Below are his quesitons and my reply.
MrEngineer wrote: MrEngineer Wrote:
Dennis,
given ur expertise in the cashflow board game and housing loan specialist, may I ask how does the banks in Singapore examine your ability to repay loans and thus approve your property loans?
In the cashflow game, as long you can afford the downpayment, you can own a certain property to get e cashflow. but i believe that is not so easy in real life.
Is there a general rule by Singapore banks for financing e.g. 10 times of your total assets or ? times of your income (salary + cashflow) or any other gauges?
Thanks!
Hi MrEngineer,
the Cashflow Game has its weaknesses, as you pointed out, it is not entirely reflective of real life. In fact, one of my dreams is to create an online Financial Game that is realistic and educational....hopefully to make it a reality in the next year or so.
In Singapore, max financing currently is 70% to 80% for investment property. Banks would look at things such as your income, stability of income, your debt-servicing ratio (percentage of income used for repayment of debt), how many properties you own etc, to assess before approving the loan application.
For unsecured loans, typically banks limit to 2 times your monthly income. However, a person can get unsecured loans for 10 times monthly income simply by borrowing from 5 banks. (10 times is the max loan you can get in the Cashflow Game).
Even in the Cashflow Game, there are cards whereby there is negative Cashflow for properties. Actually, even in the game I would still buy the property, depending on the property price for sale in the game and the range of property prices for that property.
Thus, investing into properties is NOT simply about buying properties with positive Cashflow. For instance, in year 2007, I bought and sold 2 properties under construction, there was no rental (zero Cash inflow), but I have Cash Outflow in terms of loan instalments, yet these properties are still worth investing as the Capital Gain potential was good. I made total gains of about 150% returns from these 2 properties.
I've not invested into any properties since year 2008, and I might only consider investing into properties again sometime in year 2010.