you know the loan amount that you qualify for as well as the monthly instalment that it will require.
     Can you meet the Total Debt Servicing Ratio (TDSR)? This is a question that you need to be able to answer in the affirmative before making any serious commitments in the property purchase process.
     You should also be able to meet the Mortgage Servicing Ratio (MSR) prior to commitment if you are buying a condominium.
     Keep in mind that that interest rates can increase during the loan term and plan for that contingency.
     If you plan to use CPF funds, determine your withdrawal limit prior to purchase
     Contact your bank for a full list of requirements before purchase. Once you get info from this housing loan checklist, make certain that you can meet each requirement.
Before You Commit
Remember, it’s important to pay each instalment on time. Not only might there be fines or fees for late payment but you’ll also face overdue interest if you’re late. Furthermore, if you don’t pay your instalments in a timely manner, you may see the bank recall your housing loan and take possession of the property.
If that occurs, the bank sells the property, and it cannot recoup the amount of your loan, you could face a serious financial disaster.
Terms You Should Know
There are certain terms that which are commonly used in property sales that you may not have encountered before:
     Loan Tenure: Loan tenure is the length of time that you have to pay back the loan. It is sometimes referred to as the repayment period. All borrowers are considered when determining the loan tenure.
     Fixed-Rate Loans:Fixed rate loans feature a static interest rate that cannot be changed for a period of time (typically several years). This results in a static monthly instalment payment. If interest rates are low when buying, this may be an ideal option.
     Variable-Rate Loans:These are loans in which the interest rate varies according the market benchmarks. When the interest rate varies, so too does your monthly instalment.
Educate Yourself before Committing to a Purchase
Because a property purchase is such a milestone and such an expensive one, you should take the time to educate yourself properly before you take the plunge. Contact your bank for more information and read up on more detailed housing loan information.


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