Housing loans are very common in the real estate and finance sectors all over the world. Buying a home can cost a lot of money and there are some of us that cannot afford to lay down all the money at once. Mortgage and loan systems are put in place so that everyone gets the opportunity to buy their own house on a down payment and pay off the cost of their house with an interest rate.
This is the basics of a mortgage or housing loan in the world, but there are different sets of rules and regulations for each country and like others, Singapore has its own unique conditions.
Housing loans and how it works
A bank or lender offers a housing loan to the applicants for buying a home. An approval of a housing loan depends on a range of factors, including your credit score and financial situation. Before taking a loan, you should consider the conditions surrounding the loan such as its interest rate, instalment costs and length of the maturity period. The bank or lender will hold the title of the property until the loan is entirely paid off. This means that you only fully own the home once the maturity period of the mortgage loan ends and the due payments have been made.
You should have a proper knowledge about what kind of loan you are applying for and compare the housing loan rates offered in Singapore. You can apply for either fixed interest housing loans or floating interest rate housing loans, both of which have different conditions and requirements to be met.
Applying for a housing loan in Singapore
First of all, it is essential to understand the types of risks involved with the housing loan and how the lender covers the risk. A housing loan gives you temporary rights over your home and you can live on the premises in exchange for regular instalments and enjoy full rights of the property after maturity period. To make sure that you can actually pay off your loan, banks will grant you a loan if you can prove that you are eligible for the loan.
The eligibility status starts from checking your credit history, loan-to-value ratio, credit bureau score, TDSR and your financial commitment to your income ratio.
This allows the lender to determine how much loan you can afford as well as your commitment to paying back your loans.
What to do if your loan doesn’t work out
There are a few options if you fail to pay your loan, although you have a threat of foreclosure in the standard practice. You will get the option of refinancing, but this may be a tricky process as it involves extensive documentation, legal fees and various types of penalties.
So, the first step would be to contact your lender or bank to understand your eligibility and discuss the conditions and pre-approval for your loan. Good luck!