If you are thinking about buying a home in Singapore, you are likely thinking of finding a suitable financing option. Mortgages and bank loans are both great options, but most people go with a mortgage when buying an HDB flat. Choosing a mortgage can be a complicated process as there is a lot to consider and think about when choosing one. In this article, we will be looking at a few things you need to know so you can make an educated decision to get the right mortgage.
Mortgage Vs. Bank Loan
Although we know that many people choose a mortgage over an HDB bank loan when purchasing an HDB flat, it is important to know the differences between the two. An HDB housing loan is provided by the Housing and Development Board while a bank loan comes from a bank.
For the HDB loan, you need to meet certain requirements such as having a certain income or being a citizen. For the bank loan, your credit score and history will be the most important considerations as banks want to know you can repay the loan.
The HDB loan is only available for HDB flats while the bank loan is offered for both private properties and HDB flats. If you are thinking of investing in different types of properties, this condition means that a bank loan might suit you better so you can diversify your investments easily.
If you are just thinking about buying a HDB flat, a HDB bank loan might suit you better as the interest rates are usually quite low. Many banks also offer floating interest rates that make the loan much cheaper in the long run.
To learn more about getting an HDB bank loan and how it is different from a HDB loan, you can check out the guide provided by PropertyGuru. You will also find additional information on mortgages on the platform as well as property guides that will simplify investing in properties in Singapore. If you want guidance, PropertyGuru also gives you access to lots of agents who focus on different types of properties and on different regions.
How Much Can You Afford?
You should try to borrow as much as you can afford and no more, whether you are going with an HDB loan or a bank loan. If you have a great credit score, lenders will be more open to letting you borrow larger amounts. Even when you can afford a certain amount, it is not always a flat for rent because the rental income will help cover the mortgage or loan.
Consider the Terms of the Mortgage
Apart from how much you need and can borrow, there are other factors you need to think about. These include the term and interest rate type. The term is how long the mortgage will be. The term can range anywhere from ten to 30 years depending on factors like the amount borrowed and interest rate.
A longer term typically means you pay less per month as the interest rate is lower, but you pay more overall because of the length of the mortgage.
You can achieve a balance between loan term, interest rate, and monthly repayments by using a mortgage calculator that helps you work these numbers depending on how much you can afford.
The two main types of interest rates are fixed interest rates and floating or variable interest rates we have mentioned above. Fixed interest rates remain the same for the term of the loan while floating interest rates change according to market conditions.
Floating rate mortgages can be risky because the interest rate can increase over time resulting in higher monthly payments and an expensive overall loan.
Compare Lenders and Get Estimates
Getting the right mortgage will require that you get the best terms and estimates, ensuring both are favorable to your circumstances. Once you know the type of mortgage and how much you need, start comparing lenders.
You can use platforms like PropertyGuru mentioned above to find the best mortgage terms and lenders. Getting all this information will give you some negotiating power. If that is not possible, then you will have the power to choose a lender with the best terms according to what you need.
If you prefer personal recommendations, you can always talk to friends and family to see which lenders they recommend.
Regardless of the route you follow, you should end up with at least three lenders who you compare against each other to see which one offers the best terms. Ensure that you also disclose their fees as well as the fine print so you can see if there are any points to be concerned about. Such thorough research can save you tens of thousands of dollars over the loan’s term.
It is always best to be as informed as possible when taking a mortgage. Remember that you have to repay it and thus it should benefit and favor you as much as possible.