The document provides 9 tips to consider when choosing a home loan: 1) whether to choose a fixed or variable interest rate, 2) the benefits of interest-only mortgages, 3) doing research on rental rates if investing in a rental property, 4) banks have lock-in periods where selling the property within that time incurs fees, 5) legal clawbacks that subsidize legal fees, 6) using a bank's panel of law firms, 7) various fees charged by lenders, 8) total debt servicing ratios used to assess loan affordability, and 9) the importance of mortgage insurance. It concludes that considering these tips can help find the most suitable home loan.

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Tips To Consider When Choosing A
Home Loan

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By Sean Lim
Founder of FindaHomeLoan.co
Trusted by clients, Quoted in media

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About Us
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 Top referrer of Standard Chartered (Singapore) Limited in 2013
 Your mortgage partner for property loans in Singapore,
Australia, UK, Japan and many countries
 A home loan comparison portal in Singapore
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 Comprehensive information
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 Free consultation

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Tips To Consider
Competition amongst banks has led to be
innovative in terms of rates, benefits and
freebies.
The cheapest rates is not necessarily the most
suitable. Though some home loan
packages look so inviting but you should
ask what your requirements are rather
than purely based on rates only.
So here are 9 tips to take into consideration
when comparing mortgage rates.

5. + Tip 1 : Fixed or Variable
If you feel loan interest rates will increase, fixed rate
mortgages might be better for you as it gives you a fixed
loan interest rate that doesn't change even if market rates
change.
However if you think that the market-based rates such as
SIBOR, SWAP/ SOR will drop, floating interest rate packages
could be a better choice.

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Tip 2 : Interest Only Mortgage
These mortgage loans let you pay only the loan interest
amount for a specified period. You thus make small
monthly payments for some time before you start to pay
off the loan principal amount as well. This is a wise
decision to leverage your finances to buy an overseas
property that allows you a higher rental yield. MAS has
banned interest only home loans for Singapore
properties. It’s available for Australia though.

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Tip 3 : Do Your Research
If this is your first property investment where you will
be depending on rent to repay your loan, first find
out more about the going rent in the area you intend to
buy your house. Remember that if you plan to rent
your house, it may lie vacant for some time. You thus
need sufficient standby funds to pay your installments
to avoid loan defaults.

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Tip 4 : Holding Period
Whether you are a home owner or property investor,
home loans in Singapore have a lock in period, ranging from
zero to few years.
Zero or smaller lock in period is appealing to short-term
investors where the intention is to sell the property within
few years outside the lock in period.
Selling the property, within the lock in period attracts a fees
charged by the bank. Some banks in the past have launched
mortgages that waive this fees if one make a full redemption
via sale of a property.

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Tip 4 : Holding Period
With the recent cooling measures in Singapore for
residential properties, a longer lock in period may
be logical since selling the property within the first 4
to 5 years will incur additional taxes imposed by the
government. Mortgages with longer lock in period
should has better perks, such as lower margin or
spread or free fire insurance for more years.

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Tip 5 : Legal Clawback
Banks grant a legal subsidy when one takes up a
mortgage loan for the private property or HDB flat. This
legal subsidy goes towards the legal conveyancing fees
charged by the law firm. Usually, the subsidy ranges from
0.4% to 0.5% of the loan amount, or $2,000 to $3,000,
whichever is lower. Some banks may have tie ups with
law firms that covers fully the legal fees even if the legal
subsidy is insufficient to cover the legal fees

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Tip 6 :Law Firm
Banks will have a panel of law firms that they work with. If one
prefers to use a law firm not on the bank's panel, the bank will
impose additional fees, above the typical legal conveyancing fees.
This means you will have to pay more to use this law firm. Hence,
it's prudent to check with the bank if you intend to use your own
law firm. Otherwise, there is no reason not to utilize any of the law
firms on the bank's panel, whom have been scrutinized and
selected.

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Tip 7 :Fees
There are numerous housing loan terms where a lender
can charge you more for your loan like processing,
default, late payment, annual, cancellation, partial or
full redemption and fall below fees. However at times,
lenders may subsidize the closing costs through
insurance premiums and valuation and legal fees.

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Tip 8 :Total Debt Servicing Ratio
TDSR is a ratio banks use to calculate to decide if the
loan is affordable to you. It’s now standardized
according to the guidelines set by MAS.
You can only use 60% of income to repay all debts in
Singapore. Offshore financing differs as they are
governed by other central banks.

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Tip 9 :Mortgage Insurance
is necessary as if something happens to you wherein
you lose your income, instead of your family facing the
debt of the mortgage; the insurance company is
responsible for the loan. It usually is a reducing term
insurance, where the coverage reduces every year as
the home loan amount decreases with the repayments.
You can also determine the interest rate pegged to the
insurance.

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Conclusion
With these tips in mind, you will be able to find the right
house loan in Singapore for yourself.
Start today to shop for the best (oops, we mean most
suitable) mortgages, using the
Home Loan Calculator.
For existing home owners, check out your options between
repricing versus refinancing here. Remember, the lowest
interest rate mortgage might not be the best.

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