Understanding Property Loans in Singapore
Want to get a mortgage loan, cash out of your property, or refinance your home loan?
Properties are definitely not cheap in Singapore, costing several hundred thousands or even millions. Getting a house in Singapore is a huge form of financial commitment and the process usually comes with lots of researching and paperwork. If you are reading this article, it means that you are either planning to buy a house, upgrade your house, refinance your home loan, cash out of your property or raise funds to start a business or for a financial emergency.
Whatever plans you have for your property, MPM Capital will be able to provide you with the necessary help. Don’t worry about the paperwork, don’t worry about the large amount of content. MPM Capital is here for you.
But where does one start? You will need to look at how much money you can borrow, the properties available and procedures needed. Rest assured that we will walk you through every step of the process.
Property Prices in Singapore
Homes and properties are known to be very expensive here on this sunny island. Whether you are looking to buy a home to stay or get a property for your business or investments, you should always get a home with a good space area and location. The table below gives an estimate of the prices for different properties in Singapore.
|House Type||Housing Price||House Details|
|3-Room HDB||$300,000 – $370,000||Usually measures 60-65 sqm.|
|4-Room HDB||$450,000 – $550,000||Usually measures 90-100 sqm.|
|5-Room HDB||$520,000 – $650,000||Usually measures 110-120 sqm.|
|Executive Apartment||$580,000 – $690,000||Larger public housing, usually measures at least 130 sqm.|
|Executive Condominium||$800,000 – $970,000||Public-private hybrids. They start of as public housing but will be considered as private properties after five years. They generally share the same facilities as private condos though with certain restrictions.|
They have a 99-year leash and will achieve a full private status after 10 years.
|Condominium (Outside Central Region)||$1,100,000 – $2,000,000||Private housing that comes with various facilities for their residents. Usually, the condo has swimming pools, 24/7 security, gyms, gardens, BBQ pits and function rooms.|
|Condominium (Central Region)||$2,700,000 – $4,000,000||Private housing that comes with various facilities for their residents. Usually, the condo has swimming pools, 24/7 security, gyms, gardens, BBQ pits and function rooms.|
|Terrace House||$2,000,000 – $3,100,000||Landed properties. Terrace houses are identical properties, linked side by side with one another and is connected by one shared wall.|
|Semi-Detached House||$3,500,000 – $4,500,000||Landed properties that only share one wall with the neighbour. Semi-detached houses usually come in pairs and are usually a mirror image of one another. They are bigger than terrace houses and provide more privacy.|
|Bungalow||$9,000,000 – $11,100,000||Landed properties that are also known as detached houses. Bungalows stand on their own and do not share any walls with any other properties. They are usually at least 400 sqm large.|
|Good Class Bungalow||$20,000,000 – and above||As the name suggests, these good class bungalows are larger than 1,400 sqm. They standalone and are usually found in good locations with large gardens, carparks, swimming pools, tennis courts and more. They provide comfortable living with lots of privacy. In Singapore where land is limited, there are only two or three thousand good class bungalows.|
Factors that Affect Property Prices in Singapore
You probably have heard that the location of the house is the most important factor.
There are many property options in Singapore and everyone wants to have a place that is comfortable and convenient. While everyone has different preferences for their homes, one should generally look at the following when purchasing a property on the little red dot.
1. Accessibility of the house (near MRTs, access to expressways)
2. Whether the house is near amenities such as food courts, supermarkets, food outlets
3. Good value for money (more space/ area of the house)
Best Locations and Prices for HDBs in Singapore
Perhaps you are planning to get a new home or to upgrade to a more comfortable place from your current one, but you are not quite sure where is a good location to live in. The house that you are purchasing now will not only make your life better, but can also be used as a form of investment in years to come. You can choose to rent out your house or resell it in the future and one of the most important factor that affects the price is the location.
Below is a list of the top areas (with estimated prices) for HDBs:
|Location||HDB Type||Sale Price||Rental Price|
|Pinnacle @Duxton (3 Bedrooms)||$950,000||$3,400/month|
Best Locations for Property Investments in Singapore
In Singapore property investment is one of the most popular form of investments. To get the most out of your investment, one needs to consider not only the type of housing, but the location as well. Below is a list of the best areas for property investments in Singapore.
- Nassim Road
- Sentosa Cove
- Tanjong Pagar (especially for commercial properties)
- Marina Bay (especially for commercial properties)
- Bugis (especially for commercial properties)
Affordability – How Much Can You Borrow or Cash Out Of Your Home?
“How much money can I actually be approved for?”
This is probably a question that runs through your mind. To answer that, we will need to look at several different factors. They include your monthly income, mortgage servicing ratio, loan to value ratio and your income to debt ratio and other factors. We will be happy to help you calculate what you can actually afford to purchase. This will save you time because you can then narrow down your search to only look at homes you are interested in. As the aforementioned ratios are important, and we have provided a quick summary of the terms with simple explanations for you to have a better understanding before moving forward.
1. Mortgage Servicing Ratio (MSR)
MSR refers to how much your gross monthly income goes to paying off the mortgage loan. Gross monthly income is the amount calculated before tax and CPF deductions. To prevent Singaporeans and PRs from overborrowing, the guideline stated by Monetary Authority of Singapore (MAS) is that no more than 30% of their salary should be used to pay for a home loan.
For example, anyone earning S$4,000 per month can only afford to pay S$1200 towards a mortgage. This approach is considered sensible because it means that one can comfortably pay off the loan. If you earn a higher salary, you will be able to qualify for a bigger property loan.
2. Total Debt Servicing Ratio (TDSR)
The TDSR in Singapore is capped at 60% of one’s monthly income. This means that the amount of money that goes into paying debt each month, for each person, should not exceed the 60% mark. The total debt obligations per month are inclusive of car loans, personal loans, home loans, revolving debt, and any other credit facilities you may have. The idea here is to encourage borrowers to be prudent about their borrowing. MPM Capital is a trustworthy, compliant financial institution that adheres to the guidelines set by the Ministry of Law.
3. Loan-To-Value Ratio (LTV)
This is the amount of money that you can take out to purchase a property relative to its value. LTV is expressed as a percentage so the amount you can borrow differs from one property to the next based on several different criteria. Factors considered when calculating LTV include other credit facilities that have been granted by various other financial institutions or even by the seller. Rebates, discounts, and other benefits tend to be deducted when the purchase price is calculated, prior to working out how much you can get as a loan. We will consider the following when calculating LTV:
- Monthly payments relative to gross
- Any existing loans
Sourcing The Best Finance For A Home Purchase
With Singapore properties being one of the most expensive in the world, Singaporeans usually need to borrow money to purchase a home from financial institutions, banks or from the HDB. MPM Capital is a legal and established financial institution in Singapore that offers property and business loans. Taking from banks or financial institutions have different advantages. One of the main advantages of coming from us for your home loan is that we have a large variety of loan types to offer. These mortgage loans Singapore come with varied interest rate options. They include variable rate, fixed rate, interest only, SIBOR (Singapore Interbank Official Rate) and pegged among others. Additionally, with current interest rates being so low, you may even be able to pay less on your mortgage if you choose to borrow from us than if you had taken an HDB loan. Here is a quick breakdown of the different interest rate options available for mortgage loans Singapore today:
- Fixed rate mortgage – This package offers the stability of equal payments throughout the duration of the loan. Most people like this package because they are able to budget their payments well in advance.
- Variable rate mortgage – This is another popular option. We offer a flexible mortgage rate that tends to fluctuate from time to time. The predictability of the fixed mortgage rate is absent in this case since the amount paid every month changes based on the adjustments made.
- Tracker mortgages – These mortgages are fixed interest loans that tend to change with time based on changes made by the lender. As such, should the interest rates rise, the monthly payments can also rise with them. Of course when the interest rate drops, the payments also become smaller.
- Offset mortgage – This package works for those whose savings or current accounts are on credit. This means that the amount of money in these accounts cancels out some of the money borrowed and one then pays interest on what remains. Should you spend the money in your savings, then the amount considered to be interest-free reduces. If you have money in savings that you know will not be in use for a long time, this can be a great way to keep monthly payments low.
- Repayment mortgage – If you are expecting your earnings to go up in the near future, or if you are currently having financial problems, you can benefit from this loan. A repayment mortgage actually guarantees that you will own the home in the long run. However, the cost of the loan is more than the average with other loan types. Payments made from month to month are used to pay back the principal and interest fees.
- Interest only mortgage – Anyone looking to keep monthly payments low will opt for this type of mortgage. Here, the monthly payments only cover interest and not the principal. With time, you will be expected to pay back the principal as well.
It must be noted that each loan package will be different and customized for each applicant.
Applying For A Mortgage Loan With MPM Capital
There are three main objectives at MPM Capital. The first is to help our clients secure the property that they desire, provide them with the best property loan and finally, ensure that the entire application process is fast. We understand the long processing time for loans by banks so we do our best to expedite the process.
Getting your IPA (in-principal approval) is the first step. We offer this as an indicator of how much you are able to borrow and it is actually considered conditional mortgage approval. With this in hand, you have a better idea of which price bracket is suitable when looking at available homes. Later, when you have finally picked a home and are ready to make a purchase, a letter of offer will be issued. This letter contains all the pertinent information including the interest rate to be paid, the loan amount, lock-in period, and the like. With the letter of offer in hand, you will be able to purchase the home of your dreams. To save your previous time, we offer online applications. You can also submit the following details to us:
- NRIC copies of the owners or business directors
- Bank statement of the business for the last 6 months
- Most recent ACRA printout
- Tenancy proof for the business premises
- Income tax statements
- Proof of assets/Title deeds
- P&L statement
Upon verification, your property loan request will be accepted and we will contact you immediately so as to not delay the processing to you. We target to serve you at the quickest time possible.
Financial Responsibilities Of Owning A Home
MPM Capital loan advisers are excellent information resources. Most people often consider the upfront payments made when purchasing a home, but forget about the monthly payments that will follow. We provide all the necessary information so that you are not caught unawares.
Here are some of the fees that you will be looking at upfront:
- A down-payment – This amount varies from one lender to the next. The HDB asks for about 25% in down-payment, but most other lenders look for about 10%. Factors affecting the amount of down-payment include the value of the property, property type, whether one already has another housing loan, and loan tenure.
- Option fee
- Fees and commissions stipulated by the salesperson or housing agent
- Stamp fees and other legal costs
- Miscellaneous costs
Once the purchase has been made, there will be monthly payments that must be made. These include payments for:
- Fire insurance
- Property taxes
- Mortgage insurance
- Mortgage repayments
- Utility bills
- Management service and conservancy fees
5 Tips to Clear Your Debt Quickly and Efficiently
Getting a loan is a serious financial commitment. It is understandable that one will be worried about the repayment and bills that they have to pay. MPM Capital cares for their clients and below, we have listened the best 5 tips that can help you clear your debt quickly.
1. Making a decisive commitment to stop and prevent overborrowing
Be disciplined. Make a strong commitment to stop borrowing. In other words, if a person is in debt, the first step that they should take towards clearing the debt is to stop borrowing further. This means stopping the tendency to borrow in order fund a given type of lifestyle.
Therefore, it is important for a person who is in debt to avoid borrowing money to buy fancy items such as furniture, a car, luxurious items or electronics just for the sake of having these items. Most of them are usually wants and not necessities. With the temptations and discounts given by credit cards, many Singaporeans have a tendency to purchase more goods on credit, which increases their debt as well. They should avoid borrowing to fund unplanned trips, luxurious meals and other impulsive purchases. By not borrowing further, an individual can strategize better on how to clear an existing debt.
2. Plan a feasible budget and stick to it
Closely related to the issue of making a decisive commitment to stop borrowing is the matter of having a budget. A budget is a tool that acts as a meter that shows how people are using their finances. It is important to have a practical budget that shows the income that one has as well as the expenses that need to be settled, including debts. More importantly, the budget should clearly indicate the amount that will be saved each month even as one continues to make payments for an existing debt.
Having a budget that keeps track of one’s revenue and expenses is critical to clearing off a debt within a short period of time. For example, with a clear budget, one is able to determine how much money is being used and the types of items that are being paid for as well as the bills that are being cleared. Based on this information, one can assess what needs to be done to make more money available for saving and clearing the existing debt.
One way of making more money available, for instance, is trimming expenses based on the budget. By reducing the amount that is being used on some expenses that are not very necessary, more money will be available to be used to pay for an existing debt. By sticking to a budget that makes it possible to have more money to settle a debt, it will be possible to clear the debt more quickly and comfortably.
3. Organizing debts
There are two ways in which debts can be organized to make them easy to pay off; the snowball method and the avalanche method. The snowball method involves reordering debts on the basis of the amount owed. Based on this method, a person should clear the smallest debt first. On the other hand, the avalanche method involves reordering debts on the basis of the level of interest that is charged on each of the debts. Based on this plan, the debt that has the highest interest rate should be cleared first. Further details about the snowball and avalanche methods of clearing debts are provided below.
As noted above, the snowball method focuses on clearing the smallest debt first. For instance, if a person has a telephone bill of $100, a personal loan of $1000 and a student loan of $8000, they should focus on paying the minimum requirement for each loan while ensuring that the smallest debt is cleared first. Once the smallest debt is cleared, the minimum amount that would have been paid to settle it is channeled to the next debt, thus reducing the repayment period for the entire debt.
The aim of the avalanche debt repayment method is to reduce the interest that accrues on a borrowed amount as quickly as possible. Thus, by targeting the debts that have the highest interest first, an individual is able to reduce the repayment period and thus pay a lower amount in interest in the long run.
4. Having an emergency fund
Although it is very important to clear off your debts, it will also be wise to have an emergency fund to take care of unforeseen events that may require money. Emergencies are unexpected events such as a job loss, illnesses that are not covered in insurance plans, theft, property damage by natural disasters such as fires, accidents, and many others. All these events will need to be attended to if they occur, even as one continues to pay off an existing debt. And attending to emergency needs may require varying amounts of money depending on the nature of the problem. It is here that an emergency fund comes in handy.
With an emergency fund, one is able to attend to emergency needs without having to compromise the debt repayment plan. For example, if a person needs $5000 to treat an illness that is not covered in a health insurance plan, the amount can be obtained from the emergency fund savings that the individual has. The result is that the person will continue repaying any existing loan without fail despite the emergency. This helps avoid the penalties that are associated with defaulting on debt repayment and also ensures that the debt is settled quickly.
5. Channeling any extra cash to paying off debt
This point is closely linked to having a budget. As it was pointed out above, having a budget enables people to know the amount of money that is available and how it is being used. Along this line, any extra income that has not been budgeted for should be channeled towards debt repayment. Extra income could be due to a work bonus, a tax refund, passive income, or a pay raise. If the extra amount is used on paying off debt, it will go a long way in helping to settle the debt quickly and efficiently.
Finding the best and most suitable mortgage loan is not that hard. We will be happy to walk with you and find a mortgage that fits your specific requirements. Get in touch with us today to kickstart your property investment or secure your dream home today!