Getting a home loan: Tips to get you started

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Very few people these days buy houses without using a home loan due to the steep prices of property in Singapore.

If you want to purchase a home using a home loan, you will need to familiarize yourself with a few things first to get a loan that will suit you best.

Here are three points that you must know first before applying for a home loan:

• Most lending institutions will not finance more than 80% of your home loan, and you will have to pay at least 5% of your 20% upfront in cash, and you can pay the remaining 15% either through CPF contributions or using cash.
• As you apply for a loan, know that you cannot exceed the TDSR (Total Debt Service Ratio), which stands at not more than 60% of your income. The above means that financial institutions will not approve a loan if you will be spending over 60% of your income paying back loans.
• Also, know that your MSR (Mortgage Service Ratio), which is the percentage of your salary you spend, paying back your mortgage, cannot exceed 30% of your gross salary.

With the above information, you can begin the process of choosing a loan, and some of the vital questions you need to answer to determine whether you are getting the right loan include:

Are you qualified to take up that loan?

Do you have a source of income that will allow you to pay your deposit upfront, and not face problems resulting from TDSR and the MSR? If you do, then you can begin your loan application process.

What penalties will you get if you fail to make a payment?

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If you lose your job or for some other reasons you fail to make your payments, you need to know what penalty you will receive, and what course of action will result if you are unable to keep making payments.

Having this knowledge will prepare you for the results, and you can decide whether to get that particular loan or to look for a different loan.

How long can you afford to pay the loan?

It is not common to pay a home loan for more than 30 years, or to keep making payments well into your retirement age. Make sure only to sign up for a home loan which you can clear within a short period so that it does not become a burden to you when you are too old.  

What interest rates apply for your loan?

 Depending on the type of loan you sign up for, you can either have a fixed interest plan or variable interest plan. You should get advice from professional lenders when it comes to this since they are in a position to predict the trend of the interest rates, and can advise you on which of the options will work best for you.

Can you get a better deal through a mortgage broker?

Mortgage brokers usually have their ear on the ground concerning bank promotions, increase in interest rates or their fluctuations and many other aspects of your loan. They are in a position to get you a really good offer, or special promotions, both of which will save you a lot of money.

Get a home loan from reliable banking institutions in Singapore. See Business Directory's bank listings to select a branch near you.